Fund Manager John Buckingham: Five Stock Picks (Part Two)

In Part One of an interview with YCharts, John Buckingham, manager of the Al Frank Fund and chief investment officer at Al Frank Asset Management, laid out his reasons for favoring Apache (APA), Hasbro (HAS) and KLA-Tencor (KLAC). Below, Buckingham explains picks four and five.

Norfolk Southern (NSC): The railroad operator has “a good yield and a stock that’s been beaten up,” he said. Its dividend yield is 3.2%. Norfolk has lost more than 16% this year, while the Dow Jones U.S. Railroads Index has gained more than 3%.

NSC Chart

NSC data by YCharts

The reason for the assault by investors is weaker commodity prices, particularly for coal, the main commodity that Norfolk hauls. At a PE ratio of 11, the stock may be priced for sluggish growth but not for the peppier economy that Buckingham anticipates long term. Another point in its favor, in his view, is that “there’s only so much rail out there.” A limited number of operators chugging down a limited amount of track can give an edge to an industry leader like Norfolk.

Wells Fargo (WFC): Sometimes the way to thrive is to merely survive when your competitors are dropping dead. The financial crisis allowed comparatively healthy banks like Wells Fargo and J.P. Morgan Chase (JPM) (another stock that Buckingham likes) to expand their asset bases, as the chart below shows, and to enhance their competitive positions, in large part by acquiring moribund rivals on the cheap. “We think that companies that were able to make acquisitions in the middle of the financial mess in 2008 are going to make out like bandits in the long run,” he said.

WFC Total Assets  Chart

WFC Total Assets data by YCharts

Conrad de Aenlle, a contributing editor at YCharts, has covered investment and personal-finance topics for more than 20 years, writing for The New York Times, International Herald Tribune, Los Angeles Times, Bloomberg News, Institutional Investor, MarketWatch and CBS MoneyWatch. He can be reached at editor@ycharts.com.

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