Schizophrenia - Adding PEP and GNTX
I wake up every morning fearing that I do not have enough cyclical exposure in my portfolio, yet at the same time I think Pepsi is a good investment. Some might call that crazy.
On a really good day I can completely ignore top-down thinking, but as I age I have fewer good days.
I feel there is a 60% chance that the pro-growth elements of Trump’s Big Beautiful Bill will be enough to make 2026 economic growth greater than expected. If that happens, I own too few cyclicals.
There is also a 20% chance that tariffs, wars, and unknown calamities, could evaporate that 2026 growth, or even political realities might stop the main parts of the BBB from ever being passed. I worry the consensus is the BBB will pass, but I see some risks.
There is also a 20% chance the consumer is already too leveraged, especially if residential real estate prices start falling.
Here is what I get when I look through my cyclicals:
Gentex - GNTX - $21 - smart guys with great technology, no debt, making cheap acquisitions and buying back shares, what more could you want (they make high end dimming mirrors (36% of all autos), primarily for most premium auto brands), has 90% market share in electrochromic mirrors if the buyer chooses a higher end trim package, gaining placements of FDM’s (full display mirrors, done digitally), the stock is selling at about 10x, there are tariff issues but only because they export to China, only 4 buys and 7 hold/sells
Columbia Sportswear - COLM - $62 - This is very close to being a buy. COLM should gain share from private label and smaller brands. COLM has the fortress balance sheet to survive ($800 million in cash and no debt). The strategy is to “punt” 2025, absorb the tariff costs and focus on 2026. COLM withdrew 2025 guidance. They are calling the rest of 2025 “unknown and unknowable”. Yes I am attracted to maximum uncertainty. They are calling out a new advertising campaign for the Fall of 2025. This is a very high quality brand selling about .66x EV/sales.
Norwegian Cruise - NCLH - $20 / Pursuit - PRSU - $28 - I want to own a travel stock, because like restaurants they are easy to understand, the Gentex story is just slightly better
Mohawk - MHK - $102 - Buffett owns the other carpet maker (Shaw Industries), at the right price I want to own this stock
Louisiana Pacific - LPX - $92 - neat company, but stock has already run some, again waiting for the right price
Quaker Chemical - KWR - $110 - steel making chemicals, I need to learn more, down from $250
Steel Dynamics - STLD - $135 - at the very center of the tariff issue, waiting for a better entry point, I prefer this to Nucor
Celanese - CE - $55 - smart folks are buying this stock, but the leverage is just too high, pass with the market at a high, must be ready to buy on a pullback
Ball Corp - BALL - $54 - a very well run “chicken cyclical”
PulteGroup - PHM - $100 - I need to see more pain in housing, but we are under-built, smart value guys are starting to nibble at homebuilders, great 50+ communities
Whirlpool - WHR - $83 - the 8% yield is juicy, but also scary, waiting for the cut
Ford - F - $10 - I prefer auto parts to autos
CarMax - KMX - $65 - I fear their exposure to financing, but they are great operators, and at some price I want to own this stock
Polaris - PII - $41 - 6.5% yield is tempting, but I like Brunswick better, should I own both?
Dow - DOW - $29 - 10% yield is TGTBT, too tied to housing
Macy’s - M - $12 - 6% yield is interesting, but tariffs are an issue
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I was going to wait until 6/30, but I might chicken out
Adding a Pepsi position at $130.03 and a Gentex position at $21.41
Selling FirstCash Financial - $125.78 - the stock is up 20% this year and I still fear their POS financing business, did not real care for the British acquisition, pawn shops are still a great business
Selling Revvity at $91.97 - I hate to bailout down 17% YTD, but the lab spending cycle is taking too long to develop, and I like Alexandria better. I am concerned that Select Equity is a big seller. The RVTY restructuring is complete, but the industry is more difficult than I thought.