Few investors embrace the mantra, Less is more or have been more successful at it than Eddy Elfenbein. Since 2005, Elfenbein has trounced the S&P 500 index. From January 1, 2006 through October 28, 2024, the S&P 500 generated returns of 575.41% with dividends reinvested. Elfenbein’s Crossing Wall Street Buy List saw returns of 691.87% for that same period (with dividends reinvested). He even has outperformed renowned figures like Warren Buffett over that period.
How he does it: Elfenbein holds a buy list of 25 equally weighted high-quality companies. The list is locked, so no changes can be made during the year. At the start of each new year, he can sell and replace up to five stocks, and the entire list is rebalanced back to equal weighting. This low-maintenance approach is especially attractive when investors are overwhelmed by endless choices and complexity. Even more impressive is that Elfenbein has achieved stellar results without chasing cutting-edge growth stocks such as Tesla or Nvidia. Instead, his buy list is filled with safe, boring companies.
Bottom Line Personal asked Elfenbein how he selects stocks…and how you can incorporate his strategy into your own investing. Here’s what he had to say…
Early in my career, I thought of investing as a game I was trying to win. I bought stocks of fast-growing companies that weren’t going to pay profits or dividends for years, if ever. I counted on some picks to soar in price to make up for my losing bets. Treating stocks as lottery tickets was exciting, but I’ve achieved better performance with less stress by thinking of stocks as partial ownership in real businesses. Once I adopted that mindset, my investing criteria shifted dramatically…
I invest only in great companies. The companies must offer products and services that customers routinely need and consider essential…and they must have understandable and easy-to-analyze business models, dominant positions in their market niches, strong cash flow and high profit margins, and a long history of steadily rising sales and earnings. Two of my favorites and longest holdings…
Aflac (AFL). Most investors know the insurer’s duck mascot that says “Aflac” instead of quacking. Aflac provides more than 50 million consumers in the US and Japan with supplemental health insurance for accidents, dental and vision, disability and cancer. The business model is stable, and Aflac has increased its dividend, recently yielding 2.4%, for 41 consecutive years. Recent share price: $109.79.*
Stryker Corp. (SYK) has thousands of patents for medical devices and spends more than a $1 billion a year on research and development. It is a leader in hip- and knee-replacement products and an early mover in robotic surgeries for joint replacements. Stryker enjoys wide profit margins and remarkable earnings stability, and it has powerful demographics on its side (aging baby boomers with the resources to stay active). Recent share price: $356.01.
I set up allocation and trading rules to counter my impulses. This prevents me from second-guessing myself or letting emotions dictate investment moves. Example: I equally weight stocks on my buy list (4% allocation for each of the 25 stocks)…I don’t allow myself to touch those stocks during the year…and I rebalance at the start of each new year.
Since I only replace a maximum of five stocks each year, my holdings remain in the buy list anywhere from five years to forever. That forces me to choose stocks with the most likely long-term potential. I sell a stock only if the company is acquired…it soars to an untenable valuation…or it encounters long-term problems that aren’t readily fixable, such as the deterioration of a key market.
I’m not looking for big bargains. I’m willing to pay a decent price for high-quality businesses, perhaps when a firm’s price-to-earnings ratio (P/E) falls below its historical averages or surprises me with a predictable avenue of long-term growth.
I don’t worry about the financial markets, economy or Federal Reserve. Instead, I trust that over time great companies find a way to be profitable during bear markets and recessions, no matter where interest rates and inflation are headed.
Here’s the rest of my buy list for this year. You can follow the list each year at CrossingWallStreet.com/buylist…
Abbott Laboratories (ABT). The health-care juggernaut makes medical devices, diagnostics solutions, baby formula and nutritional shakes. The stock has increased its dividend for 52 consecutive years. Recent share price: $114.07.
American Water Works (AWK), the regulated water and wastewater utility in the US, serves 15 million people across 16 states. Recent share price: $138.79.
Amphenol (APH) manufactures basic but essential components for the technology industry, including audio/video coaxial cable, sensors and circuit boards. Recent share price: $68.68.
Broadridge Financial (BR) helps public companies process billions of SEC-required documents, including annual and quarterly reports and prospectuses. Recent share price: $213.70.
Celanese (CE) is the world’s leading producer of acetic acid and other engineered chemicals for industrial products ranging from anti-fog film to sweeteners. Recent share price: $129.97.
Cencora (COR). Formerly AmerisourceBergen, this is one of three pharmaceutical distributors that dominate the prescription drug industry in the US. Recent share price: $233.57.
FactSet Research (FDS) provides financial data and analytic software to investment pros. It has grown sales for 43 consecutive years. Recent share price: $459.29.
Federal Agricultural Mortgage Corporation (AGM). Better known as Farmer Mac, this stockholder-owned, government-sponsored enterprise buys mortgage loans, farm real estate and rural housing on the secondary market. Recent share price: $186.
Fair Isaac Corporation (FICO) holds a near-monopoly in credit scoring and consumer decision-making data for financial institutions. Its FICO scores are a benchmark to determine the creditworthiness of 200 million American consumers. Recent share price: $1,996.88.
Fiserv (FI), the financial technology company, provides banks and credit unions with services such as electronic funds transfers and loan processing for more than 1.4 billion customer accounts. Recent share price: $201.42.
Heico Corp (HEI) makes replacement parts for jets and services aerospace engines for commercial and military clients. Recent share price: $248.69.
Intercontinental Exchange (ICE) runs financial exchanges and clearinghouses including the New York Stock Exchange. Recent share price: $166.44.
Intuit (INTU) is the gold standard in US tax-preparation and accounting software including TurboTax and QuickBooks. Recent share price: $612.09.
McGrath RentCorp (MGRC) manufactures modular storage for businesses and educational institutions. Earlier this year, the company agreed to be bought out by a larger rival. After the government raised concerns about the deal, the merger was eventually called off and McGrath remains independent. Recent share price: $115.15.
Miller Industries (MLR) is the largest manufacturer of specialty tow trucks and equipment. Wall Street ignores this profitable company because it operates in an unglamorous industry and has a tiny market capitalization. Recent share price: $67.76.
Moody’s Corp (MCO) is part of an industry duopoly with S&P Global offering bond-rating and risk-assessment services that examine the creditworthiness of companies and governments. Warren Buffett owns nearly $10 billion worth of Moody’s stock. Recent share price: $462.14.
Otis Worldwide (OTIS). Founded in 1853, Otis is the world’s leading elevator and escalator manufacturer. Recent share price: $101.45.
Polaris (PII) manufactures powersports vehicles, including snowmobiles and watercraft, under the brand names Bennington, Hurricane and Godfrey. Recent share price: $74.05.
Rollins (ROL) has been called the Nvidia of extermination. Its popular Orkin and Critter Control brands provide pest and wildlife control to nearly three million residential and commercial customers. Recent share price: $47.26.
Science Applications International (SAIC) provides technical and engineering services for military and intelligence agencies. Recent share price: $144.83.
Silgan Holdings (SLGN) manufactures half of all metal containers for food and household goods, as well as plastic and paper packaging for consumer goods. Recent share price: $51.16.
The Hershey Company (HSY) dominates the US chocolate confectionary market, capturing more than one-third of all sales. Its 100 brands include Almond Joy, Cadbury, Hershey’s Kisses, KitKat, Reese’s and York Peppermint Pattie. Recent share price: $182.85.
Thermo Fisher Scientific (TMO).More than 400,000 customers depend on Thermo Fisher Scientific’s gene-analyzer instruments, diagnostic tools and reagents (compounds used to study chemical reactions). Recent share price: $552.54.
