The Perfect Stocks Portfolio: March 2025 Update

Welcome to the March 2025 update of the Perfect Stocks portfolio.

I am about a week late getting this month's update out, but this is a long-term portfolio, and a week here or there really does not matter all that much.

I am running late because we old out Florida property last week, We are digital nomads for the time being, hanging out down in South Texas at my in-laws' place. The dogs love it, the Gulf is close, and it is not hurricane season.

Hard to beat that.

We will be settling in North Carolina in a couple of months and finding a new perfect abode.

The portfolio managed a one percent gain for March, not counting dividends.

The yield is sitting around 4.09%now.

That is a solid showing considering U.S. stocks have taken a hit, down around three percent for the month. Europe, on the other hand, was up 1.89 percent, Japan up 2.53 percent—Japan leading the way again this month. Canada posted a 1.64 percent gain despite tariffs and weaker economic data, while China, no surprise, lagged badly—down 4.74 percent for the month.

Here in the United States, it has been all about tariffs, tariffs, and more tariffs.

Forget AI, data centers, infrastructure, and EV.

None of that is driving markets right now. It is Trump's trade policy that is dominating every conversation. The prospect of a trade war with just about everyone is casting a big shadow over the economy.

On top of that, we are looking at 300,000 government layoffs. The exact number laid off depends on who you ask, but for every government worker gone, figure three to five contractors and private sector folks tied to those agencies will get hit. That is a serious concern.

There is also the immigration issue. Not the border crossings or smuggling. I am talking about legal immigration. The pace has slowed, and that is a problem.

High legal immigration filled jobs without pushing up wages too much. Cut that down, and you have job market problems.

Put all this together, tariffs, declining immigration, sticky inflation that has been around long before Donald Trump moved back to Washington, and we are staring down the barrel of stagflation.

Mild stagflation looks inevitable now, and that is the biggest fear out there. It is tough to hit the administrations political and fiscal goals without running into that wall.

The result? Volatility. Every new memo, executive order, or tweet from the White House is swinging the market around. I expect that to continue. Our job is simple—take advantage of it without letting fear or greed take over.

Europe, which is now the biggest piece of the Perfect Stocks portfolio, continues to tell the same story. Eurozone inflation is stickier than the ECB hoped, coming in hotter than expected thanks to rising services and wages, especially in Germany and France.

Still, markets are pricing in cuts from the ECB, but those cuts are not coming anytime soon. Expectations are shifting out to June or later. Lagarde and company are staying cautious. Between Ukraine, defense spending, and wage growth risks, they have plenty to worry about.

Germany and France remain the sick men of Europe. Industrial production is weak, exports are soft, and consumer confidence is in the basement. Germany's economic policy mistakes, especially around energy, have hammered consumer faith. The debate in Berlin is now whether to keep the austerity policies that gutted the economy or finally turn on the stimulus spigot.

France lost its AAA credit rating thanks to rising debt and protests over Macron's reform. That is a headline we could have run any year in the last five.

The UK's officially in recession.

The Bank of England's signaling three more cuts by mid-September. Inflation's falling, but so are housing prices and employment levels.

Still, bad markets are the best time to buy. Euro stocks just hit a 23-year high on the back of tech, luxury, and energy. Financials lagged due to rate cut sluggishness, but there has been a big rotation into cyclicals, setting up a rebound.

Incredibly, Italy's leading the pack thanks to stable politics and strong banks printing money.

Europe and Japan today remind me a lot of the U.S. in the 1980s. Both are coming out of tough times, cheap assets, no faith in the government. Back then, the vultures circled. Today, it is private equity, activists, and restructuring experts. They are busy. Telecom Italia's in play. Utilities and industrials are being picked apart. European real estate, offices, hotels, multifamily, is dirt cheap compared to the U.S., and private equity's scooping it up fast.

Up in Canada, the Bank of Canada held rates steady this month. They are open to cuts starting this year. Inflation cooled, mostly thanks to energy prices falling. Service inflation is still sticky. Markets see two or three cuts coming, maybe starting in early summer.

 But the real story is economic weakness. Growth's flat to negative lately. Add in tariffs and you have mild-to-severe recession fears. Consumers are pulling back, housing prices are falling, especially in the big markets, while rents keep rising.

High debt loads and weak loan growth have bank stocks dancing on a knife's edge, supported mostly by rate cut hopes.

The worse the news, the more stocks we find that are cheap enough to buy. We have had a market-beating start to the Perfect Stocks adventure, collecting dividends and watching several of our names absolutely slaughter the market. Among our leaders:

Magellan Aerospace MGALF
Canadian aerospace and defense company. They do complex systems, engine components, assemblies, space and satellite systems, and maintenance. Tier one supplier to Boeing, Airbus, Lockheed, Rolls, Raytheon, and Pratt & Whitney. They are in the F-35, satellites, and the 737 Max. Cash flow's steady, dividend is solid, and the military/space exposure is only going to grow.

Commerzbank CRZBY
Old-school German bank, Frankfurt-based. They needed a bailout during the financial crisis but have steadily rebuilt. They are sticking to core business—trade finance, capital markets, corporate lending—and rolling out a digital platform. Loaded with capital, dividend back on. If Germany becomes organized, Commerzbank will soar.

China Yuchai CYD
They make big engines—trucks, buses, ships, generators. Heavy-duty diesel, marine, construction, ag, you name it. They are a major player in China's off-road and marine markets and sell into Southeast Asia and Africa. Solid balance sheet, piles of cash, and a 3% dividend. A rare Chinese company that actually looks financially sound.

Other standouts include THK, Central Pareto, and NACO Industries—all of them crushing the market.

Quick news hits:

Porsche SE POAHY has cash and control of Volkswagen. They are launching an infrastructure fund—think toll roads, energy assets, defense—and pushing money into Volkswagen.

Fresh Del Monte bought an avocado oil business out of Uganda. Fits nicely with their fruit business and avoids Mexican tariffs. Great margins and growth potential.

Maersk AMKBY inked a 33-year extension at the Elizabeth Terminal in New Jersey, dropping $500 million into upgrades.

Neo Performance Materials NOPMF is posting 70% cash flow growth, selling off non-core businesses, and focusing on core high-growth, high-margin materials markets. Rock-solid balance sheet.

That is the rundown.

The Perfect Stock approach—deep value, high margin of safety, dividends—is classic Benjamin Graham. It is working.

We are beating the SPY by a healthy margin and expect that to continue. If the market tanks, our financial strength, and dividends will carry us through.

We will be back next month with a full rebalance. Spoiler alert: most of the portfolio stays. A few winners have run far enough we will be selling and replacing. Thanks for sticking with the Perfect Stocks adventure here on Benzinga Edge. See you next month.