The U.S. Hall of Heroes is composed of the 22 stocks that got at least one A and one B on our value and growth tests this year. We think all of them are worthy of your time and consideration. (To read an overview of this year’s list and how it was created, click here.)
A Duo of Double-A Heroes
Dillard’s (DDS) and Reliance Steel (RS) top the list of heroes this year. They got double-A prizes by picking up As for value and As for growth. Kudos to both of them.
Dillard’s is a department store operator from Little Rock, Arkansas. It got the nod thanks, in part, to a hefty share buyback program. The firm cut its share count by 32% over the last three fiscal years. It also trades near book value and at 7.3 times earnings. Its shares are up 16% over the last 12 months.
Reliance Steel is the largest operator of metal service centres in the U.S. and makes its home in Los Angeles, California. Its stock trades at just 6.7 times earnings and at 1.1 times book value. The firm’s return on equity is north of 18% and its 41% three-year earnings-per-share growth rate was helped along by the big tax cuts stateside.
The Value Heroes
The 12 stocks on the value side of the roster sport As for value and Bs for growth. The value Heroes are dominated by banks and retailers this year.
The list is led by Goldman Sachs (GS) and Morgan Stanley (MS), which both have market capitalizations near $74 billion, trade near book value, and are based in New York. The former changes hands at 13.8 times trailing earnings and the later at 10.1 times. Both are expected to grow their earnings nicely over the next year.
The smaller SunTrust Banks (STI) and State Street (STT) round out the top value banks with the former hailing from Atlanta and the latter from Boston. They’re a touch more expensive and trade near 1.3 times book value and 11 times earnings. SunTrust offers the best yield at 3.2%.
Chicago-based Old Republic (ORI) made it into the hall this year. The property and casualty insurance company trades at just 7.9 times earnings, offers a 3.6% yield, and has a long history of growing its dividend. The last financial firm on the value roster is Santander Consumer USA (SC). The auto-financing firm based in Dallas trades at 0.9 times tangible book value and at 4.8 times earnings.
The three value retailers are Big Lots (BIG), Group 1 Automotive (GPI), and Penske Automotive (PAG). Big Lots operates discount stores across the U.S. from its headquarters in Columbus, Ohio and trades at 10.4 times earnings that are expected to grow next year. Group 1 and Penske both operate automobile dealerships and trade near 5 times earnings. The former hails from Huston and the later from Bloomfield Hills, Michigan. Provided the economy doesn’t sour, they should do quite well.
The value list continues in Chicago with giant agricultural firm Archer-Daniels-Midland (ADM) at 11.3 times earnings. It’s followed by SYNNEX (SNX), which trades at 10.6 times earnings while offering electronic parts and services to customers from its home in Fremont, California. The last member of the value side is home builder Toll Brothers (TOL), which hails from Horsham, Pennsylvania. It changes hands for 7.8 times earnings.
The Growth Heroes
There are eight stocks on the growth side of the roster with As for growth and Bs for value. The growth side of the team is dominated by banks and retailers this year.
Berkshire Hathaway (BRK.A) is the largest growth stock this year with a market capitalization of $519 billion. The firm is headquartered in Omaha, Nebraska and is well-known as famed-investor Warren Buffett’s baby. The insurance-based conglomerate recently started to buy back its own stock, which is a good sign that the Oracle of Omaha thinks the firm’s shares are trading at a reasonable prices.
Alleghany (Y) is the second insurance firm on the growth side of the ledger. It hails from New York and is itself something of a mini-Berkshire because it’s another insurance-based conglomerate. The firm grew its book value per share by an average of 8.7% from 1999 through to the third quarter of 2018. Not bad for a stock trading at 1.1 times book value.
The two health care firms to make the growth grade are Anthem (ANTM) and Universal Health Services (UHS). The former is headquartered in Indianapolis and offers health care benefit plans. The later runs hospitals from its home in King Of Prussia, Pennsylvania. Both have climbed more than 28% over the last 12 months and have ROEs in excess of 16%.
On the energy front, DTE Energy (DTE) is an electric utility from Detroit that pays a 3.2% yield. HollyFrontier (HFC) is an independent petroleum refiner from Dallas that trades at 7.1 times earnings. It has grown its earnings-per-share at a 30% annual rate over the last three years.
Sticking with the commodity theme, Nucor (NUE) is a well-regarded steel producer from Charlotte, North Carolina. It trades at 9.1 times earnings and has grown its sales-per-share by an average of almost 14% per year over the last three years.
Advertising firm Interpublic Group (IPG) from New York rounds out the growth side of the Hall of Heroes with a return on equity of 29% and a 12-month return of 27%.
Before running off to buy any stock it is important to understand the risks of stock ownership. While we believe our Hero stocks have the ingredients necessary for success, the future isn’t certain and some stocks will encounter difficulties. There will also be periods – like the crash of 2008 – when stocks generally do poorly. There are no guarantees when it comes to the stock market.
