Skin In The Game: My Model Portfolio

I recommend about 250 stocks a year in this column, but in a typical client portfolio, I own only 20 to 30 stocks. Readers sometimes are curious about which stocks I own. Here’s a rundown on my current holdings.

Communications

The world clamors for American entertainment and information. I own AlphabetGOOGL
, for its relentless innovation, Paramount
PARA
Global (PARA) for its trove of movies and TV shows, and Walt DisneyDIS
for its synergy with theme parks, movies and characters.

Consumer Discretionary

The selloff in housing stocks bothers me, but I believe it’s overdone and am retaining D.R. Horton (DHI). The same goes for MarineMax (HZO), the leading retailer of pleasure boats. America’s Car-Mart (CRMT), which sells used cars, has a long record of consistent profitability.

Consumer Staples

For a long time, I resisted consumer staples stocks, since I think people pay too much for their presumptive stability. Recently, however, I bought Tyson FoodsTSN
(TSN), which I think is a bargain at less than eight times earnings. Tyson is the nation’s largest producer of beef and chicken.

Energy

Energy stocks have been the only bastion of strength this year in a weak market. I own three: Dril-Quip (DRQ), Pioneer Natural ResourcesPXD
and Total Energies SE (TTE). Most of the money is in Pioneer. With oil near $120 a barrel, I think profits will be solid in 2022 and 2023.

Financial

At this moment, the only financial stock I own is Berkshire HathawayBRK.B
, the redoubt of the redoubtable Warren Buffett. I’m considering some regional bank stocks, but haven’t pulled the trigger.

Healthcare

I don’t expect a recession this year, but I figure the odds of one have crept up to about 40% from about 10%, as inflation roars and the Federal Reserve puts the brakes on the economy. Accordingly, I’m now holding four healthcare stocks, since these tend to be defensive in down markets.

Edwards LifesciencesEW
makes artificial heart valves. PfizerPFE
is a leader in vaccines. Sonic Healthcare Ltd. (SKHHY), based in Australia, is the number-three test lab in the U.S. and number one in several other countries. ZoetisZTS
makes medications for pets and farm animals.

Industrials

I’m often heavy in industrial stocks, but not so now, with the Fed hitting the brakes. General DynamicsGD
(GD), a leading defense contractor, seems to fit these perilous times. Snap-On (SNA), which makes car-repair tools, may benefit from the transition to electronic cars. Sterling Infrastructure (STRL), which builds or repairs bridges and tunnels, should benefit from increased federal spending on those items.

Materials

In times of inflation, metals and mining stocks frequently do well. I have three in my satchel: Cleveland-CliffsCLF
(CLF), which mines iron and makes steel, NucorNUE
, the nation’s largest steel producer and SPDR Gold Trust GLD
, which holds physical gold.

Technology

This year, technology stocks have taken it on the chin worse than other groups. But the previous three years, they were the market leaders. In my opinion, many tech stocks have gone all the way from overvalued to undervalued during the past six months.

My current tech holdings are:

• AppleAAPL
  , which has a loyal following and a fortress balance sheet with $51 billion in cash and marketable securities.
• Lam ResearchLRCX
  (LRCX), a specialist in etching semiconductor chips.
• Logitech International SA (LOGI), a Swiss maker of computer peripherals such as mice and keyboards.
• Sony Group (SONY), which is classified as a technology stock, but is more a conglomerate. It makes the PlayStation and parts for iPhones, and runs a movie studio.
• Texas InstrumentsTXN
  is more expensive than I usually go for, but is an immensely profitable semiconductor manufacturer.

Most managers use the classification system devised by Standard & Poor’s, which puts companies into 11 sectors. Nine sectors were covered above. I have no holdings at present in the real estate or utility sectors.

The Record

In almost every column, I give the performance of past column recommendations. I always say that “these results shouldn’t be confused with the performance of accounts I manage for clients.”

However, today’s column is about the stocks I actually do own for clients. Therefore, here is my firm’s performance for the 22 ¼ years through March 2022. On an aggregate of individual accounts, we are up 592% (including dividends), versus 371% for the Standard & Poor’s 500 Index. Past performance doesn’t predict future returns.

Disclosure: I own each of the stocks discussed today personally and for most of my clients.