2023-12-08 08:48:47 ET
Summary
- My 2023 buy rated articles beat the S&P 500 by an average of over 5%.
- Results are based on assumption that an equal sum was invested in each stock on the date the related article debuted.
- I focus on dividend payers and highlight five stocks as current top buys, including Alphabet, Discover Financial Services, Medtronic, Comcast, and PNC Financial.
Readers might claim that beating the S&P 500 by just over 5% isn’t an accomplishment of note. After all, as of the middle of November, the Magnificent Seven were up 71% year to date.
However, there is another side to the Magnificent Seven’s story. That group of stocks fell 39% in 2022. In fact, collectively those companies' valuations are nearly 7% below the highs each stock reached in 2021 and/or 2022.
Furthermore, most of those names don’t pay a dividend, and dividend payers are my primary focus. Of my 27 Buy rated articles, only two highlight a non-dividend payer ( GOOG ).
To calculate my returns, I reviewed the articles Seeking Alpha posted as Buys. All returns are as of midday on 12/07/25. To compare my picks to the S&P 500, it is assumed that one would invest an equal sum in each stock on the day the article debuted.
Of the 27 picks, 16 beat the market, 9 provided positive returns but lagged the market, and 2 lost money.
I will note that one of my losers was an article on PNC Financial Services Group ( PNC ). I had the bad luck of highlighting that stock shortly before the banking crisis.
While I count my article on Travel Centers of America as one that beat the S&P, I do not include the gain from that stock in my calculations. That is because the company was acquired by BP for nearly twice the share price shortly after the article was published. I can’t claim that I predicted BP’s acquisition, so I’ll not take credit for the surge in share price.
I occasionally recommended a stock twice (GOOG, TSM, and O.) In those instances, I included the returns for each article in my calculations.
This piece provides a chart with a comparison of the returns of each ticker and that of the S&P 500.
I also highlight five stocks that I currently rate as Buys.
An Overview Of Returns
The following chart has the total returns of each ticker highlighted in an article along with the return of the S&P 500 in the same time frame. The tickers are in the order in which the related article appeared on Seeking Alpha.
% Total Returns / % Return S&P 500
Alphabet ( GOOG ) 54.59 / 16.5
Microsoft ( MSFT ) 54.66 / 14.66
PNC Financial ( PNC ) -10.63 / 13.93
Schwab ( SCHW ) 6.75 / 17.67
U.S. Bancorp ( USB ) 9.74 / 14.46
Bank of America ( BAC ) 9.71 / 11.5
Intuit ( INTU ) 30.06 / 10.66
Broadcom ( AVGO ) 49.43 / 10.73
Home Depot ( HD ) 14.03 / 10.32
Taiwan Semiconductor ( TSM ) 6.0 / 7.4
Kroger ( KR ) -1.53 / 9.35
Lowe’s ( LOW ) 11.04 / 8.46
Blue Owl Capital ( OBDC ) 15.43 / 9.6
VICI Properties ( VICI ) 2.08 / 9.6
Comcast ( CMCSA ) 9.94 / 5.44
Verizon ( VZ ) 15.94 / -.07
Alphabet ( GOOG ) 6.84 / 3.33
Main Street Capital ( MAIN ) 3.65 / 5.76
Realty Income ( O ) 11.71 / 5.76
Agree Realty ( ADC ) 11.35 / 5.76
Schwab US Dividend ETF ( SCHD ) 4.93 / 5.44
Pacer Cash Cows 100 ETF (COWZ) 5.04 / 6.24
Pepsi ( PEP ) 2.84 / 5.03
Realty Income ( O ) 15.22 / 8.01
Discover ( DFS ) 18.52 / 1.46
Taiwan Semiconductor 1.28 / .4
Average 13.65% / 8.39%
My Current Top Five Buys
Alphabet ( GOOG ) (GOOGL)
Alphabet's Google search business has battled headwinds from a slowdown in the overall digital advertising industry. However, the firm’s Q3 2023 results, released late in October, appear to have signaled an inflection point.
Revenue was up 11% year over year, diluted EPS surged 46% over the comparable quarter, and net income increased 42% to nearly $20 billion.
Much of the growth came through a 9.5% increase in advertising revenue. Advertising revenues in search increased by 11.4% while YouTube ad revenue climbed 12.5%. These results appeared to embolden the bulls, as the stock is up nearly 10% since the earnings debut.
The company’s enormous profits are being channeled into the higher-growth YouTube and Google Cloud divisions.
