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Investor gives peek at stocks in his portfolio

| Tuesday, June 11, 2013, 12:01 a.m.

Every year, I write about 200 to 300 stocks. But for my personal account and for most of my clients, I only own about 25 or so at a time.

Readers sometimes ask, what do you actually own? It seems a fair question, so I have decided to devote one column a year to it.

My biggest cluster of holdings is in the auto industry. With the average car on U.S. roads 11 years old, I think there is pent-up demand for new cars and forced demand for replacement parts. I own General Motors Co. (GM), Dorman Products Inc. (DORM, replacement parts), Magna International Inc. (MGA, original-equipment parts), and Cooper Tire & Rubber Co. (CTB).

I see the housing industry as enjoying a genuine and forceful recovery. Here, my holdings are NVR Inc. (NVR, a homebuilder), Flexsteel Industries Inc. (FLXS, a furniture maker), and Carlisle Cos. (CSL, a conglomerate that gets a lot of its revenue from roofing).

Technology stocks are often too expensive for a value investor like me, but I own several with modest valuations: Kulicke & Soffa Industries Inc. (KLIC) at six times earnings, Western Digital Corp. (WDC) and AOL Inc. (AOL) at a multiple of eight, and NetEase Inc.(NTES, a Chinese Internet company that I view as a rough equivalent of AOL) at a multiple of 14.

At the moment, I own no utilities and no telecommunications stocks. I'm light in health care but do own United Therapeutics (UTHR), which specializes in the treatment of vascular (blood vessel) disease. Its main drug treats hypertension of the pulmonary arteries.

Industrial stocks seem promising to me, as I'm more optimistic than most about the durability and strength of the economic recovery. Chicago Bridge & Iron Co. (CBI), which despite its name is based in the Netherlands, is a longtime holding. Now that it has hit 18 times earnings, I am peeling off a few shares for some clients.

Jardine Matheson Holdings Ltd. (JMHLY), a pan-Asian conglomerate, is a core holding. I own Cubic Corp. (CUB), which makes defense electronics and highway toll-collection systems, and Norfolk Southern Corp. (NSC), a railroad.

Finance, an area hit hard in the financial crisis of 2007-09, has some opportunities. Personally and for clients, I own Nasdaq OMX Group Inc. (NDAQ), City National Corp. (CYN, a bank holding company that serves parts of California, New York and Nevada), and Raymond James Financial Inc. (RJF, which is a brokerage house and a money management firm). On the low end of finance — pawn shops and payday loans — I own EZCorp.

Five miscellaneous holdings are:

• Deckers Outdoor Corp. (DECK), the maker of Ugg boots, which I bought on what I believed was temporary bad news of rising sheepskin prices.

• EGShares Emerging Markets Consumer ETF (ECON). This is an exchange traded fund that gives my clients and me some exposure to Mexico, South Africa, Brazil and India. Emerging countries like these generally have a faster underlying economic growth rate than America, younger populations and lower government deficits.

• Oceaneering International Inc. (OII), a leading maker of undersea robots. I've made good profits in this one but am worried it is getting expensive, and I may sell soon.

• Olin Corp. (OLN), a maker of chemicals and ammunition.

• RPC Inc. (RES), which provides hydraulic fracturing and pressure-pumping services to oil and gas drillers.

I wrote a column like this one on June 12, 2012, detailing 20 of my holdings at the time. From then through June 7, my selections rose 30 percent compared to 27 percent for the Standard & Poor's 500 Index.

Fifteen of the 20 holdings rose, with 11 beating the index. Two stocks more than doubled — Western Digital (up 114 percent) and Dorman Products (up 106 percent). The biggest losers were my two gold stocks. Barrick Gold (ABX) fell 46 percent, and Newmont Mining (NEM) dropped 31 percent.

Exactly half of last year's selections are back on this year's list.

I usually caution that my column recommendations shouldn't be confused with actual portfolios that I run for clients. Obviously, that statement is less true than usual this week, since I'm writing about what I own. Nevertheless, it still applies, because my “column” holding period is one year while my real-life holding period may be longer and shorter.

The performance of my column recommendations is calculated with no regard for trading costs or taxes. And the old saying always applies: Past performance does not predict future results.

John Dorfman is chairman of Thunderstorm Capital LLC in Boston. He can be reached at jdorfman@thunderstormcapital.com.

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