Companies that show value plus momentum
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.