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January 1, 2024 (Maple Hill Syndicate) The Robot Portfolio returned more than 22% last year but was edged out by the surging Standard & Poor's 500.
Each year, the Robot a naive stock-picking paradigm, generates a theoretical portfolio of ten very unpopular stocks. The idea is that stocks advance by exceeding expectations, and low expectations are easierto exceed.
Over the past 26 years, this hypothetical portfolio has returned 1,710%, compared to 673% for the Standard & Poor's 500 Index.
Bear in mind that my column results are hypothetical and shouldn't be confused with results I obtain for clients. Also, past performance doesn't predict the future.
How It Works
I designed the selection criteria, but a computer programs picks the stocks that compose the Robot Portfolio. Some of them I wouldn't touch with a ten-foot pole; others I like. They are the ten stocks selling for the lowest multiple of the company's earnings, with three provisos:
1. The company must show a profit for the past four quarters.
2. The market value of the stock must be at least $500 million.
3. The company's debt must be less than its equity (net worth).
11.8% Per Year
In 26 years, the Robot has beaten the S&P only 13 times. But when it does well, it tends to do very well. In four years, the Robot's return has exceeded 50%. In six years, it has been between 25% and 50%.
The paradigm has also generated some big losses, most notably a 60.8% loss in the recession-scarred year of 2008. The S&P 500 Total Return Index declined 37% that year.
The compound average return for the Robot has been 11.8% per year, compared to 8.2%% for the S&P 500.
Last year, the Robot returned 22.7% but couldn't beat the S&P 500's total return, which was 25.0%. The portfolio's best performer was CNX Resources Corp. (NYSE:CNX), a natural gas producer, up 83%. The worst was PBF Energy Inc. (NYSE:PBF), a refiner, which fell almost 40%.
New Slate
As we enter 2025, there's an entirely new slate of Robot stocks. They are listed with the cheapest (lowest price/earnings ratios) first.
Site Centers Corp. (NYSE:SITC), sells for 1.1 times the past four quarters' earnings. Future earnings for this shopping-center real estate investment trust may be less because it has spun off some of its properties.
Selling for 2.2 times earnings is Vital Energy (NYSE:VTLE), an oil-and-gas company from Tulsa, Oklahoma. Revenue and earnings have fallen in the past year, and the company has posted four losses in the past ten years.