A Five Pack of Favorites
03/04/2005 12:00 am EST
I'm a big fan of Gary Alexander's , due to his disciplined, long-term, and common sense investment approach. A good example is his recent recommendation for a package of five stocks, put together, as he explains, "to help readers construct a balanced and safe portfolio".
"Biomet (BMET NASDAQ) makes orthopedic appliances. It was founded by four men in Warsaw, Indiana, in 1977. All four are all still active in the company. They now have 28 years of increasing earnings. This is a growth stock, even though most baby boomers are in denial about their aging. I like Biomet because it is only about half the market-cap as its competitors, but is a leader in most orthopedic category sales.
"H&R Block (HRB NYSE) is a hybrid financial stock, involved in mortgage sales as well as tax preparation services. Their fiscal year ends April 30, to take full advantage of peak revenues in tax season. Then, when you sit across the desk from a Block accountant, it is easier for them to cross-sell you a mortgage product. The stock is down, mostly due to anticipation of rising long-term interest rates, affecting the cost of mortgages. But I don’t believe that will be the case. Taxes are getting more complex, not less, especially when you enter the Alternative Minimum Tax (AMT) zone.
"Cendant (CD NYSE) is another hybrid stock, split between two real estate—mortgage brokers (Coldwell Banker, Century 21, ERA) and motels (Ramada, Days Inn, Super 8, Howard Johnson)— and travel-related businesses, including motels and rental cars (Avis and Budget). Cendant is America’s largest residential brokerage firm. As if this mix weren’t confusing enough, Cendant keeps unloading non-performing or non-core assets, in order to buy more travel and real estate names, adding shareholder value.
"Pfizer (PFE NYSE) is the newest addition to my Core Portfolio, and it’s a steal on dips under $24. I don’t want to pay a ‘fair’ price for any stock. I want to steal it. We see an ‘incredibly shrinking p/e’ for a classic blue-chip stock: Even if Pfizer pulls both Bextra and Celebrex off the market, its 2005 earnings may fall to $2.00. At a price of $24, that’ a 12 p/e, which is half the 2000-03 average p/e.
"Finally, D.R. Horton (DHI NYSE) is a buy under $40. Baby boomers are well off enough to afford retirement homes or second homes. The coasts are high-cost, but the vast majority of middle America is wide open and affordable. Those who think America is too crowded to accept more immigrants or houses must have never seen Europe or China. We’ll never be as crowded as coastal China, but we are still have lots of wide open spaces."