QVI Portfolios Review | Fall 2023 | #6

Part Six of a Series | Industrials Sector Holdings: Group 1

Photo by Crystal Kwok on Unsplash

Summary

• This review of Quality Value Investing’s portfolios covers 6 of 11 industrial sector holdings (Group 1): 3M, Union Pacific, FedEx, United Parcel Service, Mueller Industries, and Northrop Grumman.

• The post includes updates to QVI’s checklist research and analysis of each company’s current wealth and the stock price’s present value.

• Any changes in my view (buy, hold, sell) are reflected in the QVI Concentrated and Expanded Real-Time Portfolios.

• This post, in its entirety, is exclusive to premium (paying) subscribers.

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Uncovering the winning stocks of enduring enterprises

When referencing this report, premium (paying) subscribers can access their Quality Value Investing (QVI) Glossary of Investing Terms and Metric Targets. Unless noted, all data presented is sourced from Seeking Alpha Premium as of the market close on October 10, 2023, and intended for illustration only.

In this series, Quality Value Investing (QVI) reviews the holdings in the QVI Real-Time Portfolios by sector to update each stock pick’s performance, current wealth, and present value.

Today’s post analyzes 6 of QVI’s 11 industrial sector holdings (Group 1): 3M (MMM), Union Pacific (UNP), FedEx (FDX), United Parcel Service (UPS), Mueller Industries (MLI), and Northrop Grumman (NOC).

The Group 2 post will be published on a subsequent date.

Company Current Wealth

To uncover the current wealth of the company, QVI defines the value proposition, measures select returns on management, and assesses enterprise downside risks.

Value Proposition

QVI’s value proposition section defines the competitive advantages of a company’s products or services to its customers compared to the industry, including the stock’s historical performance vs. the sector and market.

Value Proposition Elevator Pitches

3M is the industrials sector's patent leader and yields double-digits on a cost basis in the QVI Concentrated Portfolio, despite or because of its much-publicized product legal woes.

Union Pacific owns the highest quality business model in the North American freight rail oligopoly.

FedEx remains a formidable operator in the air freight and logistics industry despite its challenges in recent years that facilitated the stepping down of founder and long-time hands-on CEO Fred Smith to become executive chairman.

United Parcel Service or Big Brown is everywhere transporting and delivering packages, whether in the neighborhood, workplace, at the airport, or on the highway.

Mueller Industries is a boring yet fundamentally sound industrial staple, commodity prices and construction business cycles notwithstanding.

Northrop Grumman is an entrenched member of the military-industrial complex, reaping the long-term benefits of predictable incremental growth and steady profit margins.

Performance vs. Sector and Market

The chart below illustrates each Group 1 holding’s performance against the Industrial Select Sector SPDR® Fund ETF (XLI) and the SPDR® S&P 500 ETF Trust (SPY) since July 21, 2010, when QVI’s first sector holding, MMM, was added to the Concentrated Portfolio.

NOC, UNP, and MLI outperformed the sector and market in total return during the coverage timeframe. MMM, UPS, and FDX underperformed against the sector and market during the coverage window.

Next, we’ll look at each stock’s performance since being added to the QVI Real-Time Portfolios.