I recommend about 250 stocks a year in this column, but usually hold only about 25 stocks in a typical client portfolio.
Naturally, readers ask from time to time, “Well, what do you actually hold?” So, once a year in this column I report on the holdings in my firm’s Model Portfolio. I own these for most clients, though not for all.
Technology
Buying stocks with rising dividends is a time-tested technique. Intel Corp. (INTC), the nation’s largest semiconductor maker, fits squarely into this paradigm; it has increased its dividend by 6% a year in the past five years.
Apple Inc. (AAPL, Financial) has raised its dividend even faster, more than 10% a year (though its yield is lower).
Check Point Software (CHKP, Financial), based in Israel, specializes in Internet security, a timely area. The stock is expensive, but the 13% annual earnings growth rate in the past ten years is impressive.
Sony Corp. (SNE, Financial), which has its headquarters in Japan, makes consumer electronics, notably the Sony PlayStation, and runs a movie studio, Sony Pictures. Its return on stockholders’ equity in the latest 12 months was more than 26%.
Financial
Berkshire Hathaway Inc. (BRK.B, Financial), the kingdom of the renowned Warren Buffett (Trades, Portfolio), is huge in reinsurance and insurance. It also has interests in railroads, utilities, and scores of other businesses. It’s nice to be aligned with a genius.
Bank OZK (OZK, Financial), traditionally a very profitable bank with a niche in construction lending, has expanded rapidly – too rapidly, in the view of critics. We are reviewing this holding.
China Construction Bank (CICHY, Financial) is one of the largest banks in China. While many investors avoid China because of authoritarian government and lax accounting, we believe there is opportunity in the world’s second-largest economy.
MasterCard Inc. (MA, Financial) made it into the model at the urging of my colleagues, despite my skeptical view that it was pricey. It has been our best performer. It keeps expanding internationally and is hugely profitable.
Progressive Corp. (PGR, Financial) is a property insurance company whose humorous ads are often seen on national TV. Its market share and revenue have been growing nicely.
Communications services
Alphabet Inc. (GOOGL, Financial), the parent of Google, strikes me as one of the most innovative companies in the world. In addition to its signature search engine, it runs YouTube, works on artificial intelligence, and is developing self-driving cars.
Walt Disney Co., famous for its theme parks and movies, is a TV power, owning ABC, ESPN and the Disney channel. It will soon start a streaming service, for which I have high hopes.
Consumer stocks
An old favorite of mine is Sanderson Farms (SAFM, Financial), a Mississippi-based chicken producer that benefits from the long-term trend for Americans to eat more chicken and less beef.
Escalade Inc. (ESCA), a more recent acquisition, makes sporting equipment such as basketball hoops and archery gear. The stock sells for a modest eight times earnings.
One of our newest acquisitions is Walmart Inc. (WMT). It seems to be making rapid progress is selling online, in competition with Amazon.com.
We are having some trouble with Walgreen Boots Alliance (WBA), which has declined since we purchased it. I think investors are worrying too much about threats from national health insurance, and from Brexit.
Health care
A longstanding holding is Fonar Corp. (FONR), which makes specialized magnetic resonance imaging (MRI) machines and runs MRI centers. It is a very small stock, selling for only eight times earnings, with minuscule debt.
Our other health-care choice, Zoetis Inc. (ZTS), makes medicines for farm animals and pets. It is unabashedly a growth stock, not a value stock.
Energy
Energy has been a sore spot in the portfolio this year. Struggling badly is Antero Resources Corp. (AR), a natural gas producer whose shares sell for less than four times earnings. Insiders have been actively buying the stock.
Holding up better is Helmerich & Payne Inc. (HP), an oil service company. Its strong balance sheet should help it get through the industry’s current tough times.
Miscellaneous
Li Ka Shing, a famous financier in China, built CK Asset Holdings Ltd. (CHKGF). It owns buildings in Hong Kong and throughout the world, including the Chelsea Waterfront in London.
SPDR S&P Emerging Markets Dividend ETF (EDIV) gives us exposure to emerging markets, which generally have younger populations, faster economic growth, and smaller government deficits than the U.S. does.
An old favorite of mine is General Dynamics Corp. (GD), which I consider the best-run U.S. defense contractor.
In a world where political and military tensions run high, I also like having a little exposure to gold, which is usually resilient in crises. I get it from SPDR Gold Trust (GLD).
The final stock is a homebuilder. Since I am still accumulating it for clients, I won’t name it right now.
Disclosure: I own each of the stocks discussed today personally, and in most clients’ portfolios.
John Dorfman is chairman of Dorfman Value Investments LLC in Newton Upper Falls, 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].
