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The Sleuth
According to Dorfman, "From Aug. 23, 2005, through Aug. 16, 2006, the Sane Portfolio returned 13%, including dividends. The S&P 500 was up 8.4% in the period. "Over the past seven years, the average 12-month gain for the Sane Portfolio has been more than 14%, versus 1.3% for the S&P. "The Sane Portfolio, which I compile each August, is designed as a middle-of-the-road, slightly conservative collection of a dozen stocks. To be eligible for inclusion, a stock doesn't have to be outstanding in a single respect; rather, it must be fairly good in most respects." ************************** A Secret Growth Market Most investors don't know water-related investments have already made silent fortunes for some of the world's more savvy market players. Holding just one of these top-performing water stocks would have given you gains 49 times larger than other investors made holding the S&P 500 over the last 10 years. ************************** In order to be in the Sane Portfolio, a stock must meet all the following criteria: * Debt-to-equity ratio less than 1 Now, let's take the Sane Portfolio and apply it to small-cap stocks. That means the only thing that will change in the above criteria is market cap. Instead of Dorfman's condition of a market cap of above $1 billion, we will use a market cap below $1 billion. I used the stock screener on MSN Money. Here are the results: Mexican Restaurants, Inc. (CASA:NASDAQ). If you've ever eaten at Casa Ole, Monterey's Tex Mex Cafe, Monterey's Little Mexico, Tortuga Coastal Cantina, La Señorita or Crazy Jose's, you know that Mexican Restaurants, Inc. owns all these chains. The company recently posted a quarterly year-over-year earnings growth of 100%. And with a return on equity of 17.59%, it's no wonder this stock is up 407% in the last five years. Nutritional supplement maker Neutraceutical Intl. Corp. (NUTR:NASDAQ) has been popping up on many of my small-cap screens for nearly two years. The company sells its supplements through health stores under the brand names Solaray, KAL, Nature's Life, Natural Balance and Body Gold. Neutraceutical isn't an explosive growth stock. Rather, it has been growing earnings slowly, but steadily and churns out a good amount of cash flow. The company has a price-to-cash flow ratio of 8, which is well below its industry's 9.90 and the S&P's price-to-cash flow ratio of 15.30. ************************ $2000 GOLD Over the next two years, you'll witness the greatest surge in gold prices in market history -- at least 257% above where gold sits today. And there's a way for you to buy gold for as little as one-tenth what other bullion investors will pay...while making as much as 12 times what they'll make on every move upward in the gold price. Read on to learn this entirely new way you can get rich off this trend right now... ************************* Given that real estate is topping out and major real estate companies are all seeing falling profits, I was surprised to see a Hawaiian landholding company on the Sane Portfolio screen. I almost didn't take the Maui Land and Pineapple Co. (MLP:AMEX) seriously. But Maui Land and Pineapple might be the best contrarian play for 2006. The company owns a valuable 28,600 acres, making it the second largest landholder in Maui island. MLP operates a resort community and a 6,000-acre pineapple cultivation. Shares of MLP are significantly undervalued. Compare MLP's P/E ratio of 13.49 to competitor Fresh Del Monte's P/E of 1,765 (no, that's not a typo). The packaged and processed goods industry has a P/E of 21.30. If MLP were to be valued at these levels, its stock price would have to rise to $52.40! (The stock is now at $33.37.) Realizing its value, Steve Case, former chairman of America Online, bought 47% of MLP in 1999. Here is a quick comparison of the five-year performance of the above three stocks and the S&P 500:
Going by past performance alone, you can see that the three stocks from our Sane Portfolio screen have beaten the S&P. And given their fundamentals, they are poised to the beat the S&P for the next five years, just like John Dorfman's original Sane Portfolio. And finally, here are some other winning stocks that showed up on the Sane Portfolio screen:
If you invest in stocks based on the results of a stock screen, like the Sane Portfolio screen, you need to know when to sell. Remember that the best indicator of when to sell a stock is when it no longer satisfies one or more of the criteria that were used to screen the stock. Regards,
In fact, she just discovered a company that produces a new "designer fuel" that could be the answer to America's energy crunch. Learn all about this future "blue-chip" in her new special report... |
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Sala Kannan earned her economics degree from prestigious Cambridge University in England and is an expert on global economic trends, as well as versed in developing nations and their economies. <click here for full bio> |
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