Sane Portfolio Drives In for its Annual Tune-Up
Posted: August 10, 2026
August 3, 2026 — (Maple Hill Syndicate) – If you consider yourself a medium-risk or slightly conservative investor, you may want to take a look at my Sane Portfolio.
It’s a hypothetical stock portfolio that I refresh each year. Today is the day for its annual tune-up.
The Sane Portfolio contains a dozen stocks. To get in, a stock must meet seven criteria. Once I choose a stock, it stays in unless it flunks one of the seven.
This year, only three of last year’s dozen stocks made it back.
Seven Checkpoints
To be eligible, a stock must satisfy seven criteria. No single criterion is especially hard, but few companies can jump all seven hurdles.
- Market value of at least $1 billion.
- Debt less than stockholders’ equity.
- Return on stockholders’ equity of 10% or better.
- Stock price less than 18 times per-share earnings.
- Stock price less than 3 times per-share sales.
- Stock price less than 3 times book value (corporate net worth per share).
- Five-year earnings growth averaging 5% per year or better.
They’re Back
The portfolio’s longest tenure belongs to D.R. Horton Inc. (DHI), the largest U.S. homebuilder. It’s back for a seventh year, despite 6% to 7% mortgage rates that are a headwind for home buyers. Horton’s profits fell, but it still made the cut.
W.R. Berkley Corp. (WRB) returns for a fourth engagement. It’s a casualty insurance company based in Greenwich, Connecticut. Its return on equity was nearly 20% in the past four quarters.
Back for a third year is Photronics Inc. (PLAB), which makes photomasks used in manufacturing semiconductors. Photronics shares rose 48% in the past year. Even after that climb, the stock sells for only 11 times trailing earnings.
New Selections
Nine companies dropped out, giving me a bunch of spots to fill.
Start with Walt Disney Co. (DIS). I’ve always liked the synergy between Disney’s movies, theme parks and toys. And I have a higher opinion than most people of the ABC and ESPN television operations.
Pilgrim’s Pride Corp. (PPC) is the second-largest U.S. chicken producer (after Tyson Foods). There’s a long-term trend for people to eat more chicken. The company has exceeded a 15% return on equity in 10 of the past 15 years.
Raymond James Financial Inc. (RJF) is a brokerage and investment management company. Years ago, at The Wall Street Journal, I created a ranking of the performance of brokerage-house recommended lists. Raymond James usually did well in that. Profitability looks strong, with an 18% return on equity.
Unloved and Cheap
Selling for only eight times earnings, Synchrony Financial (SYF) runs credit cards for Amazon, Sam’s Club and more than 100 other companies. The big risk is a recession, but (contrary to my earlier prediction) a recession doesn’t seem likely soon.
Also cheap is Prestige Consumer Healthcare Inc. (PBH), which makes over-the-counter health products such as Clear Eyes, Dramamine, Monistat and Summer’s Eve. Wall Street pays little attention to this stock, which trades at 13 times earnings.
Lear Corp. (LEA) makes car seats and electrical systems for many car manufacturers. To me, Lear looks attractively cheap on all three measures I usually use (price/earnings, price/sales and price/book value).
Completing the Roster
I like to have an energy company in the portfolio. Halliburton Co. (HAL) is one of the largest U.S. oil service companies. During the Iran war, the U.S. and other countries have depleted much of their petroleum reserves. Hence, I expect more drilling.
I also like the defense industry, but most defense stocks are too expensive for the Sane Portfolio. Textron Inc. (TXT) is a conglomerate that is partially a defense firm, owning Bell Helicopter.
A longtime favorite of mine is Oshkosh Corp. (OSK), which makes fire engines, garbage trucks, troop carriers, mail trucks and aerial lift platforms. Its balance sheet is strong, with not much debt and lots of cash.
Performance
Today’s version is the 25th annual iteration of the Sane Portfolio. Returns have averaged 11.7% in twelve months, a bit better than the 11.2% average for the Standard & Poor’s 500 Total Return Index.
My Sane Portfolio picks have been profitable 19 times out of 24, and beaten the index 13 times.
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.
Last year’s Sane Portfolio returned 23.8%, versus 18.9% for the S&P 500. The best performer was Axcelis Technologies Inc. (ACLS), up 76%. The worst was Boise Cascade Co. (BCC), down 8%.
Disclosure: I own Disney and Pilgrim’s Pride for most of my clients, and Oshkosh in a hedge fun I run. One or more of my firm’s clients own Halliburton and Textron.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.