OT Meryl Witmer Picks

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Berkshire director Meryl Witmer is one of the members of Barron’s Roundtable. Her picks for 2022:

Dollar Tree has raised prices on most items at the Dollar Tree stores from a dollar to $1.25, and is rolling out items priced at $3 and $5 at many stores. The combination of shipping costs and wage and product inflation pushed the company to do this. Dollarama [DOL.Canada] in Canada moved in this direction in 2009, and its stock did well. It has operating income margins of more than 20%. This should happen in the Dollar Tree segment, also, and lift earnings to more than $11 a share, growing to $13 a share if the company executes this properly and shrinks the share count. If Mantle Ridge is successful, I can see earnings approaching $15 a share in 2024. My earnings-multiple range is 16 to 20 times, which results in a target price range of $200 to $300 a share sometime in early 2024.

Sylvamo [SLVM], was spun out of International Paper [IP] in October.
Sylvamo produces uncoated freesheet paper, or UFS, used to make copy paper and envelopes, and used in commercial printing. It also produces pulp for tissue and specialty paper, and coated paperboard for liquid packaging. It has operations in Latin America, North America, and Europe.

We think Sylvamo is a free-cash-flow machine. UFS is a much better business than people perceive.In North America, Sylvamo has the lowest-cost mill. In Latin America, Sylvamo is the largest UFS producer, with a 34% share. It owns forest plantations near its mills for a low-cost source of fiber.

We see operating income of about $510 million next year, interest expense of about $60 million, and taxes of 30%, for normalized earnings of $7 a share. Over the next couple of years, the catalysts for a higher stock price are paying down a lot of debt, proving how good the business is, and paying a large dividend.

Sylvamo has a fantastic management team. Insiders have purchased shares, and I can see a dividend of more than $3 a share in a couple of years from a company earning over $7 a share and trading at more than $50 a share.

Other 3 picks are:
Ardagh Metal Packaging [AMBP], is an aluminum can manufacturer.It traded down as sales growth slowed for hard seltzer, which is about 5% of the business, and as raw material prices increased. But demand for cans continues from a broad range of customers in sparkling waters, energy drinks, and soft drinks, and the shift away from plastic to aluminum for environmental reasons continues.

Hillman Solutions [HLMN], which faced more headwinds than I anticipated with the port situation, and also experienced a lag time in passing through increased raw material costs, which affected margins. Hillman supplies fasteners and hardware for construction and is the dominant supplier of keys and key-cutting machines.

Holcim [HOLN.Switzerland], which makes cement, concrete, and roofing materials. I recommended it last year at 52.80 Swiss francs [$56.40], and we received CHF2 as a dividend. Today, the stock is CHF48. Holcim has an extraordinary management team that is making smart acquisitions. The company generates lots of cash, which we estimate will be over CHF6 a share annually in the next few years. It has a 4% dividend yield. We think it is a leader in its industry in environmentally forward thinking, and at some point, the stock should have outsize returns as the value it creates gets recognized.

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I did my customary analysis of Wimer’s picks. My review is not all that elaborate and thus should not be used for anybody’s decisions. The purpose of this post is to see what others on this board may be saying about Witmer’s picks.

I bought Dollar Tree when our esteemed Mungerfitch gave us the all in signal last September and am familiar with its numbers.

Sylvamo’s numbers look pretty darn good. I’ve got to do more work to understand the industry. I may add Sylvamo to our holdings.

Ardaugh Metal Packaging looks expensive by my usual measures.

Hillman Solutions looks relatively good. It is in a competitive industry - products space and that gives me pause. I’ve personally bought Hillman Fasteners products numerous times for home and hobby work. I buy its products from Amazon and local stores.

Holcim îs cheap by my usual measures. It pays a good dividend (4%). It is reducing its debt. It is also buying add-on acquisitions in the construction products space. There is a good environmental story shaping up as they reduce CO2 generated by cement production. However, . . . . . . the stock has gone nowhere for years and years (looking at the five, ten and max charts, it looks like an up and down sine wave bouncing back and forth across essentially the same mid-point number. I’ve had my share of Value Traps and Holcim has had a long history of a being a value trap. Maybe good for the folks that play an in and out game with its sine wave ups and downs, but not for a buy and hold guy like me. Maybe Witmer knows something we don’t about Holcim’s future.

Anyone else crush the numbers on Witmer’s picks?

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Re Sylvamo I am not interested with anything that has part of it’s business in Russia. I also wonder why it was spun out last year but due to the Russia issue did not look further.

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I am already familiar with Dollar Tree and am long 2014 call options.

I hadn’t heard of Sylvamo and in general don’t follow basic materials extraction and processing sectors. Too brutally cyclical and not much growth over a full economic cycle. But spin-offs of slow growth companies often do better than the mother company, so I looked at it. As expected, I found ROE of 7.3% and ROTC of 5% (figures from SeekingAlpha). Too low to interest me.

Didn’t look at the other three.

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I’ll try to add to this discussion. I watched Meryl on some videos and I liked her demeanor and it seemed she had a very logical thought pattern as to investing. Still see it that way.

I have managed my wife’s investment account for 40 years now while she does do some small things on her own. Basically we’ve indexed buying now some 250 stocks and up until this point we have not sold one single stock. She began with $2000 in a utility fund that we did sell and now she has several million. Success from being average? Yes.

I have bought a bunch of the stocks Meryl has presented in the Baron’s roundtable for a few years now. Overall? Well, just being perfectly honest here…those stocks have not done very well.

Still like Meryl and likely it is my problem as to which stocks were bought.

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Note: As to the above post and figures, my wife added (retired now) and average of about $8,000 to her IRA through the years. Started with $2,000 and up to double digits in the end.

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Thank you for posting this.

Sylvamo was a great find, easy to read about and understand. It is up 80+% since the original post, and might have more room to run.

This is an old school Buffett play, like straight from the partnership days.

More of these fat pitches please.