These companies are often poorly covered by Wall Street, That creates opportunities.

Paychex - PAYX - $114 - PAYX is part software technology and part industrial services. PAYX will benefit from a growth in small business and the outsourcing of HR functions. The stock was hit along with other software stocks on AI fears, but business remains solid.

1. Core & Main - CNM - $45 - water infrastructure, 15x for a 10%+ grower, hurt by low housing starts

2. WillScot - WSC - $27- storage and modular buildings, new management, decent idea

3. Corteva - CTVA - $87 - I like this stock, better at $60 than at $85

4. Scott’s Miracle-Gro - SMG - $71 - gardening supplies, well run, has run too much

5. Toast - TOST - $30 - software for restaurants, decent idea, I like Roper better

6. Pentair - PNR - $62 - pool equipment, I have heard too many complaints about bad pool equipment, need to learn more

7. Rollins - ROL - $45 - Orkin, still 30x,

8. Mattel - MAT - $14 - Barbie, I liked Hasbro better, Southeastern still has a big position, tariffs are an issue

9. Methanex - MEOH - $55 - commodity methanol producer, low cost gas supplies, leveraged

10. Star Bulk Tankers - SBLK - $25 - tough industry, stock has run

11. Darling - DAR - $63 - rendering is sexy, but the stock has run

12. WEX - WEX - $164 - payments for truckers, lots of value guys own this, maybe

13. Kirby - KEX- $144 - tug boats, needs to be a little cheaper

14. Axalta Coatings - AXTA - $32 - just spent a lot on Nobel, I am not thrilled

15. LKQ - LKQ - $25 - lots off tariff issues, too confusing

16. Yeti - YETI - $51 - has run a lot, neat products

17. Hasbro - HAS - $82 - now a video game company, a little too expensive

18. SunOpta - STKL - bought out for only $6.50

19. Limoneria - LMNR - $14 - maybe too small, Mexico risk

20. Del Monte - DMC - $23 - do not trust the big shareholder

21. Vail Resorts - MTN - $147 - we need more snow, old management returns

22. Coty - COTY - $2.60 - cosmetics, strange German owner, decent fashion sense

23. Aramark - ARMK - $58 - foodservice, I liked this stock more at $40, great business

24. Genius Sports - GENI - $6 - sports betting has too many challenges, just made a big acquisition

25. Toro - TTC - $93 - doing well, stock at 20x, pass

26. Amdocs - DOX - $53 - telecom software, need to learn more

27. MP Materials - MP - $45 - this was a big miss, management too promotional

28. Whirlpool - WHR - $38 - few signs of intelligent life, losing to the Germans?

29. Best Buy - BBY -$85 - new CEO incoming, has run too much

30. Wabash National - WNC - $13 - legal issues

If I were 20 years younger, I would form Bottom Quintile Capital Management. I would only buy stocks ranked in the the bottom quintile when stocks are ranked by Price/Book Value (P/B).

Book value is an imperfect valuation method. However, P/B is the best
”one number” to measure how much Wall Street hates a stock. P/B is the number that Fama & French used in their academic work to create the highest returning portfolio.

Maybe this would be a difficult concept to sell to unsophisticated individual investors, but BQCM would be an easy sell to institutional investors. The Fama/French numbers sell themselves.

Does anyone else already do this? Yes, Don Smith & Co (checkout the portfolio on Whale) manages over $5 billion using this strategy. The founder, Don Smith, died a few years ago, but the firm lives on. He called the strategy “deep value” investing.

Compared to the portfolio I just built “bottom up”, we would lose some of the bigger cap defensive idea like Sysco, Tractor Supply and Devon Energy. Right now, it would be hard to find any technology or industrial companies for a pure low P/B strategy. On average the portfolio would have more financial leverage.

In short, we would lose a little quality and diversification, but we would have a simpler strategy to explain. It might be fun and educational to be an advocate for these “orphan” stocks.

The portfolio below is from a screen of all US/Canadian companies over $1 billion, with P/B below 1.5x, that is about 250 stocks from a universe of about 2500 companies.

The median P/B of the new portfolio is 1.06x, the median EV/EBITDA is 8.0x, the median market cap is a comfortable $5 billion.

