David Kass adds nine new companies to his watch list
Q1 2021 hedge fund letters, conferences and more
SMITH BRAIN TRUST – With temperatures rising, Maryland Smith’s David Kass is looking to add a little heat to his biannual list of stocks to watch, dropping four of the picks he made in December of 2020 , and adding nine new ones.
Of the 16 stocks he recommended in December, 12 have increased in value over the past six months.
The five best performers were Restoration Hardware (RH) +59%, Bank of America (BAC) +47%, Google parentAlphabet (GOOG) +37%, Facebook (FB) +21%, and Microsoft (MSFT) +21%. (Percentage changes are calculated from December 12, 2020, through June 11, 2021).
Overall, Kass’ equally weighted portfolio rose 13.2%, compared to a 15.9% return on the S&P 500 over this time period.
His new list of stocks to watch includes 12 of the 16 stocks he recommended in December – Berkshire Hathaway, Apple, Microsoft, Amazon, Facebook, Micron Technology, RH, Bank of America, Pershing Square Tontine Holdings (has agreed to acquire a 10% stake in Universal Music from Vivendi), Alphabet (Google), Liberty Sirius XM, and Abbvie.
Midyear 2021 Stocks To Watch
His nine new picks are:
Alibaba (BABA) – “Berkshire Hathaway vice president Charlie Munger added this stock to the portfolio of Daily Journal during the first quarter of 2021,” says Kass, a clinical professor of finance at the University of Maryland’s Robert H. Smith School of Business. Kass has been following Berkshire Hathaway CEO Warren Buffett’s investments and philosophy since 1980 and has taken many Maryland Smith students to Omaha to meet the “oracle” himself.
Organon (OGN) – Official this month, OGN is a spinoff from Merck, and Kass says it’s got a healthy outlook. “It specializes in women’s health care products and is currently trading at an attractive valuation,” Kass notes, adding, “Spinoffs frequently outperform the market.”
Kansas City Southern (KSU) – Cross-border North American railroad stalwart Kansas City Southern has been keeping its proverbial trains running on time, and that’s caught Kass’ attention. “It has received takeover bids from Canadian National Railway and Canadian Pacific Railroad,” says Kass. “And it’s easy to see why. It is also the seventh-best performing stock in the S&P 500 over the past 30 years.”
Monster Beverage (MNST) – There’s some positive investment mojo surrounding this popular energy drink. “It is the second-best performing stock in the S&P 500 over the past 30 years,” says Kass, who says he’s personally more inclined to invest in the stuff than drink it. “It has generated steadily rising profits and has a dominant market share in the energy drink market.”
The Progressive Corporation (PGR) – “Insurance is never boring,” Kass says. “Progressive was praised by Warren Buffett during the Berkshire Hathaway 2021 annual meeting. By some measures, it is outperforming Berkshire’s Geico.”
Kraft Heinz (KHC) – Ketchup has never been out of fashion (because French fries). Still, Kraft Heinz these days is looking better and better. “Praised by Greg Abel during the Berkshire Hathaway annual meeting. It has been successfully turning around its business under the leadership of Miguel Patricio,” Kass says.
The Kroger Co. (KR) – Berkshire Hathaway added to its stake in the Cincinnati-based grocery giant in the first quarter of this year. “The company has made major investments in its online business,” Kass says, a move that is paying off. Kroger on Thursday reported higher-than-expected earnings, raised its earnings guidance for 2021, and announced a $1 billion share buyback. Not small potatoes.
T-Mobile US (TMUS) – Kass can hear T-Mobile now. And so can Berkshire Hathaway, he notes. The multinational conglomerate holding company has been recently adding to its stake in the U.S. subsidiary of Deutsche Telekom.
Danaher Corp. (DHR) – Kass has had an on-again, off-again relationship with Danaher, having picked the stock in 2019 and dropped it for 2020. He’s adding it back to his midyear 2021, as the economic outlook brightens once again. “It’s an impressive, well-run Washington, D.C., conglomerate previously headed by Larry Culp, CEO of General Electric,” Kass says.
Article by Dr. David Kass
