Hatfield vs. McCoy. Montague vs. Capulet. Yankees vs. Red Sox.
Great feuds, each. But what about value and growth, the two main schools of investing? They don’t have to be enemies.
Once a year, I write a column on stocks that I believe show both value and growth characteristics. For 17 columns beginning in 2001, the average 12-month return on these stocks has been 18.9%.
That compares very nicely with the 11.6% average return for the Standard & Poor’s 500 Total Return Index over the same periods.
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.
Here are five new suggestions for stocks to consider. They all sell for less than 15 times per-share earnings, so they count as “value” in my book. As for growth, they all have grown their profits at a rate of 12% per year or better over the past five years.
Nucor
Can a steel company really be considered a growth company? I’d say yes, in the case of Nucor Corp. (NUE, Financial). Over the past five years, it has increased its profits at a 43% annual clip, and sales at 18%.
Nucor was the first major company to see the promise in recycling scrap steel, and the first to use electric arc furnaces instead of blast furnaces.
Today Nucor is the largest steel producer in the United States, more than twice as big as Steel Dynamics (STLD, Financial) and more than five times the size of U.S. Steel (X, Financial), which was once the world’s largest corporation.
Builders FirstSource
Based in Dallas, Builders FirstSource Inc. (BLDR, Financial) is the nation’s largest supplier of building materials to homebuilders and remodeling contractors. Among its products are wall panels, stairs, trusses, engineered wood and trim. In 2022, it acquired National Lumber.
Following several years of losses, the company has shown good profits from 2016 forward. Many people would like to see mortgage rates come down before they invest in a company like this. But I think the stock is a good buy now, selling for 9 times earnings.
Seaboard
Seaboard Corp. (SEB, Financial), headquartered in Merriam, Kansas, is a small conglomerate. It raises pigs, trades commodities and does ocean shipping in the Caribbean and South America. It also produces sugar in Argentina and electricity in the Dominican Republic.
Some people don’t like it that the Bresky family controls the majority of the stock here. I don’t see that as a big disadvantage. The company has shown a profit in each of the past 15 years, though it was a close call in 2018.
Albemarle
Albemarle Corp. (ALB, Financial), out of Charlotte, North Carolina, is the world’s largest lithium producer. Lithium is a key component of batteries for electric cars. Albemarle also produces bromine and chemical catalysts.
The stock has more than doubled in the past five years, yet sells for a modest multiple – 7 times recent earnings.
The main risk I see is that someone may develop a new battery technology not requiring lithium. A second concern is that some of Albemarle’s lithium comes from China, with whom the U.S. has tense relations.
Luckily, Albemarle owns the largest lithium mine in the U.S. and also obtains some lithium from Chile.
Stifel
A debt-free choice is Stifel Financial Corp. (SF, Financial), based in St. Louis, Missouri. It is a brokerage firm (Stifel Nicolaus) and investment management company that has grown rapidly through acquisitions.
Financial firms tend to rise and fall with the tides of the economy and the market. A recession in 2024 is a possible threat, but who knows? Pundits have been predicting an imminent recession for at least two years.
In this regard, I like Peter Lynch’s comment. He said that more money has been lost by investors anticipating recessions than in the recessions themselves.
Last year
My “value plus growth” picks have been profitable in 13 of the past 17 years, and have beaten the S&P 500 Total Return Index in 12 years.
Last year I made four picks, three of which beat the index. Applied Materials Inc. (AMAT, Financial) was the best performer, up 40%. Regeneron Pharmaceuticals Inc. (REGN, Financial) chipped in 24% and Berkshire Hathaway Inc. (BRK.B, Financial) 21%.
The laggard was Laboratory Corp. of America Holdings (LH, Financial), which advanced 6%.
Collectively, my four “value plus growth” stocks returned 22.7%, versus 17.1% for the S&P.
John Dorfman is chairman of Dorfman Value Investments in Newton Upper Falls, Massachusetts. His firm or clients may own or trade the stocks discussed here. He can be reached at [email protected].