My proposed portfolio for BQCM:

1. Tyson Foods

2. Nutrien

3. Lineage

4. Alexandria Real Estate

5. Eastman Chemical

6. Mohawk Industries

7. ConAgra Brands

8. Rayonier

9. Matador Resources

10. Ingredion

11. Alaska Air

12. Thor Industries

13. Post Holdings

14. PVH Corp

15. Graphic Packaging

16. Helmerich & Payne

17. Harly-Davidson

18. Neogen

19. Coty

20. Azenta

I do not buy the GLP-1 argument for packaged food underperformance. I do not think we stopped eating food because of inflation, yet when you you look at Flowers Foods, you are told folks are eating less bread. Maybe everybody is eating kale and broccoli (I really did not even know how to spell those words, much let eat them), but I am not buying that either. I guess I realize young folks are drinking less, but maybe soon they will understand how bad things are? Insert laugh here.

My two old ideas are Tyson Foods - TSN - $58, and Sysco - SYY - $83. TSN will recover when the cattle cycle turns, chicken and pork are doing fine. The ranchers will always bitch and moan, but eventually herd size will increase. TSN sells at 8x EV/EBITDA but is losing money in 1/3 of the business. SYY is the simple play on restaurants returning to normal. I think the recent acquisition in beverages is a “home run”.

My marginal new idea in beverages is Keurig Dr. Pepper - KDP - $31, and maybe Boston Beer - SAM - $ - $172. I want to understand the coffee business better, but I am buying the argument there is “white space” to grow in second tier soft drink brands and other beverages at KDP. Boston Beer needs more work, but could be a good idea.

Pepsi and Constellation almost get there, but I like KDP a little better

In the summer of 1981 I walked into a conference room filled with old dusty ledgers. I was a bad internal auditor for Beatrice Foods (I was not fast on the 10-key adding machine). So they put me on a project to calculate the return on capital for Beatrice’s poor performing industrial businesses. The CFO was building the case to overthrow long-time CEO James Dutt. Four years later everybody wanted to own consumer staples and Dutt was ousted. Buffett was buying Coke and Gillette. The tobacco companies were buying General Foods and Nabisco. As the new consumer staple’s research analyst at a Texas bank’s trust department, I instead told the PM’s to buy Caterpillar. They hated me. They wanted to chase the food stocks, which they did without their analyst’s help.

Now 40 years later, the staples stocks lie in absolute ruin. Since that summer of 1984, Caterpillar is a 250x bagger. The stock is up (split-adjusted) from $4 to $1000. I want to find the next CAT. Maybe after some dividend cuts, I can be a hero and find you one.

I broke things down into beverages and other.

Beverage stocks I considered in addition to KDP:

1. Boston Beer - SAM -$172 - the co-founder is back and owns 20%+, they are doing well with Twisted Tea, but Truly is pulling down results, beer is only 15% of the business, great record for new product innovation, I need to start drinking to understand this better, a strong maybe

2. Constellation STZ - $135 - the story has changed from “we are going to mitigate tariffs” to we are going to live with tariffs”, waiting for the fog to clear, Buffett is still holding

3. Pepsi PEP - $138 - recent results are mixed, I think I have 20 better ideas and KDP is slightly better

4. Diageo - DEO - $83 - The new CEO is “Drastic Dave”, I think things get worse before they get better

5. Brown-Foreman -BF.B - $26 - even a buyout rumor cannot make the stock go up, fundamentals are bad

6. Pernod Ricard - PDRDF - $71 - potential buyer of Brown, seldom trust the French, pass

7. National Beverage - FIZZ - $31 - 70% family owned, weak results, 2x sales, pass

8. Primo Brands - PRMB - $24 - bottled water, lots of operational problems, watch

9. Molson Coors - TAP - $40 - not thrilled with the new CEO, did not come from outside

10. MGP Ingredients MGPI - $18 - closing plants cannot be a good sign, leveraged

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TSN and SYY are my winners here, but these are the other Staples companies I looked at:

1. Ingredion - INGR - $98 - maybe this is a better idea than TSN, I like the Tate & Lyle deal but a little annoyed they used some equity, the combined company is well positioned in flavors and textures, not sure the synergies are obvious, watching carefully, solid idea not a great idea

2. Post Holdings - POST - $86 - maybe a great company to study but not invest in, they state they are using a private equity model of not “over-equitizing” their company, guys came from the old Ralston Purina, having problems in pet food

