Purloined Portfolio includes steel, gas, aircraft

Apolitician would be silly not to do opposition research. A baseball team would be goofy not to use scouting reports. By the same token, an investment manager would have to be singularly incurious not to check out what other managers are buying and selling.

Once a year in this column I construct a Purloined Portfolio, made up of stocks that are held by other managers I particularly respect. This year, the managers are Scott Black, Randall Eley, Ken Heebner, David Katz and Charles Royce.

My information on the managers’ holdings came from public filings. It’s possible that a manager might have sold one of the stocks highlighted here.

Scott Black

From Scott Black, who runs Delphi Management in Boston, I select steel maker and iron miner Cleveland-cliffs Inc. (CLF).

As consensus builds that the U.S. will enter a recession in 2023 (if it’s not already in one), investors flee from cyclical stocks such as steel companies. That’s why this stock is remarkably cheap — less than three times recent earnings and less than five times the earnings analysts forecast for 2023.

Randall Eley

From Randall Eley, founder of Edgar Lomax Co. in Alexandria, Virginia, I choose Chevron Corp. (CVX).

Chevron shares are up 34 percent this year through Oct. 14 (nice!), but they are up only 39 percent for the past 10 years (ugh). While the stock is no longer screamingly cheap, I consider it quite reasonably priced at 11 times earnings.

Ken Heebner

Ken Heebner is chief investment officer at CGM Trust in Boston and runs mutual funds including the CGM Focus Fund. From his portfolio I draw Antero Resources Corp. (AR), a natural gas producer based in Denver.

The stock price is 13 times recent earnings but less than four times the earnings analysts predict for 2023. Gas is in keen demand, and gas in storage is lower than usual.

David Katz

Based in New York City, David Katz is chief investment officer for Matrix Asset Advisors and manages the Matrix Advisors Value Fund. From his holdings I recommend TE Connectivity Ltd. (TEL), a Swiss maker of electrical connectors and sensors.

The shares have fallen 33 percent this year, yet sales and earnings are actually up.

Charles Royce

Charles (Chuck) Royce is the head of Royce Investment Partners and the longtime manager of the Pennsylvania Mutual Fund.

From his portfolio, I’d pluck Air Lease Corp. (AL) as a speculation. The Los Angeles company leases aircraft, mostly to Asian customers. It had an 11-year profit streak going before suffering a loss in the past four quarters.

As of June, Air Lease had a fleet of 911 planes, 392 of which it owned. It has spent heavily on new aircraft and may have overspent.

Debt is high, so this stock is risky. However, the company has been buying back its own shares. And the stock is cheap, selling for less than book value.

Past record

My Purloined Portfolio from a year ago suffered a 2.3 percent loss, but that was 16 percentage points better than the 18.9 percent loss for the S&P. The best performer was Diamondback Energy Inc. (FANG), up 35 percent, drawn from the holdings of Scott Black.