Li Ka-shing is sometimes called the Warren Buffett of China. Warren Buffett himself is the most celebrated investor in the U.S.
Companies built by these two famous investors are among my 10 favorite stocks for 2019.
Li’s son, Li Tzar Kuoi, known as Victor, now runs CK Asset Holdings Ltd. (CHKGF) Management, the real estate arm of Li’s empire. It owns office buildings, hotels and residential complexes in Hong Kong and worldwide. It also does real estate brokerage, manages properties, leases aircraft, and runs utilities.
The trade war currently depressing stocks in both countries qualifies as “bad news that is real but temporary,” my mantra for a situation that creates an investment opportunity.
Some reasons I like CK Asset are an extremely cheap stock price (five times recent earnings), low debt and a dividend yield of 3 percent.
As for Warren Buffett’s flagship company, Omaha-based Berkshire Hathaway Inc. (BRK.B), if you had invested $10,000 in it 30 years ago and held on, you would now have $627,053, compared with $161,370 if you had chosen an index fund that tracks the Standard & Poor’s 500 Index.
Along the way, you would have had the privilege of reading Buffett’s annual reports, masterpieces of pithy insight and wry humor.
Slammed by tax-loss selling late this year, natural gas producer Antero Resources Corp. (AR) has fallen to about $9.21 a share. It was over $60 five years ago. The company is buying back its own stock like crazy, and my hunch is that we will not have a fourth consecutive warm winter.
How would you like to pay only 13 times earnings for a company with astounding profit margins? You can do that at the moment with Apple Inc., and in my opinion, it would be missing an opportunity not to.
I like the synergies among Disney’s three traditional divisions — movies, theme parks and licensed merchandise depicting beloved characters like Mickey Mouse or the mermaid Ariel. But the company has grown more complex.
It owns ABC television, 80 percent of the ESPN sports network, the Disney Channel, Pixar, Marvel Entertainment and Lucasfilm. Investors fret that Disney overpaid for some of its properties, and that ABC is struggling. Maybe so, but if these problems allow me to purchase Disney for 15 times earnings, I’m happy.
Early last year, shares in General Dynamics Corp. (GD), a major defense contractor, sold for $222 a share. Today they sell for about $155. Among the reasons: increased competition in business jets (an important sideline), fear that a Democratic House of Representatives will cut defense spending, and of course a general stock-market decline.
I regard the company as one of the best managed of the defense contractors.
The long-term trend in the U.S. is for people to eat more chicken and less beef. So I often like Sanderson Farms Inc. (SAFM), a chicken producer based in Laurel, Mississippi. It had a tough year last year; chicken prices fell about 25 percent. I think that’s unlikely to happen again. I like this debt-free company at 0.7 times revenue.
Sony Corp. (SNE) is a diversified Japanese electronics company. It makes the popular PlayStation video game machine, produces parts for iPhones, and runs a major movie studio, among other activities. Profits in fiscal 2018 were the best in years, and analysts expect another 35 percent increase in fiscal 2019. Yet the stock sells for only 10 times earnings.
SPDR Gold Trust
A trust that holds physical gold, SPDR Gold Trust is a convenient way for individuals to own gold without directly paying for a storage vault and insurance. It has declined about 5 percent this year, but I like it as a hedge against international turmoil or inflation.
Another defensive holding is Walgreens Boots Alliance Inc. (WBA), a huge chain of drugstores in the U.S. and Britain. Once someone comes into a drugstore to fill a prescription, they often linger to buy detergent or a candy bar. So, sales tend to be extremely steady. Earnings were up sharply last fiscal year and are expected to rise another 8 percent or so this fiscal year.
How much attention should you pay to these recommendations? That’s a tough question.
My record as an investment manager suggests that you should give them serious consideration. My composite of individual accounts is up 480 percent in 18¾ years.
But my record in this column on my “Top Ten for the New Year” pieces is uninspired — up an average of 4.6 percent a year vs. 8.6 percent for the market.
Bear in mind that my column recommendations are theoretical and don’t reflect actual trades, trading costs or taxes. Their results shouldn’t be confused with the performance of portfolios I manage for clients. And past performance doesn’t predict future results.
Disclosure: I own each of the 10 stocks discussed today, for clients and personally.
John Dorfman is chairman of Dorfman Value Investments LLC in Newton Upper Falls, Massachusetts, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at firstname.lastname@example.org.
The Omaha World-Herald is owned by Berkshire Hathaway.