For years, my mentor, David Dreman, invested in Westinghouse Electric Co. The stock was cheap, often selling for about nine times the company’s per-share earnings. The stock price marched up nicely, yet the stock stayed cheap, because earnings were rising as fast as the stock price.
That’s a value investor’s dream. Today, Westinghouse is in the dust bin of history, and Dreman is mostly retired. But I long to find today’s version of what I call the Westinghouse Effect.
Here are a few possible candidates. These six stocks are relatively cheap and have achieved total returns of more than 500% over the five years through Jan. 23.
Core Natural Core Natural Resources Inc. (CNR), a coal company of all things, has returned 951% over the past five years. Core was formed Jan.
15 of this year by the merger of Consol Energy Inc. and Arch Resources Inc. The 951% figure cited above is for shareholders who originally held Consol.
Arch shareholders didn’t do badly either: They got between a double and a triple. The great investor Charlie Munger once said value investors run the risk of holding “a melting ice cube.” You can make an argument coal companies are just that.
My view is different. Although coal is a highly polluting fuel, it is an important one and probably for the next decade a necessary one. I like Core’s balance sheet.
It has more than two dollars in cash for every dollar of debt. Debt is only 13% of the company’s net worth. The stock sells for seven times earn.
