As the market has started to recover from 2022’s bear market, investors are likely looking for opportunities among companies that have predictable performances and strong businesses.
One way to find these companies on GuruFocus is by using the GF Score, a unique ranking system that backtesting has found to be closely correlated to the long-term performances of stocks. Ranging from zero to 100, the stocks with higher GF Scores generally generate higher returns than those with lower scores.
The GF Score takes five key aspects in consideration, which are also ranked between zero and 10. They are financial strength, profitability, growth, valuation and momentum.
The companies with the highest outperformance potential score 90 or above.
Composed of the top 25 non-over-the-counter stocks that score between 91 and 100 and are traded in the U.S., GuruFocus also has a model portfolio based on this strategy.
The portfolio, which has posted a return of 5.51% since its inception on April 28, 2022, is up 16.96% year to date.
Among the top-performing stocks in the model portfolio as of Feb. 7 are Nvidia Corp. (NVDA, Financial), Saia Inc. (SAIA, Financial), Thor Industries Inc. (THO, Financial), XPEL Inc. (XPEL, Financial) and Old Dominion Freight Line Inc. (ODFL, Financial).
Nvidia
Soaring 44.31% following its annual rebalance on Jan. 1, Nvidia (NVDA, Financial) was an original position in the model portfolio.
Headquartered in Santa Clara, California, the semiconductor chip manufacturer has a market cap of $544.76 billion; its shares were trading around $215.57 on Tuesday with a price-earnings ratio of 91.73, a price-book ratio of 24.92 and a price-sales ratio of 19.61.
The GF Value Line suggests the stock is fairly valued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 96 out of 100, the GF Score indicates the company has high outperformance potential on the back of solid ratings for profitability, growth, financial strength and GF Value as well as a moderate momentum rank.
Nvidia also has a predictability rank of 3.5 out of five stars. According to GuruFocus research, companies with this rank return an average of 9.3% annually over a 10-year period.
With a 0.71% stake, Baillie Gifford (Trades, Portfolio) was Nvidia’s largest guru shareholder. Ken Fisher (Trades, Portfolio), the late Spiros Segalas’ Harbor Capital Appreciation Fund (Trades, Portfolio), Philippe Laffont (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Frank Sands (Trades, Portfolio) and Mairs and Power (Trades, Portfolio) also had significant holdings.
Saia
Posting a gain of 40.06% year to date, Saia Inc. (SAIA, Financial) is a newcomer to the model portfolio following its annual rebalance.
The Johns Creek, Georgia-based trucking company has a $7.79 billion market cap; its shares were trading around $294.45 on Tuesday with a price-earnings ratio of 27.39, a price-book ratio of 4.93 and a price-sales ratio of 2.79.
According to the GF Value Line, the stock is modestly overvalued currently.
On the back of solid ratings for profitability, growth, financial strength and momentum as well as a moderate GF Value rank, the GF Score is 95.
Saia also has a 3.5-star predictability rank.
Of the gurus invested in Saia, Jim Simons (Trades, Portfolio)’ Renaissance Technologies has the largest position with 0.45% of its outstanding shares. PRIMECAP, Jeremy Grantham (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Chuck Royce (Trades, Portfolio) also have positions in the stock.
Thor Industries
Another new holding following the portfolio’s annual rebalance, Thor Industries (THO, Financial) has risen 30.81% year to date.
The manufacturer of recreational vehicles, which is headquartered in Elkhart, Indiana, has a market cap of $5.25 billion; its shares were trading around $98.09 on Tuesday with a price-earnings ratio of 5.22, a price-book ratio of 1.44 and a price-sales ratio of 0.35.
Based on the GF Value Line, the stock appears to be significantly undervalued currently.
The GF Score of 98 was driven by high ratings across the board for each of the criteria.
Further, the company has a 4.5-star predictability rank. GuruFocus found companies with this rank return, on average, 10.6% annually.
With 0.53% of outstanding shares, Hotchkis & Wiley is Thor Industries’ largest guru shareholder. Other guru investors are Fisher, Tweedy Browne (Trades, Portfolio), Simons’ firm, Paul Tudor Jones (Trades, Portfolio), Greenblatt, John Hussman (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio).
XPEL
Up 30.55% so far this year, XPEL (XPEL, Financial) was also recently added to the model portfolio.
The San Antonio-based company, which provides protective films and coatings for cars, boats and windows on houses and commercial buildings, has a $2.15 billion market cap; its shares were trading around $78.02 on Tuesday with a price-earnings ratio of 55.33, a price-book ratio of 18.75 and a price-sales ratio of 6.81.
The GF Value Line suggests the stock is fairly valued currently.
Generating a GF Score of 97, the company raked in high ratings for profitability, growth, financial strength and momentum. The GF Value rank, however, was more moderate.
Further, XPEL has a four-star predictability rank. GuruFocus data shows companies with this rank return an average of 9.8% annually.
Chuck Royce (Trades, Portfolio) has the largest position in XPEL with 0.02% of its outstanding shares. Baillie Gifford (Trades, Portfolio) also owns the stock.
Old Dominion Freight Line
An original position at the model portfolio’s establishment, Old Dominion Freight Line (ODFL, Financial) has returned 30.23% so far in 2023.
The less-than-truckload shipping company, which is headquartered in Thomasville, North Carolina, has a market cap of $40.41 billion; its shares were trading around $369.57 on Tuesday with a price-earnings ratio of 39.50, a price-book ratio of 11.11 and a price-sales ratio of 6.61.
According to the GF Value Line, the stock is fairly valued currently.
The GF Score of 97 is supported by solid ratings for profitability, growth, financial strength and momentum. The GF Value rank was more moderate.
Old Dominion also has a perfect five-star predictability rank. GuruFocus says companies with this rank return an annual average of 12.1%.
Of the gurus invested in Old Dominion, Simons’ firm has the largest position with 0.29% of its outstanding shares. PRIMECAP, David Rolfe (Trades, Portfolio), Jerome Dodson (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Greenblatt, Jones and Ray Dalio (Trades, Portfolio)’s Bridgewater Associates also own the stock.
Additional opportunities
Other companies with strong performances and high GF Scores in the model portfolio include Monolithic Power Systems Inc. (MPWR, Financial), Winnebago Industries Inc. (WGO, Financial), Applied Materials Inc. (AMAT, Financial), Apple Inc. (AAPL, Financial) and Cadence Design Systems Inc. (CDNS, Financial).
