Review + Jump to 25 Stocks
As year end approaches it is a good time to review where we have been, and where we are going. I also think it is the right time to jump to 25 stocks and 4% position sizes. We will now have a Top 25 Model Portfolio.
WHERE WE HAVE BEEN
I have always wanted to right a book about value investing, and now that project is well underway with over 100 posts in the past 2+ years. Late 2022 seemed like a good starting point with small cap indices down 30%+ from their highs.
2023 was a discouraging year. First SVB in March was a scary event, and then the rest of year was all about the crazy rise of tech stocks. Who needed value investing?
I started 2024 with a list of just 10 ideas. I found a better physical location for my writing in the Spring, and built back to 20 stocks by June 30, 2024. That portfolio was a little rushed, and had a few marginal ideas.
WHERE WE ARE GOING
Right now I feel like I have 20 great ideas. I tried to kick out Revvity - RVTY - $116, but their recent investor day was just too impressive. I am trying to kick out Kinder Morgan - KMI - $27 after a nice run from $17, but there is still more in this stock.
I feel year end is the right time to jump to a 25 stock portfolio. On a practical basis, 20 stocks is maybe a little better, but on and educational basis 25 will be ideal. In the past few weeks I have had time to catch up on some stocks I had set aside. I have 5 more strong ideas to introduce. Let’s start 2025 with 25 equally weighted great ideas.
Let’s add:
The AES Corporation - AES - $13 - This is a complex story. I have waited patiently. Maybe this is the perfect “Harris stock” in a Trump world, but that is chance we must take. They continue a restructuring plan that will leave them with basically some solar/wind generating assets and the old Dayton and Indianapolis public utilities. The same smart guys that control my truck brokerage idea - RXO, also own 3% of AES. Let’s collect 5% while we wait for the storm clouds to clear.
Iridium Communications - IRDM - $30 - The common belief is that Elon Musk will eat all the satellite companies for lunch, but IRDM has a unique moat around its L-Band spectrum. This is not the internet for remote Africa, this is 100% reliable signal communication for ships and planes. The company is buying back a bunch of stock while the market worries about Elon. I have followed this stock for 20+ years, and right now “visibility” is low, the perfect time to invest.
Alexandria Real Estate Equities - ARE - $103 - This is a stock I have always wanted to own, but it was too expensive. Fear of real estate and Bobby Kennedy have put this stock on the new low list. These are very smart guys that build/rent labs for high tech drug discovery operations for big pharma, bio-pharma, and universities. The company is now 76% mega-sites, and that percentage will rise over time. I hate the REIT concept, but here it has controlled capital spending. The balance sheet is great, and will be a true asset. We get 5% while we wait.
Thor Industries - THO - $105 - This is a stock where I was waiting on the election. The biggest beneficiary of “drill baby drill” will be those driving big RVs. Selling at just 65% EV/Sales, this stock is a true bargain. Sales are down 30% for big rigs, just the right time to buy the stock. These guys have a dominant market share in the US, and are getting better in Europe. The balance sheet is very clean. Earnings power is always greater than Wall Street perceives.
Teck Resources - TECK - $44 - No this not tech stock, it is a copper miner. I almost never buy a stock within 15% of it all-time high, but this is an exception. I hate companies exposed to China, but TECK is my free “China call option”. If China even just stabilizes, there are not enough copper mines in the world. If China slumps, one of the majors (Rio Tinto, BHP, and Glencore) will buy “bite sized” TECK. Glencore has already knocked on the door, and was rebuffed. New management has cleaned up the company over the last 4 years, and now it is now a pure copper company. Maybe Hudbay Minerals - HBM - $9 is a more creative idea, but TECK is a little safer. I wanted to add add an energy name, maybe Devon or Civitas, but TECK has more upside.
Maybe these ideas are too aggressive for a market at an all-time high. I could just hide in ConAgra, Kimberly-Clark, Diageo, Coty, and Antero Midstream until the market crashes.
While in graduate school me classmates bought me a plaque of two vultures sitting on a fence with the inscription “patience hell, I am going to go kill something”.
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