The concept of the “Purloined Portfolio” is centered around leveraging respected investment managers’ insights to curate a list of potential stock picks. This year, the column has seen the introduction of two new managers, Bernard Horn and Nicole Kornitzer, alongside familiar names from previous years. By gathering insights and recommendations from five esteemed managers, valuable investment ideas are presented, intended to guide individual investors in making informed decisions. The underlying message emphasizes that while ownership by a respected individual may not guarantee a stock’s worthiness, it is still crucial to evaluate and consider such options in investment strategies.
Scott Black, a veteran stock picker from Delphi Management, has chosen to highlight Schlumberger Ltd. (SLB) from his portfolio. Schlumberger specializes in the oil and gas sector, particularly in facilitating drilling at challenging sites, making it a go-to for oil companies facing difficult wells. After experiencing significant downturns during the industry-wide bust from 2014 to 2020, Schlumberger has recently bounced back, boasting a 12% rise in sales and a 20% increase in earnings over the past year. With the stock currently trading at approximately 15 times earnings—well below its historical average of 26—it presents a compelling buying opportunity for investors according to Black.
Similarly, Randall Eley, a manager at Edgar Lomax Co., has turned the spotlight on Cisco Systems Inc. (CSCO). Traditionally renowned for its dominance in computer networking, Cisco now faces robust competition, notably from newer firms like Arista Networks. Nevertheless, Cisco has maintained strong performance metrics, including a noteworthy net profit margin of 19% and a 23% return on stockholders’ equity. Eley believes these figures demonstrate that Cisco remains a solid investment option despite the challenges posed by its competitors.
Bernard Horn’s pick, General Dynamics Corp. (GD), reflects the increasing defense spending driven by ongoing global conflicts. With geopolitical tensions involving Israel, Russia, and China, Horn anticipates that U.S. defense budgets will be bolstered, benefiting companies like General Dynamics which produces critical military hardware and technology. The company has maintained a strong return on equity for over a decade, reinforcing its position as a potential investment target, as investors look towards industries that may receive government support during tumultuous times.
David Katz has selected J.P. Morgan Chase & Co. as a notable investment from his portfolio, supported by CEO Jamie Dimon’s leadership. Despite the general challenges within the banking sector, the stock price has seen a notable increase of 50% over the past year. Furthermore, with the yield curve normalizing, Katz sees additional growth potential for J.P. Morgan. The current valuation at 12 times earnings is considered attractive, positioning J.P. Morgan as a strong candidate in the financial sector.
Lastly, Nicole Kornitzer endorses Taiwan Semiconductor Manufacturing Co. (TSMC), praising its status as the world’s leading chip manufacturer. With an impressive after-tax profit margin of 38%, TSMC’s valuation stands at 29 times earnings, a premium compared to its potential U.S. counterpart. Kornitzer’s selection comes amid growing geopolitical tensions, particularly concerns about China’s posture towards Taiwan, which also factors into TSMC’s stock performance. Despite the risk, he considers it a valuable investment due to its pivotal role in the technology supply chain.
In summary, the “Purloined Portfolio” reflects a diverse array of potential investment opportunities across various sectors, including oil and gas, technology, finance, and defense. As the compiled insights illustrate, individual stocks such as Schlumberger, Cisco, General Dynamics, J.P. Morgan, and TSMC each offer unique advantages influenced by current market conditions and management expertise. Historically, the average return of these portfolios has outperformed the broader market, suggesting that the strategic selection of stocks inspired by respected managers can yield positive results for investors. However, it remains essential to conduct personalized research and investment due diligence, as past performance is not necessarily indicative of future success.
