10 Ideas To Think About + Performance
Quarterly reports are coming to an end, so it time to “get back on the horse” and look for new ideas. There are plenty of ideas to choose from. Many stocks have gotten crushed, if they made weak 2025 forecasts for the first time.
There is a reason that “momentum” stocks did so well in October - February, there were so many “land mines” (or as the great Kidder Peabody strategist Bill Gillard called them “torpedo stocks”) to avoid.
I break the potential new ideas down into two groups. The first group are my beloved cyclicals that are sensitive to the economy. I am still confused about Trump’s economic ideas, so I remain hesitant on these stocks at the moment. My top 5 in order:
STLD - Steel Dynamics - $135 - I hate “battleground” stocks, and this company is square in the middle of the tariff debate. I love all the strategic things STLD has done. Maybe Nucor - NUE is more straightforward. These stocks have run 20% since January, but I remain very interested.
GNTX - Gentex - $24 - The auto parts makers are a hated industry. I am just not brave enough to look at Ford - F - $9.50, under $10. Maybe I should buy the highest quality auto parts maker, GNTX, given this opportunity. They are debt free and sell to both high end ICE and EV car makers. The stock is near a five year low. This is a classic “GARP” cyclical.
LPX - Louisiana Pacific - $100 - LPX has done everything right, but the homebuilding cycle has turned against them. This is a nice one to think about, but I am fairly sure I lack the guts to own this. I have been a real estate bear for 30+ years, and that is hard to overcome. I want to learn more about OSB siding.
WNC - Wabash National - $12 - WNC is the best of the small caps that have “blown up” this year. They make the best truck trailers and tankers. At only 42% EV/sales this is a classic small cap value stock. But right now truckers are paralyzed, and not buying new equipment. I do a lot of driving, just look around, the Wabash trailers are the nice looking ones.
ETSY - Etsy - $51 - ETSY did better than many other retailers this Christmas, but prospects are still murky. I have avoided retail, and that has been a good idea. The one I want to own is Columbia Sportswear - COLM - $87, but that stock has bounced.
The following ideas have less economic sensitivity. Of course that means less sensitivity, but not none.
Technology - There are finally some technology stocks on the new low list. Many have had some big runs, so the valuations are still iffy. I am watching Rogers - ROG - $80 (a neat chemical company that duPont offered over $200/share for), or small cap Ultra Clean - UCTT - $25, or widely held Amkor Technology - AMKR - $21 (packaging for semiconductors).
Drinking - I know the younger generations are not drinking enough (too many gummies), but the stocks are very cheap. The latest one to crater is the well respected Constellation Brands - STZ - $176, some guy named Buffett just bought a position. Diageo - DEO - $108 keeps getting cheaper. I like small cap MGP Ingredients - MGPI - $33.
Beauty - I continue to watch Coty - COTY - $5.70 plummet. This an interesting way to play this industry because the company is 60% owned by a big German conglomerate. Estee Lauder - EL - $71 is the big cap way to participate. Both companies have China issues.
Energy - I am happy with Halliburton and Matador, but some the other service companies keep getting cheaper. Maybe long time favorite Helmerich & Payne - HP - $27 or Atlas Energy (fracking sand) - AESI - $19, are possible ideas.
Health Care - I am worried about the Bobbie Kennedy effect, especially on laboratory equipment companies. I have been watching a growth stock called Astrana Health - ASTH - $25, which has plunged from $60.
Water - American Water Works - AWK - $135 - has bounced off the bottom, but should be monitored.
Hasbro had a good quarter. I missed that one.
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Performance of the top 25 Model Portfolio has been average for the first two months. I was helped by gold and the agriculture cyclicals.
Top 25 Model = + 3.3%
S&P 500 = + 1.4%
Equal weight = + 2.8%
Mid Cap Value Index = + 3.5%
But my fellow managers had a hard time in the first two months
First Eagle = -3.3%
Diamond Hill = -2.0%
Victory Sycamore = -1.6%
T Rowe Price =. +1.8%
All I can figure is they had outflows, and had sell some stocks with few bidders. It is possible that liquidity is much worse than we think.