Revenue for search and YouTube have increased recently, and Alphabet generates hefty operating profit margins somewhere in the 25% range.
Alphabet also has the “moonshot” initiatives that could someday drive strong growth, including autonomous vehicles, drone delivery and quantum computing.
The company’s cloud operations, which were once cash flow negative, are now turning a profit. Reporting year-over-year growth of 22% and $8.4 billion in revenue, Cloud missed consensus by $230 million last quarter.
Gartner forecasts the global cloud market will grow by just over 20%, from $563.6 billion this year to $678.8 billion in 2024.
Artificial Intelligence could also drive a surge in revenues. Alphabet has integrated AI into Google Photos, Maps, Search (speech recognition), Gmail (Smart Reply), and in Google cloud.
A recent Wall Street Journal article revealed Google’s development of a new artificial-intelligence system the company claims is the most powerful on the market. The system includes technology developed by ChatGPT creator OpenAI.
Known as Gemini, the algorithm will not be available until early in 2024.
Alphabet’s Other Bets, commonly known as “moonshots,”' could someday fuel substantial growth. These initiatives include Waymo, Wing, AI research company DeepMind, smart home products from Google Nest, and Verily life sciences.
Waymo appears to be the moonshot that is most likely to drive future revenue. Following approval by California regulators, Waymo operations in San Francisco can now transport paying customers throughout the city, without a human safety driver, 24 hours a day, through any weather, and at speeds of up to 65 miles per hour.
Morgan Stanley estimates Waymo’s potential valuation at $105 billion, and UBS estimates Waymo’s taxi service might generate $114 billion in revenue in 2030.
I hold a small position in Alphabet, and I rate it as a Buy.
Discover Financial Services ( DFS )
Sky rocketing net charge-off rates, higher credit provisioning costs, and a double-digit decline in EPS, sent shares of Discover to a new 52 week low in October.
The fall in share price followed the Q3 earnings report issued during the middle of that month.
Bears focused on two factors. The first was the 27% year-over-year decline in diluted EPS. Aside from falling at a double-digit pace, the $2.59 in reported EPS was well below the $3.17consensus.
A second area of concern was a surge in the company’s delinquency and net charge-off rates. With a net charge-off rate of 3.52%, the company recorded the fourth consecutive quarterly increase in that metric. That’s well above the number reported by commercial banks in the second quarter.
Management now guides for a full year average net charge-off rate in a range of 3.4% to 3.6% with net charge-offs expected to peak in mid-to late 2024.
Despite these negatives, I viewed the results as akin to a “glass half full.”
First, it’s important to understand that credit loss rates are normalizing following the abnormally low levels of the past two years.
Total loans in the third quarter grew to $120.4 billion, up from $102 billion in the comparable quarter.
That followed average loan growth of 19% in 2022. Management also provided guidance for average loan growth in 2023 in the mid-teens.
Revenue of $4 billion was up 16.4%, beating consensus by $80 million.
Discover’s efficiency ratio, a metric used to measure a bank’s profitability, is routinely below 40%. Now consider that banks generally shoot for an efficiency ratio below 60% (the lower the figure, the more profitable the bank.)
Discover’s ROA of 2.54% and ROIC of 2.60% outpace the sector’s 1.08% ROA and 1.35% ROIC. And Discover’s ROE of 24.59% places it well into the top 25% in its industry.
As of September 30, 2023, Discover’s Common Equity Tier 1 capital ratio, under the Basel III transition, was 11.6%. That’s well above the company’s 10.5% target rate. DFS has a BBB- credit rating, which is the lowest level of investment grade credit.
Discover yields 2.78%. With a payout ratio just above 19%, the dividend is safe, and with a 5-year dividend growth rate of 12.39%, it’s likely that the dividend will continue to grow.
Following Q3 earnings, I added markedly to the medium sized position I already held in the stock. While the shares are up over 18% since my DFS buy rated article appeared, I believe it still has plenty of room to run.
Medtronic ( MDT )
While Medtronic is up about 15% from its 52-week low, it is still trading near the lowest level for the stock in the last decade.
As the world’s largest pure-play medical-device maker, Medtronic is well diversified with operations in more than 150 countries, and products designed for the treatment of over 70 medical conditions.
MDT holds a 50% share in core heart devices and has a pipeline that includes treatments for atrial fibrillation, mitral valve disease, and renal denervation for hypertension.
