My Buy-Sell Ratings on the 20 Largest Stocks

The past year has been tough for almost all stocks

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Oct 03, 2022
Summary
  • Even though I’m fond of off-the-beaten-path stocks, once a year I give my buy-or-avoid ratings on the 20 largest stocks.
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The largest stocks dominate the headlines, and investors’ wallets.

So even though I’m fond of off-the-beaten-path stocks, once a year I give my buy-or-avoid ratings on the 20 largest stocks. Today’s the day.

Apple Inc. (

AAPL, Financial) ($2.4 trillion market value). Buy. The company’s iPhones and Mac computers have a loyal following. Having $48 billion in cash and marketable securities helps, too.

MicrosoftCorp. (

MSFT, Financial) ($1.8 trillion). Avoid. It’s a fine company, but the stock was way overpriced a year ago, in my opinion, and is still somewhat overpriced now.

Alphabet Inc. (

GOOGL, Financial) ($1.3 trillion). Buy. The most innovative American company, in my view. It has increased its earnings by 15% a year for the past decade.

Amazon.comInc. (

AMZN, Financial) ($1.2 trillion). Avoid. In the past few quarters, revenue growth slowed and earnings fell. Yet the stock still sells for 101 times recent earnings.

Tesla Inc. (

TSLA, Financial) ($863 billion). Avoid. It’s an exciting company and Elon Musk is a charismatic guy, but in my opinion the stock price (at 14 times revenue) is just too high.

Berkshire Hathaway Inc. (

BRK.B, Financial) ($591 billion). Buy. Under CEO Warren Buffett (Trades, Portfolio), Berkshire owns dozens of companies, and has $327 billion in investments. In my book, no one beats Buffett.

UnitedHealth GroupInc. (

UNH, Financial) ($480 billion). Neutral. ­­­I’m lukewarm. But if the widely-predicted recession is at hand, health care stocks are likely a decent place to hide.

Johnson & Johnson (

JNJ, Financial) ($438 billion). Buy. This health care conglomerate is a notch cheaper than UnitedHealth, and has a better return on total capital (17% versus 10%).

Visa Inc. (

V, Financial) ($388 billion). Avoid. Visa’s earnings growth has been admirable. But it is expensive at 14 times revenue and untimely if a recession is at hand.

Meta PlatformsInc. (

META, Financial) ($377 billion). Avoid. Facebook, its flagship product, seems to be losing cachet among young people. Earnings in the June quarter were down from a year ago.

Exxon Mobil Corp. (

XOM, Financial) ($357 billion). Buy. Exxon shares were up 45% in the past year while most stocks were down. I think the oil industry revival will continue.

Walmart Inc. (

WMT, Financial) ($353 billion). Avoid. I’m torn, because Walmart usually holds up well in recessions, but 25 times recent earnings is more than I want to pay.

Procter & Gamble Co. (

PG, Financial) ($323 billion). Avoid. Products like detergent and razor blades are staples; people buy them even in tough times, but I think investors overpay for the presumptive steadiness.

JPMorgan Chase & Co. (

JPM, Financial) ($320 billion). Buy. This blue chip has fallen more than 34% in the past year. Banks have their troubles, but at nine times earnings I think it’s a bargain.

Nvidia Corp. (

NVDA, Financial) ($312 billion). Avoid. The Federal Reserve’s campaign of raising interest rates is poison to high-multiple stocks, and Nvidia’s multiple is 41 times earnings.

Eli Lilly and Co. (

LLY, Financial) ($296 billion). Avoid. Lilly’s 10-year revenue growth figure is unimpressive at 3.3%, yet the stock still commands 50 times earnings.

Mastercard Inc. (

MA, Financial) ($284 billion). Avoid. Colleagues talked me into buying Mastercard a few years ago and we did well. But 13 times revenue? That’s dangerously high.

Chevron Corp. (

CVX, Financial) ($283 billion). Buy. After six years in the wilderness, the oil industry is making strong profits again. Also, Chevron sports a 3.8% dividend yield.

Home Depot Inc. (

HD, Financial) ($277 billion). Buy. I’ve had Home Depot as an “avoid” the past four years. But with the stock down to where it was eight years ago, I think it’s a value.

Bank of America Corp. (

BAC, Financial) ($255 billion). Buy. The Fed’s raising short-term interest rates hurt banks. Nonetheless, at 9 times earnings, I think it is cheap enough to be a buy.

Past record

The past year has been tough for almost all stocks, and the 20 largest are no exception. A year ago, I slapped an “avoid” rating on 14 large stocks. They declined an average of 23.7%. The six stocks I recommended buying were down an average of “only” 17.1%.

Long term, my “buys” have beaten my “avoids” by the narrowest of margins, 11.4% to 11.2%. (The long-term figure covers 18 columns about the largest stocks written from 2001 through 2021.)

Bear in mind that my column results are hypothetical and shouldn’t be confused with results I obtain for clients. Also, past performance doesn’t predict the future.

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].

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Disclosures

I am/we currently own positions in the stocks mentioned, and have NO plans to sell some or all of the positions in the stocks mentioned over the next 72 hours. Click for the complete disclosure
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