Dorfman: Only 2 'buys' in newest 30-30 Club
With baseball getting under way again, it's time for me to think about my 30-30 Club.
In baseball, a player who hits 30 home runs and steals 30 bases makes the so-called 30-30 Club. In more than a century, only 38 players have achieved it, most recently Mike Trout and Ryan Braun in 2012. Other stars in the club are Willie Mays, Hank Aaron, Barry Bonds and his father, Bobby Bonds.
My 30-30 club, however, is for corporations. To make my 30-30 roster, a company must show a 30 percent return on stockholders' equity in the latest fiscal year and a 30 percent earnings growth rate during the past five years. Only companies with a market value of $2 billion or more are eligible.
Twenty-five companies made the grade this year, nine more than last year but five short of the record set in 2001. The largest companies that qualified are Las Vegas Sands Corp. (LVS), Deere and Co. (DE), Delta Air Lines Inc. (DAL), Motorola Solutions Inc. (MSI) and O'Reilly Automotive Inc. (ORLY).
Delta, Motorola Solutions and Las Vegas Sands were standouts for rapid earnings growth. They were joined by Constellation Brands Inc. (STZ), which produces alcoholic beverages, and Questcor Pharmaceuticals Inc. (QCOR), a specialty drug company.
The highest returns on stockholders' equity were achieved by Valhi Inc. (VHI), a maker of titanium dioxide pigments; Brinker International Inc. (EAT), a restaurant chain; Delta Air Lines; Booz Allen Hamilton Holding Corp. (BAH), a business consultant specializing in defense and intelligence; and Questcor.
All of the companies on the 30-30 roster are good companies. That doesn't make them good stocks. Many of the stocks are high-priced, reflecting investors' expectations about their success.
For that reason, I usually recommend at most a handful of the 30-30 honorees as stock selections. Last year, I recommended four: CF Industries Holdings Inc. (CF), Apple Inc. (AAPL), Caterpillar Inc. (CAT) and Alliance Resource Partners LP (ARPL).
The best performer was Alliance, a coal company that is structured as a limited partnership. It rose 37.5 percent. Close behind was CF at 36.5 percent. Apple and Caterpillar also did well, up 27.9 percent and 24.7 percent, respectively.
All four of those stocks beat the Standard & Poor's 500 Stock Index, which was up 21.8 percent.
Bear in mind that my column picks are hypothetical and don't reflect trading costs or taxes. The performance of column recommendations shouldn't be confused with that of portfolios I run for clients. And past performance doesn't predict success.
I've written 11 columns about the 30-30 Club, in 1999-2005, and 2010 to the present. I recommended at least one stock in 10 of those years.
On average, my recommendations drawn from the 30-30 roster have returned 12.9 percent the year after selection. By comparison, the Standard & Poor's 500 Index has returned 8.7 percent during the same periods.
My 30-30 picks have been profitable six times in 10 years and beaten the S&P 500 six times.
This year I can recommend only two of the 26 stocks on the roster. They are all excellent companies, but most of the stocks are too expensive for my taste, and a few have more debt than I deem desirable.
I like CVR Energy Inc. (CVI) of Sugar Land, Texas. It is the general partner for two companies structured as partnerships. One refines petroleum products; the other produces fertilizer.
CVR stock trades at only 10 times earnings and 0.4 times revenue, my kind of multiples. Debt is under control, amounting to about 37 percent of stockholders' equity. And I like the refining industry, although my clients and I own a rival refiner, HollyFrontier Corp. (HFC).
I find Delta Air Lines attractive now. In the past, I often dismissed Delta as too indebted. It has brought debt down into my acceptable range, albeit just barely. (Debt is just below stockholders' equity.)
Airlines should benefit this year from labor costs and fuel prices lower than in recent years. Longer term, the airline should benefit from the ongoing consolidation in the industry.
Here, listed alphabetically, are the companies in this year's 30-30 Club that are not already mentioned above:
Alliance Data Systems Corp. (ADS), Eastman Chemical Co. (EMN), Fossil Group Inc. (FOSL), Graco Inc. (GGG), GNC Holdings Inc. (GNC), Generac Holdings Inc. (GNRC), Goodyear Tire & Rubber Co. (GT), Manhattan Associates Inc. (MANH), Nu Skin Enterprises (NUS), Polaris Industries Inc. (PII), Pool Corp. (POOL), Tenneco Inc. (TEN), Team Health Holdings Inc. (TMH), and Western Refining Inc. (WNR).
Congratulations to all.
John Dorfman is chairman of Thunderstorm Capital in Boston and a syndicated columnist. He can be reached at firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- NFL coaches weigh in on Polamalu’s legacy
- Penguins notebook: Five defensemen dress against San Jose
- Shortfalls sabotage promise of union retirees’ pensions
- Before leak, NSA mulled ending phone program
- Starkey: Next frontier for Steelers offense
- Pirates notebook: Decker leaves game with calf injury
- More Parkway West closures planned this week
- Arrests follow South Side fracas
- ‘Swing Night’ has feel of Prohibiton-era dance hall
- Duke returns to Final Four with win over Gonzaga
- West Virginia continues WNIT run, advances to semifinals