New product developments last quarter included a filing for FDA premarket approval of the PulseSelect PFA catheter for cardiac ablation. If approved, it would become the first pulsed-field cardiac ablation catheter available in the U.S.
Medtronic also introduced the Hugo robotic system for soft tissue surgery in Europe. Hugo is currently undergoing trials in the U.S. for urology applications.
Hugo is now in use in South America, Europe, and Asia. Medtronic claims fewer than 5% of surgeries use robotics, so this arena may have potential for robust growth.
In April of 2023, the FDA approved Medtronic’s MiniMed 780G, an algorithm-powered insulin delivery system for diabetes care.
Medtronic's AccuRhythm AI algorithm technology won MedTech’s Breakthrough best new monitoring solution award.
By utilizing AI algorithms Medtronic’s LINQ insertable cardiac monitor improves alert accuracy and outcomes for heart related diseases. LINQ is designed to monitor the patient's cardiac rhythm and heart rate. Using AccuRhythm, it provides long-term monitoring of heart rhythms, thereby reducing false alerts related to atrial fibrillation ('AF'), as well as false alerts for asystoles.
LINQ reduces false AF alerts by 74.1% and asystole alerts by 97.4% while providing 100% accuracy in measuring true pause alerts.
Medtronic’s GI Genius endoscopy module is an example of the company’s use of AI to push the envelope on medical device technology. The GI Genius detects small colorectal polyps and lesions that are oftentimes missed by the human eye.
According to MDT, GI Genius increases detection of adenoma by up to 14.4%. That is of pivotal importance considering early detection can increase the survival rate for colorectal cancer significantly.
With a dataset of over 13 million polyp images, as the use of GI Genius increases, so does the related data. This results in the AI endoscopy module enhancing performance and accuracy.
Medtronic's recent partnership with Nvidia to improve the GI Genius will allow third-party developers to test AI models to improve the ability of GI Genius to detect signs of colorectal disease.
Health care professionals' strong adoption of GI Genius boosted Medtronic’s gastrointestinal business 16% last quarter alone.
Medtronic’s diabetes products use AI to improve automated insulin-delivery systems. Harnessing advanced algorithms of patients’ actual glucose levels, the company's 780G insulin pump, along with its Guardian continuous glucose management system, lowers the rate of glucose fluctuations.
Prior to undergoing procedures, Medtronic's UNID Adaptive Spine Intelligence System analyzes probable patient outcomes. Incorporating data from thousands of spinal surgeries, the system allows surgeons to deliver better outcomes for patients.
The above are examples of Medtronic’s use of AI for its product lines. Grand View Research estimates a CAGR of 37.5% for the global artificial intelligence healthcare market from 2023 to 2030.
An aging population, increasingly in need of medical care, should insure not just a steady but growing demand for Medtronic’s products.
Medtronic’s debt is A rated.
MDT has a yield of 3.49%. With a payout ratio just below 51%, and a 5-year dividend growth rate of 7.37%, Medtronic’s dividend is safe. Investors should know that with 46 years of dividend raises, MDT should soon join the ranks of the Dividend Kings.
I’ve recently increased my small position in MDT markedly, as I believe it has considerable upside potential.
Comcast ( CMCSA )
Bears argue that Comcast’s exposure to traditional TV will at best result in slow growth. A second concern is that the Sky acquisition resulted in the company’s debt surging from $47.2 billion to $111.7 billion.
And last but perhaps not least Peacock’s streaming service is eating up cash.
There’s no doubt that cable TV is in what appears to be a death spiral; however, lost in that picture is Comcast’s position as a near monopoly over half of the United States. That means Comcast is the primary provider of broadband, and broadband comes very close to being an essential service in Americans’ businesses and households.
A study by The Institute For Local Self-Reliance determined that CMCSA is the sole provider of broadband for 30 million customers. Furthermore, the only alternative to cable companies for an additional 33 million households are markedly slower and less reliable broadband service providers.
Not only does Comcast hold a monopoly in many areas in which it operates, the company also offers superior service, at least in terms of download speeds. A recent study by Ookla rates Comcasts’ Xfinity as having superior download speeds among all fixed broadband providers.
Bears see this, too, as a negative, in that Comcast has saturated the broadband markets in many areas so that little growth is possible. Morningstar estimates CMCSA increased its broadband market share in the areas it serves from 50% a decade ago to about 65% today. However, broadband brings in a steady, high margin revenue stream for the company.
Additionally, a recent initiative may allow Comcast to capitalize on its broadband offerings.
