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  1. Home
  2. / Investing
  3. / Energy

The Final Fine-Tuned Gad Value Investment Portfolio for 2017

We've made a few tweaks due to price changes, while others were based on a last-minute assessment of better value.
By SHAM GAD Jan 03, 2017 | 02:00 PM EST
Stocks quotes in this article: BAC, MHGU, LUV, DAL, BXE, XCO, GM, BRK.B, TOWN, FCAU, AAPL, KIN, LNG

As I suspected, we are making some final changes to the Gad Value Investment Portfolio for 2017. Some changes were a result of price changes while others were based on a last-minute assessment of better value.

We are adding Bank of America (BAC) . Although BAC, as just about all financial firms, has appreciated nicely after Trump's election, I believe its balance sheet is especially set to benefit from any further rise in rates. Meritage Hospitality Group (MHGU) , a fine business in its own right, was removed to make room for Bank of America.

Another tough switch was replacing Southwest Airlines (LUV) with Delta Air Lines (DAL) . My first inclination was simply to have both Southwest and Delta in the portfolio, but that would mean 20% of the fund was allocated to airlines. While we believe the airline industry has some nice tailwinds ahead of it, Delta's price/earnings multiple of 7 was half of Southwest. And Delta has come a long way in improving its business, culture and cost structure. I suppose all airlines have learned a thing or two from Southwest.

Finally, we swapped our Canadian energy pick Bellatrix (BXE) for U.S. gas producer EXCO Resources (XCO) . EXCO shares fell by more than 15% in the final weeks of the year. While in many ways EXCO shares remain speculative, the price decline was enough for us. We are willing to bet that Chairman C. John Wilder, who has an impressive record of selling energy assets, will continue to transform the company. Also, EXCO's board of directors owns around 50% or so of the stock, so we like the alignment of interest.

So, without further delay, here's the fund:

  1. Bank of America
  2. Delta Air Lines
  3. General Motors (GM) Class B warrants
  4. Berkshire Hathaway (BRK.B)
  5. TowneBank (TOWN)
  6. Fiat Chrysler (FCAU)
  7. Apple (AAPL)
  8. Kindred Biosciences (KIN)
  9. Cheniere Energy (LNG)
  10. EXCO Resources

As usual, we will provide a progress report each month on performance versus the index. As always, monthly performance is irrelevant. Overall, however, we believe this group represents attractive investment opportunities in the going into the ninth year of a bull market.

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At the time of publication, Gad was long BAC, DAL, BRK.B, TOWN, FCAU, AAPL, KIN, LNG, XCO and GM Class B warrants.

TAGS: Investing | U.S. Equity | Transportation | Financial Services | Healthcare | Energy | Technology | Stocks

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