According to the High Quality with Low Capital Expenditures Screen, a predefined screen within the All-in-One Screener, four stocks that have a GuruFocus business predictability rank of a perfect five stars and high business quality are Ansys Inc. (ANSS, Financial), Illumina Inc. (ILMN, Financial), Old Dominion Freight Lines Inc. (ODFL, Financial) and Taiwan Semiconductor Manufacturing Co. Ltd. (TSM, Financial).
Dow eclipses 27,000 for the first time since July, led by Apple and other tech stocks
On Wednesday, when Americans came together for a day of patriotism in remembrance of the 9/11 attacks, the Dow Jones Industrial Average closed at 27,137.04, up 227.61 points from Tuesday’s close of 26,909.43. Wednesday’s close was the Dow’s first close above 27,000 since July 30, when the index closed at 27,198.02. The Dow boosted its gains at market open on Thursday on President Trump’s tweet that the U.S. will delay the 5% tariff hike on $250 billion worth of Chinese goods from Oct. 1 to Oct. 15 as a “gesture of good will.” Trump added the delay was at the request of China Vice Premier Liu He in recognition of the People’s Republic of China’s 70th anniversary, which is on Oct. 1.
Top Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) holding Apple Inc. (AAPL, Financial) closed at $223.59, up 3.18% from the previous close. CNBC columnist Fred Imbert said Bank of America Corp. (BAC, Financial) analyst Wamsi Mohan deemed Apple’s range of new products, which included three new iPhones, a gaming service and Apple TV+, “compelling.” Mohan added Apple TV+’s monthly subscription price of $4.99 was lower than expected, allowing the Cupertino, California-based tech giant to “drive higher number of subscribers.”
Other stocks that contributed to the Dow’s rise above 27,000 included Cisco Systems Inc. (CSCO, Financial) and Micron Technology Inc. (MU, Financial), a company that represents 23.43% of Mohnish Pabrai (Trades, Portfolio)’s U.S.-based equity portfolio, which is a fraction of the guru’s total assets under management.
Buffett and Munger’s investing approach hinges on predictable companies at fair prices
Berkshire co-managers Buffett and Charlie Munger (Trades, Portfolio) listed four criteria in their value-based investing approach, including strong predictability of earnings and an attractive price. The GuruFocus High Quality with Low Capital Expenditures Screen seeks companies that have strong financial strength, high profitability and business predictability and solid operating margins and earnings growth.
A backtest of the strategy from January 2006 to September 2019 with 12-month rebalancing shows the model portfolio returned a cumulative 230.29% over the period, outperforming the Standard & Poor’s 500 Index's return of 204.17% over the same period.
Ansys
Canonsburg, Pennsylvania-based Ansys develops software that allows companies to manufacture products more efficiently. GuruFocus ranks the company’s profitability 9 out of 10 on several positive indicators, which include a strong Piotroski F-score of 7 and operating margins that outperform 93.35% of global competitors.
Ron Baron (Trades, Portfolio)’s firm owns 2,600,736 shares of Ansys as of the end of the second quarter.
Illumina
San Diego-based Illumina manufactures microarray and genome sequencing machines and disposables. GuruFocus ranks the company’s profitability 8 out of 10 on several positive indicators, which include expanding profit margins and consistent revenue growth. Despite this, Illumina has a moderate Piotroski F-score of 4.
Old Dominion Freight Lines
Thomasville, North Carolina-based Old Dominion Freight Lines operates a network of more than 225 service centers and 6,900 tractors. GuruFocus ranks the company’s financial strength and profitability 9 out of 10 on several positive indicators, which include robust interest coverage, a strong Piotroski F-score of 7, an operating margin near a 10-year high of 20.79% and a return on assets that outperforms 94.60% of global competitors.
Taiwan Semiconductor
Taiwan Semiconductor operates a dedicated chip foundry. GuruFocus ranks the Taiwanese semiconductor company’s financial strength and profitability 8 out of 10 on several positive signs, which include robust interest coverage, a strong Altman Z-score of 7 and operating margins that have increased approximately 1.10% per year on average over the past five years and are outperforming 93.18% of global competitors.
Disclosure: Author is long Old Dominion Freight Lines and Taiwan Semiconductor.
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