You won’t find Facebook or Procter & Gamble in the portfolios I run, but that doesn’t mean I never think about them.
Once a year in this column, I give my “buy” or “avoid” opinion on the 20 largest stocks. Here are my latest ratings, from the very largest (Apple) to the merely immense (Adobe).
Apple Inc. (AAPL, Financial)($2.4 trillion) – Buy. The iPhone rolls on. Apple’s app store in the future will no longer be a quasi- fantastic.
Microsoft Corp. (MSFT, Financial)($2.2 trillion) – Avoid. Operating results have gone from strong to even stronger, but I feel the stock is fully valued at 14 times revenue.
Alphabet Inc. (GOOGL, Financial)($1.9 trillion) – Buy. I consider Alphabet the most innovative company in the U.S. It owns Google, You Tube, Waymo and Deep Mind.
Amazon.com Inc. (AMZN, Financial)($1.7 trillion) – Avoid. The pandemic accelerated the trend to online shopping but that tailwind may abate in the next few months.
Facebook Inc. (FB, Financial)($995 billion)—Avoid. Highly profitable, but I think the company lack of customer service, carelessness with customer data, and capricious enforcement of its own rules will eventually cause it problems.
Tesla Inc. (TSLA, Financial)($775 billion)—Avoid. People tend to love Tesla or hate it. With the stock at 162 times estimated earnings, I certainly don’t love it.
Berkshire Hathaway Inc. (BRK.B, Financial)($629 billion)—Buy. I know that genius CEO
Warren Buffett (Trades, Portfolio) can’t live forever, but I think he has built a wonderful combination of businesses.
Nvidia Corp. (NVDA, Financial)($552 billion) — Avoid. Its chips enjoy huge demand, especially for gaming and cryptocurrency mining. But the stock is simply too expensive in my opinion.
Visa Inc. (V, Financial)($508 billion)—Avoid. Visa has been a superb company for ages, but revenue growth slowed to a crawl last year, even though the economy did surprisingly well.
JPMorgan Chase & Co. (JPM, Financial)($487 billion)—Buy. This stock sells for less than 11 times earnings in a pricey market, and I like CEO Jamie Dimon.
Johnson & Johnson (JNJ, Financial) ($433 billion) – Buy. Its business model, with dozens of health-care businesses each enjoying some autonomy, has worked well. Revenue and earnings accelerated last year.
Walmart Inc. (WMT, Financial)($399 billion) – Avoid. Its discount stores hold up well when times are tough, but in 2022 I think some consumers will be moving up to more expensive stores.
UnitedHealth Group Inc. (UNH, Financial)($384 billion)—Avoid. Profits lately have been subdued, and dividend growth has slowed. I don’t think it’s bad but I can’t get excited about it.
Home Depot Inc. (HD, Financial)($356 billion) – Avoid. The company is in a good niche, but I don’t like the balance sheet. Debt is 20 times stockholders’ equity.
Bank of America Corp. (BAC, Financial)($355 billion) – Avoid. The stock is modestly valued, which is a big plus. But return on assets is just under 1%. I like to see banks above that level.
Mastercard Inc. (MA, Financial)($353 billion) – Avoid. Still a wonderful company but, like Visa, it has slowed down a bit lately. And the stock is expensive at 21 times revenue.
Procter & Gamble Co. (PG, Financial)($349 billion) – Avoid. Classic consumer-staples stock, with brands like Pampers, Tide, and Charmin. Well run and steady, yet I feel the stock is slightly too expensive for what the company is.
PayPal Holdings Inc. (PYPL, Financial)($327 billion) — Avoid. This newcomer to the largest-stocks list sells for 62 times forward earnings. Value investors like me balk at such things.
Walt Disney Co. (DIS, Financial)($320 billion)- Buy. Disney had a good run last year, and hasn’t done much this year. I think it will get another leg up as theme parks and movie theatres reopen.
Adobe Inc. (ADBE, Financial)($297 billion)- Avoid. Adobe is another great company that sells at high multiples – for example, 51 times recent earnings. It’s not my cup of tea.
My “buy” recommendations on this list last year returned a little over 40%. My “avoids” were up 36%, while the Standard & Poors’ 500 Index was up almost 35%.
Longer term (over 17 years), my record on rating the largest stocks is undistinguished. My “buys” and “avoids” have each risen about 13% on average. Meanwhile, the S&P 500 has averaged 14.5%.
Bear in mind that my column results are hypothetical: They don’t reflect actual trades, trading costs or taxes. These results shouldn’t be confused with the performance of portfolios I manage for clients. Also, past performance doesn’t predict future results.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at [email protected].