By Philip van Doorn
John Buckingham, editor of the Prudent Speculator, reminds investors to be ‘willing to stomach volatility’
Four among a list of recommended stocks from John Buckingham, editor of the Prudent Speculator.
The financial media’s coverage of markets and investing centers on trends, such as artificial intelligence or ways to ride the wave of asset- or commodity-price increases. But investors should also be reminded about how important it is to have a diversified portfolio.
John Buckingham, a value-oriented portfolio manager and the editor of the Prudent Speculator newsletter, shared a list of 30 dividend stocks rated “buy” by his team. We pared this list further to the group of 17 stocks listed below, which trade at very low multiples to expected earnings per share when compared with the S&P 500 SPX as a whole.
The Prudent Speculator is published by Kovitz Investment Group of Chicago. Kovitz has about $31 billion in assets under management, with about $1.2 billion managed by Buckingham’s team.
‘The challenge for most investors is to wait for that reward.’John Buckingham, editor of the Prudent Speculator
Recent market events underline the case for diversification. To illustrate that point, we looked at this year’s action for bitcoin (BTCUSD) and Strategy Inc. (MSTR). That section is at the end of this article and summarizes how investors and traders poured gasoline onto a specific asset.
Buckingham’s dividend stocks
The Prudent Speculator is an investment newsletter that has been published monthly since 1977. Buckingham and his team run four value-stock portfolios. The flagship Prudent Speculator Portfolio has the highest ranking among newsletter portfolios tracked by the Hulbert Financial Digest for 30 years through Oct. 31.
Here is a summary of how the Prudent Speculator Portfolio has performed through Oct. 31, compared with returns for the Russell 3000 Value Index XX:RAV and the S&P 500 SPX. Returns include reinvested dividends and are net of fees paid by Kovitz clients whose money is managed per the Prudent Speculator’s strategy.
Portfolio or index 12-month return 3-year avg. 5-year avg. 10-year avg. 15-year avg. 20-year avg. 30-year avg.
The Prudent Speculator Portfolio 22.9% 18.2% 16.4% 12.1% 12.3% 9.6% 12.9%
Russell 3000 Value Index 11.1% 13.1% 14.3% 9.9% 10.9% 8.3% 9.2%
S&P 500 21.5% 22.7% 17.6% 14.6% 14.5% 11.2% 10.6%
Sources: Hulbert Financial Digest, FactSet
Value stocks are generally considered to be those of mature companies that trade at relatively low prices relative to earnings, sales or book value. Growth stocks tend to be more expensive, for companies that are expected to increase sales and profits more quickly than those in the value camp.
During a bull market led by the technology sector, it might be a surprise to see a value-oriented strategy outperforming the S&P 500 over the past year. Buckingham told MarketWatch this was in part a result of having a good level of AI exposure, even though “deep value” stocks made up most of the portfolios managed by his team.
He said that the TPS team tends to hold more tech stocks than other value managers and to have “lower exposure to financials than a typical value manager.” He and his colleagues aim to hold stocks for at least three years and stick with long-term successes. These can include growth stocks selected when the Prudent Speculator team believes they are undervalued by the market. Long-term holdings include Apple Inc. (AAPL), Broadcom Inc. (AVGO) and Alphabet Inc. (GOOGL).
Alphabet was actually added to the Russell 1000 Value Index RLV on June 30. The stock returned 78.8% from that date through Monday. Buckingham said that Alphabet “qualified as growth at a reasonable price” when he started to buy the stock in 2018, when its forward price-to-earnings ratio was 25. That was not a low valuation, however, “if you did a cash-adjusted P/E, the business was being valued at a lower multiple,” he said. Alphabet’s forward P/E, based on Monday’s closing price and the consensus 12-month earnings-per-share estimate among analysts polled by LSEG, is 28.2.
“We planted our seeds, we watered the crops and some we trimmed. The challenge for most investors is to wait for that reward,” Buckingham said. Regardless of an investor’s long-term strategy, it is important not to panic and sell during broad stock-market declines, he added, saying: “Your reward can come when you least expect it.” In other words, if you move money to the sidelines during a broad market decline, you are likely to return well after a recovery has started and hurt your overall long-term performance.
“It is great to be a stock picker,” Buckingham said, in part because of an elevated level of volatility for individual stocks. He cited the group of megacap tech stocks known as the Magnificent Seven: “The amount of 20% declines in individual stocks is massive. It is as if twice a year you have bear markets for these stocks,” he said, referring to declines of 20% or more. “This is something people need to understand. You have to be wired properly.”
Buckingham said three stocks that TPS had recently added to portfolios and that had suffered significant declines were Adobe Inc. (ADBE), Salesforce Inc. (CRM) and Accenture PLC (ACN).
The Prudent Speculator team monitors about 2,800 liquid stocks of companies that are publicly traded in the U.S. These can include secondary listings of non-U.S. companies. They score stocks by a variety of metrics to identify those that trade at relatively inexpensive price multiples to sales, earnings, free cash flow, book value or by total enterprise value to operating earnings.
The TPS team sets three-to-five-year price targets based on their qualitative assessments and expectations for the companies’ long-term prospects. This is in contrast to analysts who work for brokerage firms and usually set 12-month targets.
There are typically 120 companies that are rated “buy” through the team’s ongoing analysis, across the four portfolios. Positions will be trimmed as stocks move closer to the target prices.
Buckingham shared a list of 30 stocks that he recommends with dividend yields that are at least twice as high as the S&P 500’s weighted dividend yield, which is 1.15%, according to FactSet.
Then we narrowed the list to 17 stocks with forward P/E multiples that were less than half the S&P 500’s, which is currently 22, according to LSEG. In light of his team’s three-to-five-year outlook, Buckingham suggested that we also look at prices relative to consensus EPS estimates for 2027 or 2028.
Here are the 17 dividend stocks sorted by forward P/E, based on Monday’s closing prices and consensus EPS estimates for the next 12 months among analysts polled by LSEG:
Company Ticker Dividend yield Next-12-month P/E "Further forward P/E" 2025 total return through Dec. 1
Civitas Resources Inc. CIVI 6.73% 5.5 4.0 -32%
Comcast Corp. CMCSA 4.97% 6.5 5.4 -27%
Prudential Financial Inc. PRU 4.99% 7.3 6.5 -4%
Bank OZK OZK 3.88% 7.5 7.0 8%
Omnicom Group Inc. OMC 4.44% 7.6 9.6 -14%
Pfizer Inc. PFE 6.81% 8.1 9.7 2%
Bristol Myers Squibb Co. BMY 5.04% 8.1 8.9 -9%
Verizon Communications Inc. VZ 6.77% 8.4 7.8 9%
Molson Coors Beverage Co. TAP 4.01% 8.5 7.7 -16%
Wendy's Co. WEN 6.80% 9.4 7.4 -46%
Mosaic Co. MOS 3.53% 9.5 9.4 4%
Whirlpool Corp. WHR 4.53% 10.9 4.7 -26%
CVS Health Corp. CVS 3.36% 11.0 8.5 84%
Meritage Homes Corp. MTH 2.36% 10.4 8.7 -3%
U.S. Bancorp USB 4.21% 10.1 9.0 7%
Merck & Co. MRK 3.34% 10.9 9.2 5%
PNC Financial Services Group Inc. PNC 3.53% 10.8 9.7 3%
Source: LSEG
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