The HF Sinclair Corporation logo seen displayed on a tablet.
The Prudent Speculator follows an approach to investing that focuses on broadly diversified investments in undervalued stocks for their long-term appreciation potential. Does that mean we build portfolios of 20 stocks…30…? More like 50 and up. We like stocks. And we like a lot of ‘em. We don’t rely nearly as much on “how many” as we do “in which,” but we tend to invest in far more names than most. This expansive diversification, we find, potentially serves us well in two ways: we can further minimize the risk of individual stock ownership, while maximizing the likelihood of finding the truly big winners among the undervalued masses.
As for the “in which” part, readers should know we discriminate among potential investments primarily by their relative valuation metrics and our assessments of stock-specific risk. We buy only those stocks we find to be undervalued along several lines relative to their own trading history, those of their peers or that of the market in general. Our Target Prices incorporate a range of fundamental risks (e.g. credit, customer and competitive dynamic) that we believe the companies may face over our normal three-to-five-year investing time horizon.
This month, we boosted the ownership stakes in three companies in my personal newsletter portfolio, known as Buckingham Portfolio.
HF Sinclair (DINO)
HF Sinclair operates refineries across Kansas, Oklahoma, New Mexico, Utah, Washington and Wyoming, complemented by a marketing network of over 1,500 Sinclair-branded gas stations in 30 states. While refining profits can be volatile, as evidenced by a nearly 400-basis-point-compression in gross margin in Q3 2024 compared to the prior year, the company achieved significant efficiency gains. DINO delivered adjusted earnings per share of $0.51 on an average of 604,930 barrels of throughput per day (BPD), topping the consensus estimate of $0.32, with revenue reaching $7.21 billion. More than $200 million was returned to shareholders through dividends and buybacks during the quarter, with the dividend yield now 5.2%. Additionally, the board has $800 million remaining on its repurchase authorization. Shares trade with a forward P/E of 14 but the figure falls under 10 based on the EPS projection a couple years out. With strong liquidity of $3.7 billion and a focus on operational improvements, we think the refiner is well-positioned to navigate market cycles and grow its core earnings power.
Target (TGT)
One of the nation’s largest discount retailers, Target operates 1,963 stores and 62 supply chain facilities in the U.S., putting a store within 10 miles of most doorsteps. Target leans towards discretionary spending more than a competitor like Walmart, with key segments including Beauty (29% of 2024 revenue), Home Furnishings (16%) and Apparel & Accessories (15%). Shares fell more than 20% after the company reported a big earnings miss and a market share loss. Competitors have gained with prices rising and post-pandemic spending normalizing. TGT now expects Q4 EPS between $1.85 and $2.45 (vs. $2.65 consensus est.) and analysts worry that Target has few levers left to pull to improve margins. For 2025, TGT expects $8.30 to $8.90 of EPS (vs. $9.57 est.), which could be further reduced by some U.S. policy changes being floated for next year. TGT has less direct exposure to China than the likes of Walmart, which means there is potential to regain some market share in the event that hefty tariffs on certain countries come to fruition. The stock has long been volatile, but the current forward P/E of 15 is well below the historical norm and the yield is a generous 3.3%.
Timken (TKR)
Founded in 1898, Timken is the largest manufacturer of tapered roller bearings in the U.S., and a leading global manufacturer of highly engineered bearings and alloy steels. Shares pulled back after a Q3 earnings shortfall and a weaker Q4 outlook. Management placed short-term blame on continued softness in industrial sectors, particularly in Europe and China, with declines in key areas like wind energy, off-highway and general industrial demand. Despite the current challenges, we like that TKR has a robust competitive position with barriers to entry in high-end industrial bearings and power transmission products, and we continue to expect Timken to benefit from favorable trends in aerospace and defense and in emerging markets like India. We are also constructive on recent acquisitions, including CGI, which add a presence in high-growth areas like robotics and medical applications. Shares trade for 13 times NTM EPS, with analysts expecting profits to hit $7.00 in 2026 and $8.00 in 2027.
This report is an excerpt from The Prudent Speculator investment newsletter, of which I am Editor. For more in-depth analysis and exclusive insights like those shared in this article consider joining The Prudent Speculator here.
