Com­pa­nies that show value plus mo­men­tum

Daily Press (Sunday) - - Work & Money -

Look­ing for a stock that’s on the move, but isn’t too ex­pen­sive?

I have a few to sug­gest.

The four stocks I am rec­om­mend­ing to­day all sell for 15 times earn­ings or less, and have ad­vanced at least 21% in the past three months, which is ten per­cent­age points bet­ter than the Stan­dard & Poor’s 500 In­dex.

Al­though based in Den­ver, Colorado, Alacer Gold Corp. I could kick my­self. (ALACF) mines for gold Early in the cur­rent mainly in Turkey. It is in re­ces­sion, I sold the process of merg­ing homebuilde­r D.R. with SSR Min­ing Inc. of Be­gin­ning in 2000, I’ve writHor­ton Inc. (DHI), Van­cou­ver, Canada, ten 37 col­umns (in­clud­ing tore­a­son­ing that it got which has mines in Ne­day’s) on stocks that pos­sess mur­dered in the last vada, Canada and Ar­gen­both value and mo­men­tum. The re­ces­sion (2007-2009) tina. av­er­age 12-month re­turn on my and would at least be The merger is billed as rec­om­men­da­tions in this se­ries hurt in this one. a merger of equals. The is 11.8%, a cou­ple of points bet­ter

What I missed is company will keep the than the 9.4% av­er­age for the that the pan­demic might ac­tu­ally SSR name, but head­quar­ters will Stan­dard & Poor’s 500. spur de­mand for houses, since be in Den­ver, Alacer’s home. Rod Of the 35 col­umns, 25 were sub­ur­ban liv­ing is more conAn­tai, CEO of Alacer, will be the prof­itable and 18 beat the S&P ducive to so­cial dis­tanc­ing500.thanCEO. city liv­ing is. Also, if one might Alacer share­hold­ers will get My picks from a year ago be forced to work at home, the 0.3246 shares of the new SSR for re­turned 23.3%, thanks to good choice of home be­comes even each Alacer share held. Col­lec­gains in Bio-Rad Lab­o­ra­to­ries more im­por­tant. tively, they will own 43% of the Inc. (BIO, up 54%) and Pulte

So, con­trary to my ex­pectanew company. Group Inc. (PHM, up 48%). tions, D. R. Hor­ton has done just I like the merger be­cause it Auto Na­tion Inc. (AN) also had a fine, up 45% in the past three gives the com­bined company gain, but All­state Corp. and Mi­months, beat­ing the Stan­dard & greater ge­o­graph­i­cal di­ver­sity. I cron Tech­nol­ogy Inc. de­clined. Poor’s 500 in­dex by about 34 see some po­lit­i­cal risk in Turkey, Col­lec­tively my picks beat the per­cent­age points. Hor­ton which has touchy re­la­tions with S&P 500, which was up 18.0%. shares are still rea­son­ably the U.S. Bear in mind that my col­umn priced, at 14 times earn­ings. I ex­pect gold to do well bere­c­om­men­da­tions are the­o­ret­i­cause of cen­tral banks are print­cal and don’t re­flect ac­tual ing money co­pi­ously, U.S.-China trades, trad­ing costs or taxes. re­la­tions are tense, and real Their re­sults shouldn’t be con­in­ter­est rates are low. fused with the per­for­mance of port­fo­lios I man­age for clients. And past per­for­mance doesn’t pre­dict fu­ture re­sults.

Dis­clo­sure: A fund I man­age owns call op­tions on Mi­cron Tech­nol­ogy.

D.R. Hor­ton

Tem­ple­ton Dragon

Up 28% in the past three months is Tem­ple­ton Dragon Fund (TDF), a closed-end in­vest­ment fund that nor­mally in­vests about 45% in China, 20% in Ja­pan, and 35% in var­i­ous other Asian coun­tries. It has av­er­aged bet­ter than 16% an­nual to­tal re­turn in the past five years.

Un­like mu­tual funds, which are their cousins, closed-end funds trade on an ex­change just like stocks, and may sell at a premium or dis­count to the value of their hold­ings. Tem­ple­ton Dragon usu­ally sells for a dis­count, cur­rently a lit­tle wider than usual at about 16%.

Michael Lai has run this fund for about 15 years. The ex­pense ra­tio is 1.35%, which is a lit­tle high for peo­ple (and there are many) who are fa­nat­ics about pre­fer­ring low ex­pense ra­tios. Per­son­ally, I think that con­sid­er­a­tion is overblown.

Alacer Gold

Brooks Au­to­ma­tion

Many as­pects of semi­con­duc­tor man­u­fac­tur­ing re­quire vac­uum cham­bers or clean rooms. Brooks Au­to­ma­tion Inc. (BRKS), based in Chelms­ford, Mas­sachusetts, pro­vides equip­ment to cre­ate these con­di­tions, and also pro­vides other equip­ment to the semi­con­duc­tor in­dus­try.

The semi­con­duc­tor equip­ment in­dus­try is no­to­ri­ous for boom and bust cy­cles. How­ever, Brooks have man­aged to in­crease its book value (cor­po­rate net worth per share) by about 8% a year over the past five fis­cal years, and 7% over the past ten years.

