There's a great example of Texas having the best economy in the world. GDP (GDP) is worth more than $2 trillion, larger than all but seven countries, and growing at a breakneck pace. Since 2000, Texas' population has increased by 21.3%, more than any other state except tiny Idaho.
Texas is the largest exporting state and a leader in foreign direct investment. Home to more Fortune 500 companies than California or New York, Chief Executive Magazine's CEO Survey ranks Texas No. 1 in the nation for the 19th year in a row based on ratings of business environment, workforce, and quality of life. Ranked.
Indeed, Texas is a winning formula. It is the largest city in the US with 5 out of 12 cities (no other state has more than 2 cities) and I lived happily in one of them, Dallas, for 4 years. . The formula for success was clear. It has a relatively low cost of living, a hard-working and tech-savvy workforce, and a relaxed regulatory environment with no personal or corporate income taxes. No wonder, as the Census Bureau recently reported, 668,000 new residents moved to Texas from outside the state in 2022, of which 102,000 came from California.
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Of course, not everyone likes the Texas lifestyle. You may not like the climate or the dangerous area. The level of social services has been widely criticized, with U.S. News & World Report ranking the state's preschool through 12th grade education system 37th in the nation.
But you don't have to live there to benefit from Texas. On July 13, a Dallas bank launched the first exchange-traded fund to track an index of the state's publicly traded companies.of Texas Capital Texas Stock Index (TXS, $25) holds stocks in 216 companies, weighted by a formula based on sector, state GDP contribution, and market value. This fund's expense ratio is 0.49%, and it doesn't have much of a track record yet. Still, during this period of stock market volatility, stock prices were nearly flat from the start to November 30th, compared to the S&P 500 index, which had a modest gain of less than 2% over this period. did.
Portfolio is overweight energyThat's 20.4%, compared with just 4.6% for the average fund in the large-cap blend category, according to the research firm. Lucifer. Otherwise, the fund is surprisingly diversified, as reflected in its top 10 holdings, many of which I recommend. They are listed here in descending order of recent weighting in the fund.ranges from 3% to 4.8% of total assets (all companies bold; Contains stocks that I like italic; Prices are as of November 30th. )
Top 10 stocks selected by a Texas fund
tesla (TSLA, $240). The electric car company is headquartered in Austin, which is home to one of Tesla's five “gigafactories” worldwide. The Austin factory has his 10 million square feet of manufacturing space that accommodates 20,000 employees. I used to be a fan (and shareholder) of Tesla, but since taking over Twitter (now I said goodbye.
McKesson (MCK, $471). The pharmaceutical giant, based in Irving, between Dallas and Fort Worth, has experienced impressive revenue growth over the years.shares of healthcare stocks The company is up more than 40% in the eight months through November, but trades at just 16 times earnings, based on analysts' earnings expectations for the next 12 months.
crowdstrike holdings (CRWD, $237). CrowdStrike, a leading cloud-based cybersecurity systems company, moved its headquarters from Sunnyvale, California to Austin in 2021. In the most recent quarter, revenue increased 35% year-over-year.of tech stocks Although it has doubled in one year, it is still below its all-time high.
crown castle (CCI, $117). This Houston-based real estate investment trust (REIT) owns and leases 30,000 cell towers and 85,000 miles of communications fiber nationwide. This stock has a very high yield of 5.3%.
waste management (WM, $171). Also based in Houston, the company is by far the largest in its field, with interests ranging from collection services to solid waste landfills. Profits are increasing at an amazing rate, but this industry is not my cup of tea.
charles schwab (SCHW, $61). By relocating its headquarters to his 70-acre campus in Westlake, near Dallas, after being based in San Francisco for nearly 50 years, Schwab saved an estimated 10% to 15% in costs.Stocks of financial companies were hit as follows. Interest level Rising and relatively weak conditions (P/E ratio of 18x) present a buying opportunity.
Digital Realty Trust (DLR, $139). His Austin-based REIT, Digital Realty, which specializes in data center leasing, is one of the biggest players in the fast-growing sector. Like Schwab, the company's stock price has been affected by rising interest rates, and that could change quickly. The stock yield is 3.5%.
wingstop (Wings, $240). Wingstop, his fast-growing chain of more than 2,000 locations serving Buffalo-style chicken wings, was founded in Garland, Texas, in 1994. Unfortunately, the stock price has gotten out of hand and he has quadrupled in five years, giving him a P/E ratio of 90x. Wait for a significant drop before buying.
exxon mobil (XOM, $103). A typical Texas company, Exxon has a large presence in the state, with headquarters in Houston, refineries in Baytown and Beaumont, and extensive drilling operations in West Texas. The stock's 3.7% dividend yield is attractive, but I would wait to see if oil prices fall due to weaker demand later this year before buying.
cheniere energy (LNG, $182). The company owns two terminals that convert natural gas into a liquid state and transport it by ship to markets primarily in Europe, a business that has grown rapidly in recent years. Cheniere's liquefied natural gas terminals in Louisiana and Corpus Christi are one of only nine currently operating in the United States, but more competition is expected. nevertheless, energy inventory Even though it has tripled in just three years, the price is still affordable.
Yes, two of the ETF's top 10 stocks are oil and gas stocks, but Texas is diversifying away from fossil fuels. The state has the largest wind power generation capacity in the United States and ranks second in solar energy. However, most of the companies in this field are based outside of Texas or are private companies (such as his largest electric utility, TXU Energy).
In addition to the Texas Capital ETF, there is also a Texas-only small-cap mutual fund called the Texas Fund. However, the expense ratio is unusually high at 1.68%, the minimum investment is $50,000, and the return is below average. Texas stocks aren't automatic winners.
There is no doubt that there is a dire need for a well-managed, state-focused small-cap fund. During my time in Texas, I was even more impressed with startups than with large corporations. But now, look at the Texas Capital ETF, or select components. In the case of Texas, one state can represent a significant portion of the portfolio (say 10%).
James K. Glassman is Chairman of Glassman Advisory, a public affairs consulting firm. He doesn't write about his customers. He owns no stocks listed here. Please contact us at JKGlassman@gmail.com.
Note: This item first appeared in Kiplinger's Personal Finance Magazine, your trusted monthly source of advice and guidance.Subscribe to help us make more money and keep more of what we earn here.
