The 2016 Buy List

Here are the 20 stocks for the 2016 Buy List. It’s locked and sealed and I can’t make any changes for 12 months.

For tracking purposes, I assume the Buy List is a $1 million portfolio that’s equally divided among 20 stocks. Below are all 20 positions with the amount of shares for each and the closing price for 2015. Whenever I discuss how the Buy List is doing, the list below is what I’m referring to.

Company Ticker Price Shares Balance
Alliance Data Systems ADS $276.57 180.7861 $50,000.00
AFLAC AFL $59.90 834.7245 $50,000.00
Bed Bath & Beyond BBBY $48.25 1,036.2694 $50,000.00
CR Bard BCR $189.44 263.9358 $50,000.00
Biogen BIIB $306.35 163.2120 $50,000.00
Cerner CERN $60.17 830.9789 $50,000.00
Cognizant Technology Solutions CTSH $60.02 833.0556 $50,000.00
Express Scripts ESRX $87.41 572.0169 $50,000.00
Ford Motor F $14.09 3,548.6160 $50,000.00
Fiserv FISV $91.46 546.6871 $50,000.00
HEICO HEI $54.36 919.7940 $50,000.00
Hormel Foods HRL $79.08 632.2711 $50,000.00
Microsoft MSFT $55.48 901.2257 $50,000.00
Ross Stores ROST $53.81 929.1953 $50,000.00
Signature Bank SBNY $153.37 326.0090 $50,000.00
Snap-on SNA $171.43 291.6642 $50,000.00
Stericycle SRCL $120.60 414.5937 $50,000.00
Stryker SYK $92.94 537.9815 $50,000.00
Wabtec WAB $71.12 703.0371 $50,000.00
Wells Fargo WFC $54.36 919.7940 $50,000.00
Total $1,000,000.00

The five new stocks are Alliance Data Systems, Biogen, Cerner, HEICO and Stericycle.

The six deletions are Ball, eBay, Moog, Oracle, PayPal and Qualcomm. We have an extra stock leaving this year due to the PayPal spinoff.

Here’s a brief description of the new buys.

Alliance Data Systems (ADS). These are the guys behind the rewards programs for many different companies. It’s one of the businesses you would never think is as profitable as it is. ADS has grown its EPS very steadily for the last several years: $5.16, $5.86, $7.63, $8.71, $10.01 and $12.56. The company expects $15 for 2015 and $17 for next year. I think they can top both of those. Again, don’t let the high share price scare you.

There are about 400 publicly traded biotech stocks. Only about 10% are profitable in any meaningful sense. Biogen (BIIB) is one, and it’s a good one. The recent numbers have been quite good. The company also took a painful but necessary step in cutting its workforce. Biogen also has one of the highest profit margins you’ll see, about 34%. Only the mafia and the government get higher than that.

Cerner (CERN) is a healthcare IT company. What Fiserv is to finance, Cerner is to healthcare. This is another stock that’s been chopped down this year. CERN was over $75 in April and now it’s near $60. Last month, the company gave a weak outlook for 2016. They see earnings ranging between $2.30 and $2.40 per share. Wall Street had been expecting $2.53 per share. Still, that’s a nice increase over the $2.07 they should earn for 2015 and the $1.65 they made last year. Cerner is a solid company.

HEICO (HEI) is exactly the kind of company I love to find. HEICO is a defense and aerospace contractor. They’re not well known. They’re kind of boring. And they’re very profitable. In fact, the stock was just upgraded by Bank of America Merrill Lynch. Please note that I’m recommending HEI, the common shares. There are A shares which have slightly different voting rights. Of the five new stocks, HEICO is the only one that pays a dividend, but it’s pretty small (0.30%).

Stericycle (SRCL) is a medical-waste-management company whose stock got clobbered last earnings season. SRCL plunged from around $150 to $120 per share, which is about where it is today. The company missed earnings by 10 cents per share. I’m not sure why a profit miss is valued with a P/E Ratio of 300, but in this case, it was. Some of the earnings miss was due to the dollar, and some was due to a business slowdown. Stericycle said that should pass. I like that this business has high fixed costs. Also, almost all of their revenue comes from long-term contracts. Stericycle is poised for a good year.

The average market cap is $58 billion. That ranges from a high of $443 billion for Microsoft (MSFT) to a low of $3.6 billion for HEICO (HEI). Eleven of the twenty stocks pay dividends. The total yield of the Buy List comes to 0.95%.

Only three stocks have been on the Buy List all eleven years: AFLAC (AFL), Bed Bath & Beyond (BBBY) and Fiserv (FISV). This will be Stryker’s (SYK) ninth-straight year on the Buy List.

Posted by on December 31st, 2015 at 7:50 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.