Introduction
Ronald Reagan once remarked, “There are simple answers, just not easy ones.” In stock investing, one straightforward, though risky, method is to invest in the cheapest available stocks.
The Robot Portfolio
The concept of my Robot Portfolio revolves around selections made by a computer rather than human judgment. Over the last 27 years, this hypothetical portfolio has achieved a total return of 1,461%, far exceeding the Standard & Poor’s 500 Total Return Index, which returned 781%. This translates to an annual compounded return of 10.7% compared to the index’s 8.4%.
Methodology
The Robot begins by screening all U.S. companies valued at $500 million or more. It excludes firms with debts surpassing their shareholders’ equity and those showing losses over the past four quarters. The final selection comprises the 10 stocks with the lowest price-to-earnings (P/E) ratios, highlighting unpopular, out-of-favor stocks.
Performance Overview
Throughout the years, the Robot Portfolio has experienced both impressive gains and significant losses. Notable gains include 97% in 2009, 72% in 2013, and 67% in 2000, while it suffered declines of 61% in 2008, 31% in 2007, and 20% in 2018. This investing approach is undoubtedly risky and volatile, often leading to picks that I personally would avoid, yet it also brings attention to stocks I’d typically overlook.
New Lineup for 2026
The updated Robot line-up for 2026 includes:
- Fluor Corp. (FLR): An engineering firm selling for about twice its earnings.
- Pursuit Attractions and Hospitality Inc. (PRSU): Offering glacier tours, priced under three times earnings.
- Cal-Maine Foods Inc. (CALM): The U.S.’s primary egg producer, at three times earnings.
- SM Energy Co. (SM): A Denver-based oil and gas company, also at three times earnings.
- Steel Partners Holdings LP (SPLP): Engaged in various industries, priced under four times earnings.
- Boyd Gaming Corp. (BYD): Catering to Hawaiian clientele, trading for less than four times earnings.
- Civitas Resources Inc. (CIVI): Oil and gas exploration firm, slightly over four times earnings.
- Lincoln National Corp. (LNC): The sixth-largest U.S. life insurer, typically priced at nine times earnings.
- ASA Gold and Precious Metals Ltd. (ASA): A dealer in precious metals, selling for just over four times earnings.
- Rayonier Inc. (RYN): A REIT with over 2 million acres of timberland, valued at 4.3 times earnings.
2025 Performance Review
The Robot Portfolio faced a disappointing performance in 2025, recording a loss of 13.7% compared to the S&P 500’s gain of 17.9%. This marked one of the Robot’s worst years relative to the index, with major declines led by FMC Corp. (down 70%) and Vital Energy (down 42%). Investing via this method requires a strong stomach; however, focused selections could improve results, as sometimes the most surprising stocks yield the best returns.
Conclusion
I maintain my belief in investing in out-of-favor stocks, as they can exceed lowered expectations more easily. Disclosure: I hold call options on Fluor in a managed hedge fund and personally own Cal-Maine Foods.
