The Top 500 U.S. Stocks: All-Stars

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Double-A Stock

Congratulations go to PulteGroup (PHM) because it is the sole candidate to win a double-A prize this year. As it happens, the firm got the same prize last year. PulteGroup is a large home builder with operations in about 50 major metropolitan markets and calls Atlanta its home. The firm is still recovering from the aftereffects of the 2008 downturn, which hit the U.S. real estate and financial markets hard. But despite the slow recovery, PulteGroup returned to profitability in 2012, started paying dividends again in 2013, and appears to be on course for better times.

All-Star Stocks

While PulteGroup heads up this year’s All-Star team, it’s joined by 18 other companies that earned at least one A and one B on the value and growth tests. Seven of the 18 got top marks for value while 11 got top marks for growth. The seven leading value stocks are Avnet (AVT), Bank of New York Mellon (BK), Leucadia National (LUK), Old Republic International (ORI), SCANA (SCG), Trinity Industries (TRN), and Valero Energy (VLO). As it happens, Valero Energy and Old Republic were also highly rated last year. Valero is a past double-A winner while Old Republic took home an A for value and a B for growth last time.

Here’s a quick look at each value star. Avnet is an electronics wholesaler that does business in over 90 countries. The Bank of New York Mellon is the financial giant founded by Alexander Hamilton in 1784. Leucadia National is a conglomerate with wide-ranging interests from beef to banking. Old Republic isn’t related to the Star Wars franchise, but is a property and casualty insurance company. (Disclosure: I happen to own a few shares.) SCANA is an electricity and gas utility with customers in the Carolinas and Georgia. Trinity is an industrial firm that caters to the energy, transportation, chemical and construction sectors. Last up on the value side, Valero Energy is a petroleum refiner and retailer with operations in the U.S., U.K. and Canada.

The 11 leading growth stocks are Anthem (ANTM), CVS Health (CVS), Dollar General (DG), Hanover Insurance Group (THG), Jones Lang LaSalle (JLL), Packaging Corp. of America (PKG), Penske Automotive (PAG), RPM International (RPM), Southwest Airlines (LUV), Travelers (TRV) and WR Berkley (WRB). Anthem is a returning member of last year’s All-Star list but back then it was called WellPoint. The other returning All-Stars are CVS Health, Hanover Insurance, Jones Lang LaSalle, Southwest Airlines and Travelers.

Anthem is a giant in the managed care business and CVS Health runs pharmacies across the land. Dollar General operates a popular discount retail chain. They’re joined by three insurance companies, with the largest (by revenue) being Travelers, followed by WR Berkley and Hanover. Jones Lang LaSalle is a property manager, Packaging Corp. makes boxes of all sorts, Penske is an auto retailer, and RPM is a chemical company specializing in coatings, sealants and building materials. Last but not least, Southwest Airlines is the original discount airline.

Before rushing to buy any stock it’s important to understand the risks that stock ownership entails. While we believe our top stocks have the ingredients necessary for success, the future is far from certain and some stocks will inevitably flounder. There will also be periods—like the crash of 2008—when stocks generally do poorly. Simply put, there are no guarantees when it comes to the stock market.

That’s why you should make sure that a company’s situation hasn’t changed in some important way before investing. Read the latest press releases and regulatory filings. Scan newspaper stories and get up to speed on all of the most recent developments. As always, we endeavour to put you on a profitable course, but head out only after you’re fully prepared.

Norm Rothery, CFA, PhD, is the founder of StingyInvestor.com and tweets as @NormanRothery. He may hold some of the securities mentioned in this article.