Alternatives
I need some replacements for Chart, and maybe Nexstar.
It is all about the process.
Step 1
The first step is to think about those sectors where I am under-weighted.
I have not owned a tech stock this year. I missed Teradyne - TER - $108 - at $75 in April. I should have been better prepared. The stock I really want to own is MKS Inc. - MKSI - $101. The bigger cap name of interest is Entegris - ENTG - $80, lots of value guys have bought this. I at least think about the very complex Qualcomm - QCOM - $156. AMAT is still too expensive at $162, but maybe at $120? I have ignored this sector for over 2 years, but valuations are still stretched.
Yes, I even think about financials. With JP Morgan - JPM - $290 near an all-time high I am not that excited about the sector. Someday I really will look the small cap banks, but not when credit spreads at 30 year lows. I will peek at the insurance brokers, Arthur Gallagher - AJG - $302 missed for the first time in 5 years. Maybe the investment bankers deserve a look, I am warming to Moelis - MC -$70. Maybe a cheap reinsurance company? I watch RNR - $248.
I am out on healthcare right now. There is just too much regulatory stuff going on. I believe the Merck - MRK - $85 story, but worry about the vaccine issue. I have been wrong about the lab equipment cycle, but still think about Revvity and Avantor - AVTR - $13.
Step 2
The second step is do some top down thinking and consider some stocks I might want to add.
Some might want to skip this step, but to me there is no danger in thinking about it.
I still think the risk is that the 2026 economy is stronger than the consensus thinks.
It is not easy to find the right stock for this top down idea. Right now the only really cheap industrial is another trucking stock, maybe SAIA, Inc. - SAIA - $304, or Schneider National - SNDR - $25. Maybe a simpler idea is the truck maker PACCAR - PCAR - $99. The other economically sensitive idea might be a retailer or apparel company like Columbia Sportswear - COLM - $55, near its low. Tariffs are just too confusing right now. There are very few other industrials near their lows, maybe Trinity Industries (railcars) - TRN - $28.
Stocks like CarMax, Polaris, Lyondell, and Celanese have their own individual issues.
Perhaps another way to get more cyclical is an energy name. One thing the US is going to export is LNG. Why is Devon Energy - DVN - $34 still near its lows? But, I am already over-weighted in energy with two stocks.
Maybe the simplest cyclical is Nucor - NUE - $143, this is what John Galt would buy. A guy named Buffett owns some.
Step 3
It is always the right time to think about weird stocks. Stocks that do not fit in any sector, or any top down theme, are always worth considering.
I am not sure what to do with WillScott - WSM - $24 the maker/lessor of temporary buildings. Also getting cheaper is Kirby - KEX - $98, the largest barge operator. Another shipping stock that is the often overlooked is Star Bulk Carriers - SBLK - $18. My friend Tim recently did some great work on the lodging REIT, Pebblebrook Hotel Trust - PEB - $10, or maybe the similar but less leveraged Host Hotels - HST - $16.
Scott’s Miracle Gro - SMG - $62 is a classic weird stock, but SMG is really a consumer staple company.
Step 4
A similar thought is “never forget small caps”. I have done a poor job here. I am still thinking about some travel names like Pursuit Attractions - PRSU - $35, but even really small stocks like Limoneira - LMNR - $15 deserve a look. . Stepan - SCL - $50 might be too tied to housing.
Step 5
A critical step is to always be running screens. At a minimum, you must do a new low screen before buying a new idea. I choose to look at all stocks within 10% of their 3-year lows (no COVID lows).
When I did this last week I came up with at least 10 stocks I had not thought about in years. This is the “bottom up “ approach which must be done before you add a new idea.
Churchill Downs - CHDN - $104 - the Kentucky Derby, a few smaller horse tracks, and a strange slot machine (they call it historical racing) business - This stock has me very confused. I know too much about the horse racing business, and I hate the slot machine business. Let’s think about gambling next.
McCormick - MKC - $70 - great chance to win in sauces, tariff problems in spices, Cramer has promoted
Primo Brands - PRMB - $25 - bottled water, obviously problems in offices, but decent brands for home delivery
Simply Good Food - SMPL - $29 - good growth is QUEST protein bars, but problems in Adkins brand
IAC Inc. - IAC - $35, the old Meredith magazine business and 23% of MGM, Barry Diller’s old holding company, strange and weird
MGM - MGM - $36 - maybe too much financial engineering, sport betting is iffy, LV travel issues, but maybe the long-term LV winner?
Braze - BRZE - $25 - a crazy software company with some AI ideas, 4x sales
Americold - COLD - $15 - refrigerated warehouses, short-term weaknesses
Lineage - LINE - $40 - the high tech refrigerated warehouse play, straight down from $75 to $25.
Graphic Packaging - GPK - $23 - very boring, but led me to AMCOR
Amcor - AMCR - $9 - large global package maker, 6% yield, a little weird, the lazy answer is the company is too leveraged, but is there a plan?
Innospec - IOSP - $85 - is this really a specialty chemical company, or really just a well run commodity business? Barrow buying.
ManpowerGroup - MAN - $42 - temporary help, these guys used to make $8/share, but now seem to have little enthusiasm for their own business, are they the industry leaders or just hanging on, does the world still need this industry? Is this the cyclical I am looking for, or a buggy whip maker?
Step 6
Don’t forget your older ideas
Constellation Brands - STZ - $166 - is a great company with tariff issues. Buffett add to his position. Choice Hotels is very well run, but some of the franchisees might be in tough shape. Can we live with another restaurant stock, maybe First Watch or Portillo’s?
Step 7
Check with your favorites investors for ideas:
My favorite hedge fund is Select Equity - they still own a big chunk of Kirby - KEX. Their new ideas are a little too growth oriented.
My favorite mutuel fund is FEXCX - they do not have many new ideas, but one is FormFactor - FORM - $29, and another is Manitowoc - MTW - $9
My favorite manager is Barrow Hanley - they are buying more Merck and Entegris, new position in Haemonetics, Oxford, Darling, Sensata, and Limoneria.
A little more growth oriented is Ron Baron - he has a new position in Host, and is sticking with Vail - MTN
Diamond Hill Small Mid Cap Value- DHMYX - brings Teleflex - TFX - $125, Knife River - KNF - $87, Revvity, Alaska Air
Victory Mid Cap Value - taking a new shot with PPG
Bill Ackman - sticks with Restaurant Brands, but sells Canadian Pacific
My favorite low price to book guy, Don Smith, adds - Mohawk, Hudbay, Titan International, and Harley-Davidson
Some guy named Buffett adds to - Nucor, Lennar, Constellation, and Lamar Advertising