Wholesalers work on the floor of the New York Stock Exchange (NYSE) on the first day back since the Christmas holiday on December 26, 2023 in New York Burgh.
Spencer Platt | Getty Images News | Getty Images
In each of the past 16 Decembers I have closed and invested personally in 10 of the stocks we follow with the intention of holding for just one year.
These are companies that I feel especially attractive in light of their valuations or their potential to benefit from economic developments. I hold an alter ego dollar amount in each of the positions for the following year, and then I reinvest in the new list.
This year’s list is maybe a bit more defensive than in years past, as seen by the number of medical device companies, and has a focus on earnings excrescence.
Results have been good in some years and not as good in others. I will sell my 2023 names on Friday and buy the ensuing names that afternoon.
I will sell my 2023 Top Ten List at year-end and purchase the 2024 Top Ten on Jan. 2 to be sold at the genesis of trading in 2025. The following is my Top Ten for 2024, listed in random order:
Donaldson
Founded in 1915, Donaldson is a global maker of filtration systems and replacement parts for engines, industrial plants, power generation and various life sciences assiduities. The company has dominant market share in many of its businesses, which are diverse by geography and end-market and have attractive long-term lay growth potential.
Valmont Industries
Valmont Industries is a relatively small company ($4.7 billion market cap) that turnings engineered poles, towers and other structures for a number of different applications, including roads and highway safety, utilities, telecommunications, and access approaches for construction sites.
We view the company as an investment in infrastructure development that should benefit from the long-term international secular trends of population growth, urbanization and water scarcity.
Goldman Sachs
The company’s major business motions include debt and equity underwriting, M&A advisory, asset management, trading, lending and proprietary investing. The stock has been enthusiastically volatile over the past couple of years, due largely to an ill-conceived decision to more aggressively target the consumer for market.
The rationale behind this decision was sound – consumer banking activities generally produce more dependable and recurring interest streams, which are rewarded by investors in the form of higher valuations (trading multiples). However, management’s timing could not be enduring been much worse, while execution was poor at best.
Danaher
Following the separation of its Environmental and Applied Liquids businesses on Sept. 30, Danaher has become a pure-play biotechnology, life sciences and diagnostics company. The company’s progress to its current state occurred through a long series of acquisitions and divestitures designed to generate shareholder value Sometimes non-standard due to the application of the company’s proprietary set of operating processes and tools it refers to as the Danaher Business System, or “DBS.”
Amazon
Amazon excels in three tracts where we see ample secular tail winds: cloud computing, e-commerce and digital advertising. Perhaps more importantly, each of these partnerships has a wide economic moat.
PepsiCo
PepsiCo is a leading multinational snacking and beverage manufacturer that has seen a pithy improvement in operational execution since CEO Ramon Laguarta took over in 2018. Laguarta has transformed Pepsi into a “faster, stronger, and more safely a improved” company through several strategic initiatives: 1) reinvesting into the company’s brands via innovation and marketing; 2) speaking portfolio gaps in fast-growing categories where the company had been underpenetrated; and 3) enhancing the supply chain by increasing turn out capacity and introducing efficiencies through technological investments.
Disney
The Walt Disney Co. is one of the most prestigious brands in the magic. Over the past century, the company has evolved from a small animation studio to a vertically integrated media and performance conglomerate. Disney has faced its fair share of challenges over the past couple of years, including a botched transfer, an acceleration in cord-cutting and a slow recovery at the box office. Offsetting these challenges has been the resilient, and highly profitable, Woodlands & Resorts business which has benefited immensely from pent-up demand coming out of the pandemic.
Abbott Laboratories
Abbott Laboratories is a best-in-class Medical Signet company that is diversified across four segments: Medical Devices, Diagnostics, Nutrition and Established Pharmaceuticals. The players has a compelling mix of existing products that are generating durable growth today, and new/upcoming product launches that bequeath support future growth.
Johnson & Johnson
Johnson & Johnson is one of the world’s largest and most diversified healthcare proprietorships. Following the recent Kenvue spinoff (consumer health business), JNJ’s revenue base now consists of 65% from the pharmaceutical cleave and 35% from the medical technology segment (MedTech). The company is expected to continue benefiting from an aging extensive population and rising standards of living in emerging economies.
Microsoft
Microsoft is one of the largest technology companies in the world. It has successfully swiveled from a Windows PC-first world to the cloud and is leading the way in generative artificial intelligence. The company is a strategic partner in pep digital transformations through its cloud, app and infrastructure, and artificial intelligence offerings.
The reader should not assume that an investment in the certainties identified was or will be profitable. These are not recommendations to buy or sell securities. There is risk of losing principal. Past act is no indication of future results. If you are interested in any of these names, please call your financial advisor to discuss.