Brooks has debt equal to only 7% of eq­uity, an ad­mirable ra­tio that could prove in­valu­able if the na­tion goes through a longer and tougher re­ces­sion than many peo­ple cur­rently an­tic­i­pate. The stock is up close to 27% in the past three months, and sells for only about eight times earn­ings.

Track record

John Dorf­man is chair­man of Dorf­man Value In­vest­ments LLC in Newton Up­per Falls, Mas­sachusetts, and a syn­di­cated colum­nist. His firm or clients may own or trade se­cu­ri­ties dis­cussed in this col­umn. He can be reached at jdorf­man@dorf­man­value.com.

If you earn a de­cent in­come but have trou­ble sav­ing, the cul­prits could be the roof over your head and the car in your drive­way. Re­tire­ment savers who con­trib­ute more to their 401(k)s of­ten spend less on hous­ing and trans­porta­tion than their peers, ac­cord­ing to a study by the Em­ployee Ben­e­fit Re­search In­sti­tute and J.P. Mor­gan As­set Man­age­ment.

Bet­ter savers also spend less on food and drink, but hous­ing and trans­porta­tion are big­ger ex­penses that tend to be less flex­i­ble. Once you com­mit to a place to live and a car pay­ment, you’re typ­i­cally stuck with those ex­penses for a while.

“It may be de­ci­sions that you’re mak­ing as you are build­ing your life that will ul­ti­mately crowd out sav­ing for re­tire­ment,” says Kather­ine Roy, chief re­tire­ment strate­gist for J.P. Mor­gan As­set Man­age­ment.

The re­searchers di­vided 10,000 house­holds into three groups: the 25% who con­trib­uted the least to their re­tire­ment plans, the 25% who con­trib­uted the most, and those whose con­tri­bu­tions landed them in the mid­dle 50%. High savers, not sur­pris­ingly, had higher in­comes. Mid­dle and low savers had sim­i­lar in­comes, but mid­dle savers con­trib­uted about 5% at the start of their ca­reers while the low savers con­trib­uted about 2%.

That 3 per­cent­age-point dif­fer­ence in con­tri­bu­tions is largely at­trib­ut­able to the lower savers spend­ing more on hous­ing, trans­porta­tion, and food and bev­er­age, the re­searchers found. By re­tire­ment age, mid­dle savers had ac­cu­mu­lated sav­ings equal to twice their salaries. Low savers had ac­cu­mu­lated about half as much.

A ‘beater’ truck, a fat 401(k) Driv­ing older ve­hi­cles and own­ing a mod­est home are the top two sac­ri­fices cited in a study of Prin­ci­pal Fi­nan­cial Group cus­tomers ages 20 to 54 who con­trib­ute big chunks of their in­come to re­tire­ment ac­counts.

One of those savers is Er­ryn Ross, 30, of Ti­gard, Ore­gon. For sev­eral years af­ter col­lege, the ac­counts re­ceiv­able co­or­di­na­tor lived at home and drove a “beater” truck, a hand-me-down from his dad. By the time he was ready to re­place the truck, he had saved enough to pay cash for a new one while also max­ing out his 401(k) con­tri­bu­tion.

Ross re­cently bought a house with his fi­ancee, and they chose a home that cost about half of what their lender said they could af­ford. They fig­ured out how much they felt com­fort­able spend­ing each month and based their pur­chase on that amount. It’s not all about choice

Both stud­ies have their lim­i­ta­tions. Per­haps the big­gest one is that the re­searchers stud­ied only peo­ple who had ac­cess to work­place re­tire­ment plans. Be­fore the pan­demic, 55 mil­lion work­ing Amer­i­cans lacked such ac­cess, ac­cord­ing to Ge­orge­town Univer­sity Cen­ter for Re­tire­ment Ini­tia­tives. Ac­cess makes a huge dif­fer­ence: AARP found that peo­ple are15 times more likely to save for re­tire­ment if they have ac­cess to a pay­roll de­duc­tion plan at work. Re­searchers also didn’t fac­tor in the cost of liv­ing, which varies widely . Liv­ing ex­penses are

46% higher in San Fran­cisco and 86% higher in Man­hat­tan than in Port­land, for ex­am­ple.

Peo­ple’s per­sonal costs of liv­ing mat­ter hugely as well. Some­one with health prob­lems and lousy in­sur­ance likely will have more of their in­come eaten up by med­i­cal bills than some­one in ex­cel­lent health who has good cov­er­age. The num­ber of peo­ple you have to sup­port — chil­dren, el­derly par­ents, for ex­am­ple — af­fects how much you can save. Peo­ple with stu­dent loan debt have less dis­cre­tionary in­come than those whose par­ents paid for col­lege.

In­come matters, of course. Some peo­ple save on small in­comes, but the more money you make, the eas­ier it is to save.

In other words, any num­ber of fac­tors — such as, say, los­ing a job dur­ing a pan­demic — can af­fect some­one’s abil­ity to save.

When you do have choice, though, choose wisely. The de­ci­sions you make about the big ex­penses now can have a huge ef­fect on what you can spend in re­tire­ment.

Liz We­ston is a colum­nist at NerdWal­let and a cer­ti­fied fi­nan­cial plan­ner. Email: lwe­ston@nerdwal­let.com. Twit­ter: @lizwe­ston.

John Dorf­man

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