That’s why you should make sure that a company’s situation hasn’t changed in some material way before investing. Read the latest press releases and regulatory filings. Study media stories and get up to speed on all of the most recent developments. Take particular care when buying or selling smaller stocks and those that trade infrequently. While we try to put you on a profitable course, head out only when you’re fully prepared.
|Name||Ticker||Industry Group||Industry Subgroup||Price (Nov 20, 2018)||Revenue ($M)||Market Cap ($M)||Price/Book||Price/TangibleBook||P/E (Last 12 Months)||Forward P/E||Dividend Yield||Leverage (Assets/Equity)||Value Grade||1Yr Total Return (%)||3 Yr EPS Growth (%)||3 Yr SPS Growth (%)||1 Yr Total Asset Growth (%)||Return on Equity (%)||Price/Sales||Growth Grade|
|Alleghany Corp||Y||Insurance||Property/Casualty Ins||$618.19||$7,331||$9,172||1.1||1.2||10.4||16.8||0.0%||3.0||B||12.2%||19.2%||15.2%||0.3%||10.8%||1.28||A|
|Archer-Daniels-Midland Co||ADM||Agriculture||Agricultural Operations||$45.66||$64,464||$25,599||1.3||1.7||11.3||12.5||2.9%||2.1||A||19.1%||10.4%||1.4%||1.8%||12.5%||0.40||B|
|Berkshire Hathaway Inc||BRK.A||Insurance||Property/Casualty Ins||$315,970.00||$264,098||$518,808||1.4||2.0||8.4||20.2||0.0%||1.9||B||16.2%||37.0%||7.7%||8.1%||18.1%||1.97||A|
|Big Lots Inc||BIG||Retail||Retail-Discount||$40.78||$5,243||$1,633||1.3||-||10.4||8.7||2.9%||1.5||A||-24.9%||13.1%||7.6%||14.9%||18.3%||0.32||B|
|Dillard's Inc||DDS||Retail||Retail-Regnl Dept Store||$62.65||$6,556||$1,721||1.0||-||7.3||11.1||0.6%||2.5||A||16.2%||7.6%||10.5%||-3.6%||15.1%||0.27||A|
|DTE Energy Co||DTE||Electric||Electric-Integrated||$118.50||$13,733||$21,558||2.1||2.7||17.6||19.0||3.2%||3.3||B||9.2%||18.4%||9.6%||6.7%||12.4%||1.56||A|
|Goldman Sachs Group Inc/The||GS||Banks||Diversified Banking Inst||$191.34||$50,191||$73,967||0.9||1.0||13.8||7.5||1.7%||10.8||A||-18.6%||4.2%||14.0%||2.9%||7.2%||1.48||B|
|Group 1 Automotive Inc||GPI||Retail||Retail-Automobile||$56.16||$11,613||$1,077||1.0||-||4.9||6.2||1.9%||4.3||A||-27.6%||43.7%||8.2%||3.2%||21.3%||0.10||B|
|HollyFrontier Corp||HFC||Oil&Gas||Oil Refining&Marketing||$59.25||$17,363||$10,266||1.7||3.1||7.1||7.9||2.2%||1.8||B||36.7%||29.5%||12.1%||13.3%||27.1%||0.60||A|
|Interpublic Group of Cos Inc/T||IPG||Advertising||Advertising Agencies||$23.08||$8,804||$8,871||4.1||-||14.6||12.8||3.6%||5.8||B||26.6%||11.8%||7.1%||15.3%||29.4%||1.01||A|
|Morgan Stanley||MS||Banks||Diversified Banking Inst||$43.10||$49,614||$74,139||1.1||1.2||10.1||8.4||2.8%||10.8||A||-10.3%||13.1%||13.4%||1.4%||10.5%||1.50||B|
|Old Republic International Cor||ORI||Insurance||Multi-line Insurance||$21.57||$6,467||$6,528||1.2||3.1||7.9||11.4||3.6%||3.7||A||13.2%||18.9%||0.7%||0.3%||15.5%||0.95||B|
|Penske Automotive Group Inc||PAG||Retail||Retail-Automobile||$42.31||$22,744||$3,590||1.4||8.6||5.1||7.6||3.5%||4.0||A||-5.7%||31.6%||7.6%||2.4%||30.2%||0.16||B|
|Reliance Steel & Aluminum Co||RS||Iron/Steel||Steel-Producers||$78.90||$11,097||$5,557||1.1||2.7||6.7||9.4||2.5%||1.7||A||6.8%||41.0%||6.8%||6.7%||18.1%||0.52||A|
|Santander Consumer USA Holding||SC||Diversified Finan Serv||Finance-Auto Loans||$18.40||$6,798||$6,612||0.9||0.9||4.8||6.8||4.3%||6.0||A||10.6%||18.1%||0.7%||10.4%||21.3%||0.98||B|
|State Street Corp||STT||Banks||Fiduciary Banks||$71.19||$12,714||$27,019||1.3||2.0||11.2||9.3||2.6%||9.5||A||-22.1%||11.9%||9.3%||-0.8%||11.7%||2.07||B|
|SunTrust Banks Inc||STI||Banks||Super-Regional Banks-US||$61.73||$10,142||$27,734||1.3||1.8||10.5||10.6||3.2%||8.8||A||8.8%||17.6%||9.4%||1.5%||12.3%||2.84||B|
|SYNNEX Corp||SNX||Electronics||Electronic Parts Distrib||$74.03||$19,743||$3,787||1.2||3.0||10.6||6.4||1.9%||3.1||A||-43.0%||9.9%||13.5%||26.5%||12.1%||0.15||B|
|Toll Brothers Inc||TOL||Home Builders||Bldg-Residential/Commer||$31.68||$6,716||$4,668||1.0||-||7.8||6.2||1.4%||2.2||A||-31.9%||25.6%||22.4%||-1.8%||13.9%||0.73||B|
|Universal Health Services Inc||UHS||Healthcare-Services||Medical-Hospitals||$130.10||$10,661||$12,036||2.2||8.0||14.6||13.0||0.3%||2.1||B||34.8%||9.1%||7.5%||6.0%||16.4%||1.15||A|