CWS Market Review – December 25, 2024

Ladies and Gentlemen:

Drumroll please.

I give you our 2025 Buy List.

Abbott Laboratories (ABT)
Adobe (ADBE)
Allison Transmission (ALSN)
American Water Works (AWK)
Amphenol (APH)
Broadridge Financial (BR)
Cencora (COR)
FactSet Research (FDS)
FICO (FICO)
Fiserv (FI)
HEICO (HEI)
Henry Schein (HSIC)
IES Holdings (IESC)
Intercontinental Exchange (ICE)
Intuit (INTU)
McGrath RentCorp (MGRC)
Miller Industries (MLR)
Moody’s (MCO)
Mueller Industries (MLI)
Otis Worldwide (OTIS)
Rollins (ROL)
Science Applications International (SAIC)
Silgan (SLGN)
Stryker (SYK)
Thermo Fisher Scientific (TMO)

The five new buys are:

Adobe (ADBE)
Allison Transmission (ALSN)
Henry Schein (HSIC)
IES Holdings (IESC)
Mueller Industries (MLI).

The five sells are:

AFLAC (AFL)
Celanese (CE)
Farmer Mac (AGM)
Hershey (HSY)
Polaris (PII).

This is our 20th annual Buy List. The new Buy List won’t go into effect until the start of trading on Thursday, January 2. The 25 stocks will be equally weighted based on the closing price as of December 31.

The Five New Buys

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

Adobe is best known for offering a wide range of programs from web design tools, photo manipulation and vector creation, through to video/audio editing, mobile app development, print layout and animation software. It operates through three segments: Digital Media, Digital Experience, and Publishing and Advertising. The Digital Media segment enables people to create content; and Document Cloud, a unified cloud-based document services platform. The flagship product is Creative Cloud, a subscription service that allows members to access its creative products.

Allison Transmission makes automatic transmissions that are used in several different industries. The stock has performed very well this year, but it’s still going for a reasonable valuation. In October, the company increased its guidance.

IES Holdings used to be known as Integrated Electrical Services before it changed its name a few years ago. IES is another stock that’s virtually unknown on Wall Street, despite having a great track record and a market cap of more than $4 billion. IES says it “designs and installs integrated electrical and technology systems and provides infrastructure products and services to a variety of end markets, including data centers, residential housing and commercial and industrial facilities. Our more than 9,000 employees serve clients in the United States.”

I confess that I’ve wanted to add Henry Schein for a few years. The company makes all sorts of products for the dental industry. Henry Schein tends to be a steady grower, which I like. The stock didn’t do much this year, so I thought this would be a good opportunity to add it.

Mueller Industries is a leading manufacturer of copper, brass, aluminum and plastic products. This is a classic small-cap cyclical stock. Once you realize the scope of its business, you understand that the use of Mueller’s products is seemingly endless. Mueller makes everything from copper tubing and fittings to brass and copper alloy bars and refrigeration valves. Only one analyst currently follows MLI.

The Five Sells

Coming up with the sells each year is hard, because you can’t help getting attached to some stocks. Also, as an investor, you have to admit your mistakes, which isn’t always easy, but it’s important. It’s particularly hard for me to let go of Aflac, but I think this is the right time.

The duck stock has been a wonderful investment for us, but it hasn’t grown as quickly as I’d like. Fortunately, we’re exiting the stock after a good return this year. Aflac is one of two stocks that’s been with us since the beginning. The other is Fiserv.

Celanese, ugh! This was a terrible investment. Celanese had a so-so year last year. This year, the chemical stock went through a rough patch before it completely fell apart in November. Celanese also bombed its last two earnings reports. Every day, I would think it couldn’t go any lower, but it did. The company said it intends to cut its dividend by 95%.

Farmer Mac is similar to Aflac. I basically like the company, but it did not perform up to expectations. The stock missed its last three earnings reports, and one of the misses was by a lot. In retrospect, I overestimated how strong its business model is.

Hershey wasn’t a hard choice. The chocolatier was a great stock for us earlier this decade, but over the last 18 months, the business took a lot of hits. In particular, the damage to the world cocoa market badly hurt Hershey. I also didn’t like how the Hershey Trust quickly shot down the merger offer from Mondelez.

Polaris was another easy choice. The company had a terrible year, and it badly missed its earnings. The last two reports were very poor. In the most recent report, Polaris’s earnings fell 73%. The CEO said he expects “a challenging retail environment throughout the rest of 2024 and into next year.” This is a great time to move on.

Thank You!

I’ll have all the details of our Buy List’s performance in 2024 in the next newsletter, which comes out on December 31.

I want to thank everyone for their support. I admit that our long-term buy-and-hold strategy can be a little boring, but it works. We’ve been doing it for 19 years.

I’m pleased to see that our ETF hit a new all-time high a few weeks ago. This year, the ETF had to add more than 1.2 million shares to keep up with investor demand.

I always enjoy following the market with intelligent, engaged readers like the ones here at CWS.

I want to wish you all a Merry Christmas and a happy, healthy and prosperous New Year.

– Eddy

Posted by on December 25th, 2024 at 6:39 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.