As we wrap up a volatile 2018, investors might wonder if there are still good investing opportunities in 2019. Fortunately, hundreds of stocks still meet criteria based on investing strategies from legendary value investors like Ben Graham, Peter Lynch and Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio). Five stocks that have produced strong returns in the Buffett-Munger model portfolio, a portfolio that outperformed the Standard & Poor’s 500 index benchmark in 2018, include Usana Health Sciences Inc. (USNA, Financial), Dorman Products Inc. (DORM, Financial), AutoZone Inc. (AZO, Financial), Tractor Supply Co. (TSCO, Financial) and Amgen Inc. (AMGN, Financial).
Dow wraps up volatile 2018
On Dec. 31, New Year’s Eve, the Dow Jones industrial average closed at 23,236.05, up 173.65 from Friday’s close of 23,062.40 despite trading approximately 200 points higher at market open. According to Table 1, the 30-stock index wrapped up a volatile year with a median day-to-day change of approximately 12.65 and a standard deviation of approximately 280.
| Dow Changes | |
| Mean | -6.73504065 |
| Standard Error | 17.96405803 |
| Median | 12.65 |
| Standard Deviation | 281.7552408 |
| Sample Variance | 79386.01574 |
| Kurtosis | 2.487647888 |
| Skewness | -0.612624146 |
| Range | 2261.46 |
| Minimum | -1175.21 |
| Maximum | 1086.25 |
| Sum | -1656.82 |
| Count | 246 |
| Confidence Level(95.0%) | 35.38369491 |
Table 1
Figure 1 illustrates the distribution of the day-to-day Dow changes for 2018.
Figure 1
CNBC columnists Fred Imbert and Spriha Srivastava said while President Trump and Chinese President Xi Jinping “were making progress on trade talks,” according to a tweet from Trump, the U.S. stock market suffered sharp losses in December primarily due to concerns of the Federal Reserve making an “monetary policy mistake” and possible economic slowdown. The Standard & Poor’s 500 index tumbled 6.5% for the year, including a 14.4% nosedive during the final three months of 2018.
Several model strategies are still outperforming the benchmark
Table 2 shows the value screener record as of Dec. 31.
| Screener Name | USA | Canada | UK / Ireland | Europe | Asia | Oceania | Latin America | Africa | India |
| Ben Graham Net-Net | 289 | 71 | 49 | 199 | 597 | 13 | 1 | 3 | 158 |
| Undervalued Predictable | 77 | 6 | 35 | 99 | 66 | 5 | 27 | 5 | 7 |
| Buffett-Munger | 31 | 4 | 28 | 134 | 83 | 0 | 19 | 4 | 35 |
| Historical Low Price-Sales | 29 | 3 | 13 | 42 | 136 | 1 | 14 | 1 | 13 |
| Historical Low Price-Book | 35 | 4 | 16 | 54 | 144 | 2 | 19 | 5 | 10 |
| Peter Lynch Growth | 49 | 5 | 24 | 86 | 152 | 3 | 32 | 1 | 37 |
| Walter Schloss | 49 | 37 | 52 | 150 | 509 | 10 | 17 | 3 | 77 |
Table 2
We are pleased to announce most of our model strategies, including the most broadly held model portfolio and the Buffett-Munger model portfolio, outperformed the Standard & Poor’s 500 index benchmark for the year: compared to an S&P 500 return of -7.03%, the most broadly held model portfolio returned -5.37% while the Buffett-Munger model portfolio returned -4.57%. Figure 2 illustrates the performance of the Buffett-Munger portfolio relative to the benchmark.
Figure 2
Usana Health Sciences
The model portfolio invested in 148 shares of Usana Health Sciences for $74.05 on Jan. 1. The Salt Lake City-based consumer packaged goods company gained 55.25% for the year.
Usana Health develops, manufactures and markets various science-based nutritional and personal care products. GuruFocus ranks the company’s financial strength and profitability 9 out of 10 on several positive investing signs, which include robust interest coverage, a solid Piotroski F-score of 7 and a strong Altman Z-score of 14.43. The company’s business predictability ranks five stars out of five on strong and consistent revenue and earnings growth over the past 10 years.
Gurus riding Usana Health’s strong momentum going into the New Year include Paul Tudor Jones (Trades, Portfolio) and Caxton Associates (Trades, Portfolio).
Dorman Products
The Buffett-Munger model portfolio invested in 179 shares of Dorman Products for $61.14 on Jan. 1. The Colmar, Pennsylvania-based auto parts company has gained approximately 44.50% for the year.
Dorman supplies replacement parts and fasteners for a wide variety of automobiles, which include passenger cars, lightweight trucks and heavyweight trucks. GuruFocus ranks Dorman’s financial strength 10 out of 10 on several positive signs, which include no long-term debt and a robust Altman Z-score of 15.43. Even though the company’s Piotroski F-score ranks a modest 4 out of 9, Dorman’s operating margin has expanded approximately 1% per year out of the past five years and is outperforming 92% of global competitors. Additionally, the company’s business predictability ranks 4.5 stars out of five on strong and consistent revenue and earnings growth over the past 10 years.
Dorman made both the undervalued predictable and Buffett-Munger screeners as of Dec. 31, suggesting good value potential ahead of the New Year. Gurus riding the company’s strong momentum include Chuck Royce (Trades, Portfolio), our keynote speaker for next year’s value conference, and Third Avenue Management (Trades, Portfolio).
AutoZone
The model portfolio added 14 shares of AutoZone for $789.79 on Jan. 2, 2017. The Memphis, Tennessee-based company gained 17.94% over the past 12 months.
AutoZone retails and distributes aftermarket automotive parts, tools and accessories. GuruFocus ranks AutoZone’s profitability 9 out of 10: operating margins of 16.23% still outperform over 92% of global competitors despite contracting approximately 2.7% per year over the past five years.
AutoZone’s 3.5-star predictability rank is on watch: although the company has consistent revenue growth over the past 10 years, the company’s EBITDA per share declined approximately 3.60% in the past 12 months.
Tractor Supply
The model portfolio added 147 shares of Tractor Supply for $75.81 on Jan. 2, 2017. The Brentwood, Tennessee-based company gained approximately 12.92% over the past 12 months.
Tractor Supply operates retail stores tailored primarily to farmers and ranchers. GuruFocus ranks the company’s profitability 8 out of 10 on several positive investing signs, which include expanding profit margins and consistent revenue growth. Additionally, Tractor Supply’s return on equity is near a 10-year high of 36.07% and outperforms 94% of global specialty retail companies.
Amgen
The model portfolio added 63 shares of Amgen for $173.90 on Jan. 1. The Thousand Oaks, California-based company gained approximately 12.71% for the year.
Amgen discovers, manufactures and delivers human therapeutics with expertise in renal care. GuruFocus ranks the company’s profitability 9 out of 10 on several good signs, which include consistent revenue growth, a dividend yield near a 10-year high and operating margins that are expanding approximately 7.90% per year over the past five years.
See also
Buffett’s favorite indicator ended 2018 at 123.7%, approximately -20.7% lower than its Jan. 3 reading of 144%. Based on this market valuation level, the U.S. stock market is expected to return approximately -0.1% per year over the next eight years.
According to the predicted and actual returns chart, the expected market return over the next eight years ranges from -7.90% in the most-pessimistic case to 4.90% in the most-optimistic case. Likewise, the two-year Treasury yield as of Dec. 27 is 2.56%.
Disclosure: No positions.
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