The fastest internet speeds are delivered using DOCSIS 3.0 and DOCSIS 3.1. DOCSIS 3.1 provides a maximum downstream capacity of 10 Gbps along with a maximum upstream capacity of 1-2 Gbps.
Comcast plans to introduce DOCSIS 4.0 t in late 2023 with 50 million customers having access to the service by the end of 2025. DOCSIS 4.0 provides downstream capacity of 10 Gbps but increases upstream capacity to 6 Gbps. The increased upstream capacity will enhance content creation, live streaming, and other upload centered activities.
Unlike telecoms, Comcast will need a negligible increase in capex for wireless spectrum licenses and to build out capacity on its network. That’s because the company can employ existing infrastructure and use a broader spectrum range with the new DOCSIS 4.0 protocol to increase speeds.
Comcast's theme park business is also set to increase. The company’s fourth theme park, Universal's Epic Universe, is under construction. When complete, it will double the size of the Universal Orlando Resort Park.
While Comcast's theme parks only account for 8% of the company's revenue, the segment’s revenue and adjusted EBITDA increased 17% and 20%, respectively, last quarter.
Comcast is also set to sell Hulu to Disney ( DIS ) for at least $8.5 billion.
Comcast’s debt is at the lowest investment grade A levels with stable outlooks.
The current yield is 2.78%. With a payout ratio just above 29%, and a 5-year dividend growth rate of 9.40%, the dividend is safe and likely to grow at a robust pace.
In part, that is because Comcast is a share repurchase machine. The company has bought back roughly ten percent of shares outstanding over the last year and a half.
I have a moderate sized position in CMCSA, and I add to that investment on a regular basis. I believe the stock has substantial upside potential.
PNC Financial ( PNC )
PNC is the 6th largest commercial bank and the 2nd largest regional bank in the U.S. The company operates 2,629 branches and 9,523 ATMs in more than 40 states across the nation.
As of the end of 2021, the primary source of the bank’s deposit base are the states of Pennsylvania (30%), New Jersey (9%), Texas (9%), and Ohio (9%). PNC has the largest deposit share in Pennsylvania and Kentucky and the second-largest share in Alabama and Indiana.
Unlike many of its competitors, PNC focuses on fee-based businesses which generate from 35% to 45% of the bank’s net revenues.
PNC has a solid history of acquiring and integrating other banks into its system. A notable example is the deal for National City in 2008, which doubled the size of PNC. That was followed by the acquisition of RBC’s U.S. branch network in the Southeast in 2012.
More recently, PNC acquired BBVA USA. That deal resulted in PNC growing by roughly 25%. The acquisition increased PNC’s assets by about $100 billion, including $82 billion in deposits, and 637 branches in Texas, Alabama, Arizona, California, Florida, Colorado, and New Mexico.
Management claims the deal will provide the bank with a presence in 29 of the 30 largest markets in the U.S. The expansion also gives PNC a strong position in the faster-growing Sunbelt region of the US.
PNC has a culture of consistent and conservative underwriting standards.
When the Feds conducted a stress test early this year, PNC posted the best score among the super-regional banks in terms of its stress capital buffer ((SCB)) score. SCB is a measure used to evaluate a bank’s ability to weather adverse economic scenarios.
Even though PNC is the sixth largest bank in the nation, it is not large enough to be considered a global systemically important bank. That translates into certain scale advantages without the more burdensome regulatory requirements imposed on the largest banks.
I’ll add that the recent banking crisis has pushed valuations in the industry into bargain basement levels.
PNC increased the dividend for 13 consecutive years. This includes during the 2020 pandemic when many banks froze or cut their dividends. The current yield is 4.45%. With a payout ratio a bit below 42%, and a 5-year dividend growth rate of 12.40%, the dividend is safe and likely to grow at a fairly strong pace.
I have a moderate position in the stock, and I rate it as a Buy.
Summation
I rank each of the five stocks I reviewed as Buys. Except for PNC, I believe all of the company’s trade for a fairly wide margin of safety.
Although I rate PNC as a buy, I would lower my rating of that stock to a Hold if the share price increased by 5% to 10%. At that point, I would consider the shares to be trading at the more desirable end of a fair value range.
Note that each company has an investment level credit rating, and with the exception of Alphabet which does not pay a dividend, a well-funded dividend, and a strong history of dividend growth.
For further details see:
My 2023 Buy Rated Articles Beat The S&P 500 By Over 5%. My Current Top 5 Picks