CWS Market Review – December 27, 2022

Ladies and Gentlemen,

Drumroll please.

I give you our 2023 Buy List.

Abbott Laboratories (ABT)
AFLAC (AFL)
AmerisourceBergen (ABC)
Broadridge Financial (BR)
Carrier Global (CARR)
Celanese (CE)
Danaher (DHR)
FactSet Research (FDS)
FICO (FICO)
Fiserv (FISV)
HEICO (HEI)
Hershey (HSY)
Intercontinental Exchange (ICE)
Intuit (INTU)
Middleby (MIDD)
Miller Industries (MLR)
Moody’s (MCO)
Otis Worldwide (OTIS)
Polaris (PII)
Science Applications International (SAIC)
Silgan (SLGN)
Stepan (SCL)
Stryker (SYK)
Thermo Fisher Scientific (TMO)
Trex (TREX)

The five new buys are:

AmerisourceBergen (ABC)
Celanese (CE)
Intuit (INTU)
Middleby (MIDD)
Polaris (PII)

The five sells are:

Church & Dwight (CHD)
Reynolds Consumer Products (REYN)
Ross Stores (ROST)
Sherwin-Williams (SHW)
Zoetis (ZTS)

This is our 18th annual Buy List. The new Buy List won’t go into effect until the start of trading on Tuesday, January 3. The 25 stocks will be equally weighted based on the closing price as of December 30.

Here’s the performance of our ETF versus the S&P 500 ETF over the last few months.

Our ETF is based on the Buy List but it’s not always a perfect match.

I’ll have more to say about the new buys in upcoming issues, but I’ll share some thoughts with you.

I’ve wanted to add AmerisourceBergen for some time. I came close last year but decided to cut it at the last minute. That was a mistake. The company is a major drug wholesaler. AmerisourceBergen was formed 20 years ago through the merger of Bergen Brunswig and AmeriSource. They also have units offering consulting services and veterinary supply.

Part of the reason I shied away from ABC in previous years is due to the legal liabilities surrounding ABC’s role in the opioid crisis. I won’t go into its culpability, but the outlook has cleared up to some extent.

Celanese is the world’s leading maker of acetic acid. That’s one of those things that few people even think about, but it’s used in dozens of applications. Celanese is also the world’s leading maker of vinyl acetate. That’s a key ingredient in furniture glue. They make 25% of the world’s supply.

Earlier this year, Celanese agreed to buy the Mobility and Materials division from DuPont for $11 billion in cash. The stock currently yields 2.7%.

I like Intuit a lot. They’re the folks behind TurboTax, QuickBooks, Credit Karma and Mailchimp. It’s a great business. To be frank, we’re adding it at a higher price than I’d prefer.

But today’s elevated price comes after a year in which the shares were clobbered. Intuit is down about 40% YTD. Even if we’re not getting in at a discount, at least we’re getting it a lot less than where it was. With a market value of more than $100 billion, Intuit is by far the largest of the new additions.

Middleby returns to our Buy List after a one-year hiatus. The company is a major supplier of kitchen equipment for restaurants and hotels. The stock did not have a good year in 2022 (-30%), but the business has rebounded quite well. I like this company.

Originally, Polaris made snowmobiles. They still do today, but they also make all sorts of off-road vehicles, those crazy “slingshot” cars, plus snowmobiles, power boats, pontoon boats and lots of other stuff. They also do a nice business in selling apparel. Polaris has increased its dividend every year for the last 27 years.

Coming up with the sells each year is hard, because you can’t help getting attached to some stocks. Ross Stores was on our Buy List for 10 years. It made 325% for us which is about double the gain of the S&P 500. Church & Dwight was on for five years, and Sherwin-Williams was on for six years. Most of our sells this year lowered guidance at some point in 2022.

Church & Dwight was particularly difficult to let go, but I think I made the right call. Perhaps I’ll add it back in the future like I’m doing with Middleby.

I decided to keep Heico, but it’s a pricey stock. It’s tempting to take profits and move on, but I’m willing to let it run for now. The recent earnings report helped convince me to keep it.

I was strongly considering adding Nike this year, but the stock shot up after its recent earnings report. Some other companies that I was considering were Trane Technologies, 3M, CDW Corporation and Dollar General.

AFLAC and Fiserv have been on all 18 Buy Lists. Also note that sometime in Q4 of 2023, Danaher will spin off its Environmental & Applied Solutions segment into its own company. The new company will be composed of Danaher’s Water Quality and Product Identification businesses. Until the company gets a name, it will be known as EAS.

That’s it. The Buy List is locked and sealed, and I can’t make any changes for an entire year. I announce our changes before they go into effect just so no one can claim that I’m playing games with our track record.

That’s all for now. The stock market will be closed on Monday, January 2. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on December 27th, 2022 at 7:24 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.