Stocks for Sanity in Turbulent Periods: A 12-Item Investment Collection
In the realm of stock investing, the Sane Portfolio has undergone a refreshing update for the year 2023. This theoretical low-risk portfolio, which has consistently delivered impressive returns over the past 23 years, now boasts a diverse mix of established and new stocks.
One of the new additions to the Sane Portfolio is Axcelis Technologies Inc. (ACLS), a company based in Beverly, Massachusetts, that specialises in ion implantation equipment for manufacturing semiconductor chips. Another new entrant is Cactus Inc. (WHD), an oil-drilling equipment manufacturer headquartered in Houston, Texas, which stands out for its impressive balance sheet, with debt only 4 percent of stockholders' equity.
Block Inc. (XYZ), operator of the Square payments system, also finds a place in the Sane Portfolio this year. Small businesses appreciate its hardware and software, and the company has been growing nicely, with profits increasing at a 30% annual rate over the past five years.
Crocs Inc. (CROX), a company known for its casual shoes with holes for ventilation or decoration, is another new addition to the portfolio. The author finds it attractively cheap at six times earnings.
Paccar Inc., the heavy truck manufacturer behind Kenworth and Peterbilt, returns to the Sane Portfolio for a fifth year. D.R. Horton Inc., the nation's largest homebuilder, and EOG Resources Inc., a big Houston-based oil and gas producer, are both sophomores in the portfolio.
W.R. Berkley Corp., a commercial casualty insurance company based in Greenwich, Connecticut, returns to the Sane Portfolio for a third year after a gain of around 30% in the past 12 months. Cigna Group, one of the largest U.S. health insurers, is a new addition to the portfolio, with the author believing it would hold up well if the market turns rocky, as analysts expect earnings to rise.
Academy Sports & Outdoors Inc., a chain of sporting goods stores headquartered in Katy, Texas, is a sophomore in the Sane Portfolio. However, the author expresses concern about potential tariff impacts due to its merchandise sourcing from China.
Boise Cascade Co., which makes engineered-wood products and plywood, is a part of the Sane Portfolio for a fourth year. Despite being a poor performer in the past twelve months, it looks cheap to the author at about 10 times earnings. Photronics Inc., which makes photomasks used in manufacturing semiconductor chips, returns to the Sane Portfolio, having shown positive earnings for ten consecutive years.
The Sane Portfolio, originally conceptualised as a stock investing strategy, aims to construct a well-diversified, fundamentally strong, and stable portfolio by selecting stocks that meet several quality, valuation, and stability criteria. These criteria typically include factors like company size, profitability, dividend history, debt levels, earnings stability, valuation multiples, and sector diversification.
The specific seven criteria for a stock to be eligible for the Sane Portfolio include a market value of at least $1 billion, debt less than stockholders' equity, a return on stockholders' equity of 10% or better, a stock price less than 18 times per-share earnings, a stock price less than 3 times per-share sales, a stock price less than 3 times book value, and a five-year earnings growth averaging 5% per year or better.
Over the past 23 years, the Sane Portfolio has averaged an 11.2% annual return, outperforming the Standard & Poor's 500 Total Return Index, which has averaged a return of 10.8% over the same period. The stocks in the Sane Portfolio are refreshed once a year.
In the realm of stock-market investing, the Sane Portfolio has incorporated Axcelis Technologies Inc. (ACLS) and Cactus Inc. (WHD) as new stocks for 2023, both meeting the criteria for a well-diversified, fundamentally strong, and stable portfolio. W.R. Berkley Corp., a commercial casualty insurance company, also returns to the Sane Portfolio for a third year, having demonstrated positive earnings for ten consecutive years, reflecting a successful investing strategy in the finance sector.
