ShareThis Page
Choices show both value and growth |

Choices show both value and growth

| Monday, July 5, 2004 12:00 a.m

Although value and growth investors often see themselves as opponents, I believe that it’s sometimes useful to fuse the two approaches.

Once a year, I devote a column to stocks that I think have a foot in both camps. The picks from 2001 and 2002 have beaten the Standard & Poor’s 500 index decisively. Last year’s crop beat the S&P by a whisker.

The 10 “value plus growth” stocks I picked last year have returned just over 15 percent from July 8, 2003, through June 29, 2004, compared with just under 15 percent for the S&P.

If you had bought and held the seven stocks on my July 2001 list, you would have a 57 percent return through June 25, 2004. The return on the S&P 500 over the same three years was 0.1 percent. If you had bought the 10 stocks on my July 2002 list, you would have enjoyed a 64 percent return. The S&P 500 was up 27 percent over the two-year period.

Now it’s time to unveil my value-plus-growth picks for 2004-2005.

China Yuchai International Ltd. (CYD), a Singapore- based maker of diesel engines for trucks, has a five-year growth rate of 138 percent. Yet the stock sells for only 12 times earnings.

ConocoPhillips (COP), of Houston, the largest U.S. oil refiner, has a growth rate of 82 percent. That’s because its earnings were depressed in the base year, 1998.

Another energy stock is ChevronTexaco Corp., with headquarters in San Ramon, Calif. The integrated oil company has shown 40 percent average annual growth the past five years and sells for only 13 times earnings.

RenaissanceRe Holdings Ltd. (RNR), a reinsurance company based in Pembroke, Bermuda, showed a 53 percent growth rate. Amazingly, it sells for only 7 times earnings.

Pulte Homes, a Bloomfield Hills, Mich., homebuilder displays earnings growth at a 44 percent rate and a P-E of 10. Everyone is sure that interest rates will rise in the next 18 months and hurt homebuilders. Yet, the scenario that everyone expects is by no means a sure thing.

The same worry holds down the price of LandAmerica Financial Group Inc. (LFG), a title insurance company in Richmond, Vir., and Ryland Group Inc. (RYL), a homebuilder in Calabasas, Calif. They sell for 6 and 7 times earnings respectively.

Sanderson Farms Inc. (SAFM), a chicken farming company based in Laurel, Miss., makes the cut with a growth rate of 29 percent and a P-E of 12.

American Italian Pasta Co. (PLB), out of Kansas City, Miss., makes pasta under the Mueller brand, Golden Grain brand and house brands. With large and modern plants, it has unusually low production costs. It has been hurting recently because of the popularity of low-carbohydrate diets. I think the low-carb fad will pass within two years.

I will give the final spot to United Fire & Casualty Co. (UFCS), the only debt-free company in the bunch.

This portfolio is notably light on technology stocks, so it could trail the overall market if technology is hot.

Categories: News
TribLIVE commenting policy

You are solely responsible for your comments and by using 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.