If you've heard of Laszlo Birinyi and like his work (as we do) but never actually paid to become a client, here's your chance to test drive the Westport, CT legend's stock picking prowess. Before the unveiling, you should know that Birinyi purposely tries not to change his picks every week based on the prevailing sentiment and says he's been advocating the five stocks all year. He says they were chosen to give investors some diversification, some play on energy and the economy, and some exposure to consumers. And now, the envelope please, I present to you, the Birinyi Basket.
1) BP Prudhoe Bay Royalty Trust (BPT): Birinyi's rationale for owning this trust is as simple as "the 8% dividend, you get energy and you get 8%." Even though BPT is down 10% this year at a time when the Energy sector (XLE) is up by at least 10%, Birinyi is sticking with it. "The stock may not do a whole lot," he says, adding that he is "very comfortable clipping coupons, if you will, and not worrying about the underlying price."
2) Ralph Lauren (RL): This play on high-end retail is in the basket in a Peter Lynch, buy-what-you -know sort of way. Birinyi says, "if you go in to a Ralph Lauren store in Manhattan you'll find out why they're doing well." He doesn't spend a lot of time trying to factor in "what the price of gas is going to do to retail sales." If Birinyi likes what he sees, he buys. And it's working, with shares of RL within a few dollars of an all-time high have gone from $40 to $140 in the past 2 years.
3) Hermes (RMS.PA): You'll have to really love shopping to chase this Laszlo luxury pick all the way to Paris to purchase it but he insists it's worth it if you want to own what he calls "the single-most solid brand in the world." Not only does Hermes sell high quality and high priced merchandise, but it's what they don't do and don't have that Birinyi likes most. Specifically, "they're not diluting their brand by putting their name on anything that comes along," he says. And at the same time, "22 or 23 analysts cover it but not a single one has a buy on it." At $22 billion dollars in market value, "it's the most significant large stock in the world that nobody recommends," according to Birinyi. Again, he's picking and sticking with a stock that has more than doubled in a year and is trading at an all-time high. "There's also a bit of a potential merger or takeover situation with Louis Vuitton but we've liked it for 5 years."
4) Priceline.com (PCLN): Priceline shares have more than doubled over the past year and are trading at a 10-year high (catching a theme here?). It is currently the second best stock in the S&P 500 for the past 12 months, eclipsed only by Chipotle Mexican Grill (CMG). Even Birinyi seems surprised by the discount travel website's continued ability to overcome obstacles and go higher. "I bought it at $150, made 10% in 3 weeks and thought I had wrung the bell. I turned around and it was $250," he says. For the record it is now north of $500 and this former trader concedes "whatever the magic is, Priceline continues to do well. They had one or two bad quarters and came right back. These are the kind of situations I look to. When you finally find out what the real story is behind the stock it's probably too late."
5) Cummins (CMI): The darling of diesel is keeping to theme, up more than five-fold since the 2009 lows. Birinyi says it's not particularly a macro or China call but rather is just getting down there and kicking the tires. "We've owned it for long time and have done well.. it hangs in there," he says.
Finally, Birinyi explains, "what we have tried to do here is give people who listen to us five names which give you some diversification, a little bit of a play on consumers."
If the market really gets ugly Birinyi says he'd be watching things like Prudhoe Bay running out of oil or starting to see some buy recommendations on Hermes.
What do you think? Would you buy the Birinyi Basket? Give us your thoughts and comments below.
- S&P 500
- BP Prudhoe Bay Royalty Trust
- Peter Lynch
- Ralph Lauren
- the real story
- The darling
- For the record