Baseball’s 30-30 Club is reserved for players who smash 30 homes runs and steal 30 bases in the same season.
Last year only two players — Mike Trout and Ryan Braun — did it. Since Major League Baseball began more than 100 years ago, only 39 players have.
I have my own version of the 30-30 Club, and it is for companies, not ballplayers.
To make it, a company must achieve a 30 percent return on stockholders’ equity and have a 30 percent earnings growth rate over the past five years. In other words, profits must be large and growing fast.
It’s a difficult feat — though not as difficult as in baseball. This year, 16 companies made my 30-30 roster, including such well-known corporations as Apple Inc., MasterCard Inc., and Caterpillar Inc.
I first compiled a 30-30 list in 1999. I did it annually for seven years, dropped it, and then revived it in 2010.
The way the list has changed over the years shows the ebb and flow of market leadership.
Back in 1999, the 30-30 Club was full of information technology companies. No more. Apple this year is the only one. Medical companies used to do well, too, but Becton, Dickinson and Co. is the sole medical entry this year.
The roster this year is as diverse, by industry, as I’ve ever seen it. For example, here are the top five by market value:
■ Apple, maker of computers, smartphones, and iPods.
■ MasterCard is in consumer and retail finance.
■ Caterpillar, a maker of heavy construction equipment.
■ Priceline.com Inc. operates an online hotel reservation service.
■ Becton, Dickinson makes medical devices and instruments.
The next five are paint maker Sherwin-Williams Co.; CF Industrial Holdings Inc., a fertilizer producer; high-end retailer Nordstrom Inc.; C.H. Robinson Worldwide Inc. a transportation and logistics firm; and adhesives maker Nordson Corp.
Rounding out the list are Newmarket Corp., which makes fuel and lubricant additives; Credit Acceptance, which provides financial services to car dealers; mattress maker Tempur-Pedic International Inc.; Nu Skin Enterprises Inc., which sells cosmetics and nutritional products; Toro Co., which makes lawn mowers and other turf equipment; and coal miner Alliance Resource Partners LP.
If a company makes this list, it is a good company. But it may not be a good stock, because the stock price may already reflect investors’ high expectations.
So, I honor all of the companies on the roster, but recommend few.
The number of companies has varied from a low of 11 (in 2004) to a high of 30 (in 2001). I have recommended anywhere from zero (2004) to seven (2005).
The 10 columns I’ve written on this list show an average 12-month gain on my recommendations of 10.85 percent, compared to 7.29 percent for the Standard & Poor’s 500.
Only nine years counted, as I had no recommendations in 2004. My picks were profitable five times out of nine, and beat the S&P five times.
This year there are four stocks in the 30-30 Club that I recommend.
CF Industries is the cheapest, selling for less than seven times recent earnings. Analysts expect its earnings to fall slightly this year and next.
But they are falling from a very high level. Profits should still be good, and the stock sells for only 8 times the 2014 estimate.
Apple is a stock I warned against at higher prices, including a year ago in the 30-30 Club discussion.
But the stock that seemed “a little pricey” to me then has fallen 29 percent, and now sells at less than 10 times earnings.
At the current quote of about $423 a share, I think it’s a buy.
Caterpillar gets less than one-quarter of its sales in the United States; it’s truly a worldwide enterprise. Its earnings are sensitive to the value of the US dollar: A weak dollar helps them and a strong dollar hurts them. I don’t know how the dollar will fare, but I like Caterpillar’s valuation of just under 10 times earnings and less than one times revenue.
Finally, I recommend Alliance Resource, in the prosaic and out-of-favor coal business. Coal has been hurt by ultracheap natural gas, but I think gas will become a little less cheap.
Alliance offers a fat dividend yield of 6.9 percent, and while there is some risk the dividend will be cut, I don’t think that will happen.