Daily Press (Sunday)

RTX and Timken hit the Casualty List

- John Dorfman John Dorfman is chairman of Dorfman Value Investment­s in Boston. His firm or clients may own or trade the stocks discussed here. He can be reached at jdorfman@ dorfmanval­ue.com.

The harsh market climate of August and September has left quite a few stocks selling for what I consider bargain prices.

Welcome to the 82nd quarterly Casualty List, featuring stocks that have been knocked around and that I think have the potential to recover and thrive.

I’ll start with RTX Corp. (RTX), formerly known as Raytheon Technologi­es. It’s a large conglomera­te, best known for making missiles, drones, satellites and Pratt & Whitney jet engines. A costly recall on the jet engines sent the stock spinning for a 27% loss in the third quarter.

One of my mantras as an investor is to buy stock in good companies on bad news that is real but temporary. I think that’s exactly the case with RTX. Pratt & Whitney has a good reputation in the aerospace industry, and I anticipate it will be back on its feet in a year or so.

Meanwhile, the stock is selling for 1.45 times book value (corporate net worth per share), compared to a 10-year average of 1.94.

I like the defense sector, which generates roughly half of Raytheon’s revenue. Congress is trying to cut spending, but I don’t see how it can chop defense spending much, given the high level of tensions between the U.S. and China, Russia, North Korea and Iran.


All sorts of machines use bearings, and Timken Co. (TKR) has been making them since 1899. It also makes automatic lubricatio­n systems, couplings and universal joints, transmissi­ons, brakes and clutches.

It has a large presence in India, and sales to Indian Railways accounted for 17% of the company’s revenue in 2022. It also supplies parts for the Mars rover and offshore wind turbines.

The stock fell more than 20% in the third quarter. In August, Timken announced that it earned $2.01 per share in the second quarter, eight cents shy of analysts’ consensus.

I think that traders put too much emphasis on whether companies beat consensus or not. Timken has grown its earnings at better than a 10% annual clip the past 10 years. With the stock selling at 12 times earnings, I think it’s a good value.


Shares of Amkor Technology Inc. (AMKR) dropped more than 22% in the quarter. The stock had been near $30 in July, but the company did a secondary stock offering of 10 million shares in September at $24. Price at the end of September: $22.60.

The sellers in the September offering were an investment vehicle for the family of James Kim, Amkor’s founder. Even after this sale, the family and its affiliates own a majority of Amkor’s stock.

Based in Tempe, Arizona, Amkor provides chip testing and packaging for semiconduc­tor manufactur­ers. Few Wall Street firms cover the stock, and only one (D.A. Davidson) ventures a price target. The target is $36 within a year.

The shares trade at eight times recent earnings, but the semiconduc­tor equipment industry is volatile. I like the stock, but be prepared for a bumpy ride.


As a speculatio­n, I think SeaWorld Entertainm­ent Inc. (SEAS) looks intriguing. The company had a close brush with bankruptcy during (but not totally because of ) the pandemic. Now its revenue is above pre-pandemic levels, and it has been profitable for two and a half years.

Shares fell almost 20% in the third quarter, mostly because of a decline in attendance at its parks that the company blamed on extra-hot weather. Revenue was up, but profits were down, partly because the SeaWorld ran various promotions in an attempt to boost attendance.

The shares sell for 12 times recent earnings, and only eight times the earnings that analysts

project for next year.


This is the 82nd quarterly Casualty List I’ve compiled. One-year performanc­e can be calculated for 78 lists,and it has averaged 15.26%.

That handily beats the 10.43% average for the Standard & Poor’s 500 Total Return index over the same periods.

My Casualty List recommenda­tions have been profitable 50 times and have beaten the S&P 39 times. Bear in mind that my column results are hypothetic­al and shouldn’t be confused with results I obtain for clients. Also, past performanc­e doesn’t predict the future.

My list from one year ago gained only 4.03% while the index advanced 16.57% from Oct. 3, 2022 through Sept. 29, 2023. Losses in Tyson Foods Inc. (TSN) and Fulgent Genetics Inc. (FLGT) dragged down the return.

The bright spots were Intel Corp. (INTC) and Western Digital Corp. (WDC). Great Lakes Dredge & Dock (GLDD) was close to unchanged.

Disclosure: A hedge fund I run owns Amkor common stock and call options on Intel and RTX.

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