Nucor, Albemarle show value, growth

Hatfield vs. McCoy. Montague vs. Capulet. Yankees vs. Red Sox.

Great feuds, each. But what about value and growth, the two main schools of investing? They don’t have to be enemies.

Once a year, I write a column on stocks I believe show value and growth characteristics. For 17 columns beginning in 2001, the average 12-month return on these stocks has been 18.9%.

That compares very nicely with the 11.6% average return for the Standard & Poor’s 500 Total Return Index over the same periods.

Bear in mind my column results are hypothetical and shouldn’t be confused with results I obtain for clients. Also, past performance doesn’t predict the future.

Here are five new suggestions for stocks to consider. They all sell for less than 15 times per-share earnings, so they count as “value” in my book. As for growth, they all have grown their profits at a rate of 12% per year or better over the past five years.

Nucor

Can a steel company really be considered a growth company? I’d say yes in the case of Nucor Corp. (NUE). Over the past five years, it has increased its profits at a 43% annual clip and sales at 18%.

Nucor was the first major company to see the promise in recycling scrap steel and the first to use electric arc furnaces instead of blast furnaces.

Nucor is the largest steel producer in the United States, more than twice as big as Steel Dynamics and more than five times the size of U.S. Steel, which once was the world’s largest corporation.

Builders FirstSource

Based in Dallas, Builders FirstSource Inc. (BLDR) is the nation’s largest supplier of building materials to homebuilders and remodeling contractors. Among its products are wall panels, stairs, trusses, engineered wood and trim. In 2022, it acquired National Lumber.

After years of losses, the company has shown good profits from 2016 forward. Many people would like to see mortgage rates come down before they invest in a company like this. But I think the stock is a good buy now, selling for nine times earnings.

Seaboard

Seaboard Corp. (SEB), headquartered in Merriam, Kan., is a small conglomerate. It raises pigs, trades commodities, and does ocean shipping in the Caribbean and South America. It also produces sugar in Argentina and electricity in the Dominican Republic.

Some people don’t like that the Bresky family controls the majority of the stock here. I don’t see that as a big disadvantage. The company has shown a profit in each of the past 15 years, though it was a close call in 2018.

Albemarle

Albemarle Corp. (ALB), out of Charlotte, N.C., is the world’s largest lithium producer. Lithium is a key component of batteries for electric cars. Albemarle also produces bromine and chemical catalysts.

The stock has more than doubled in the past five years yet sells for a modest multiple — seven times recent earnings.

The main risk I see is that someone might develop a new battery technology not requiring lithium. A second concern is that some of Albemarle’s lithium comes from China, with which the U.S. has tense relations.

Luckily, Albemarle owns the largest lithium mine in the U.S. and obtains some lithium from Chile.

Stifel

A debt-free choice is Stifel Financial Corp., based in St. Louis, Mo. It’s a brokerage firm (Stifel Nicolaus) and investment management company that has grown rapidly through acquisitions.

Financial firms tend to rise and fall with the tides of the economy and the market. A recession in 2024 is a possible threat, but who knows? Pundits have been predicting an imminent recession for at least two years.

In this regard, I like Peter Lynch’s comment. He said more money has been lost by investors anticipating recessions than in the recessions themselves.

Last year

My “value plus growth” picks have been profitable in 13 of the past 17 years and have beaten the S&P 500 Total Return Index in 12 years.

Last year, I made four picks, three of which beat the index. Applied Materials Inc. (AMAT) was the best performer, up 40%. Regeneron Pharmaceuticals Inc. (REGN) chipped in 24% and Berkshire Hathaway Inc. (BRK.B) 21%.

The laggard was Laboratory Corp. of America Holdings (LH), which advanced 6%.

Collectively, my four “value plus growth” stocks returned 22.7%, versus 17.1% for the S&P.

Disclosure: I own Berkshire Hathaway personally and for almost all of my clients. A hedge fund I run owns call options on Nucor. A few of my clients own Applied Materials.