3. Hormel - HRL $25 - protein is a good segment, kind of interesting, could be a survivor, should I own SPAM or NVIDIA?

4. General Mills - GIS - $36 - I wanted this to be the answer, but the more I looked the less I liked, let’s call this the “sandbagger special”, two years ago they were making $4/share and the stock was 20x because they were growing, now they claim they can only make $3.00 and the stock is at $36 (12x earnings) because nobody believes the growth story, maybe a classic case of long-term under-investment in their brands, to me making a sharp cut in earnings and then claiming you are now a growth company is sandbagging

5. Kimberly Clark - KMB - $110 - I was warning to this idea, but the Kenvue deal brings in unwanted legal issues

6. Estee Lauder - EL - $81 - I am just too much of a China “chicken”, it is about 34% of sales, new CEO on board for 15 months, no talks of buybacks, stock is down from $300 to $80, maybe pushing to much DTC, this could be a big miss because they have great products, travel retail scares me

7. Mondelez - MDLZ - $60 - the good part of the old Kraft, the model company today, but not quite cheap enough, reasonable folks could own this rather than Sysco

8. ConAgra - CAG - $14 - 10% yield, the brands are solid, and frozen foods is a good segment, but will the new CEO want a fresh start and cut the dividend, too much intrigue, new CEO was only OK at Smucker’s

9. Lamb Weston - LW - $47 - french fries, not impressed by the new CFO hire, too early in this turnaround story for me, a true commodity processor not a brand

10. Campbell’s - CPB - $22 - 7% yield, when you spend too much time trying to please the rating agencies, it is hard to grow your business, hard pass

11. Marzetti’s MZTI - $112 - used to be called Lancaster Colony, small brands fighting the giants for shelf space, has sold the multi-level candle business, 17x earning and 1.5x EV/Sales, maybe cheaper

12. Kraft Heinz - KHC - $25 - dear Warren is deep underwater in his 25% position, what a great lesson for value investors, new CEO is the guy who got Kellogg sold, but the brands have been losing share, pass

13. Clorox - CLX - $94 - new CEO will be chosen soon, too much talk about ERP and not enough about products, hard pass

14. Smucker’s - SJM - $109 - buying Hostess is certainly a contrarian idea, stock has jumped with lower coffee prices, I am the world’s largest buyer of Ho-Ho’s, but even I cannot build the investment case, pass

15. McCormick - MKC - $54 - if being stupid were a crime, these guys should be arrested, looks like they paid over 12x EBITDA, for a slow growing Unilever business, looks like they bought something to keep their jobs, hard pass but love the sauce business, problems is spices

16. Flowers Food - FLO - $8 - are bread sales really going down because of inflation, more of MAHA concern than I understood, worried about pesticides used to dry wheat for bread

17. Dole - DOLE - $14 - I want to call the banana cycle, but I have tried that before and failed, pass, wait for a good hurricane

18. Colgate - CL - $93 - doing great compared to these other clowns, which is why the stock sells at exactly 16x EV/EBITDA, which is still 25% too much by my standard, run for the hills

Picking healthcare stocks is tough. If you listen to too many of the quarterly calls, you begin to feel ill. It’s a dirty job, but somebody has to do it. I might skip this sector, but I think it is educational to struggle on.

I was very frustrated that I was going to end up with the big giant, Medtronic. They seem to have lots of “whiz bang” new products, but who knows if they actually work. My history with these medical equipment companies is they are great at selling doctors on doing new procedures, but the hype often dies down quickly. I get the impression it is often a question of not what the patient needs, but what Medicare will pay for. This is why I am staying far away from the obvious value stocks Boston Scientific and Zimmer Biomet. Medtronic is a solid company lumbering along with 5-7% growth rate and has a solid balance sheet, but with no talk of buybacks it is kind of a big yawn.

In the end I was able to make the case for an old favorite, Revvity - RVTY - $113. RVTY is the “remain-co” after Perkin-Elmer sold all its semi-equip businesses. RVTY is kind of a strange collection of companies Perkin-Elmer had acquired over the years. They have an interesting diagnostic test for newborns. RVTY makes reagents and assays that are key to the drug discovery process. Given the chaos at the FDA, this could be volatile, but in the long-run it should be a good business. Wall Street has only 6 buys and 11 holds, so expectations are low. My friends at Victory Sycamore own 3%. Message #1 from the last company presentation was, “buyback more stock”. There is plenty of room for margin expansion.

Medtronic would be safer, but let’s live dangerously with RVTY.

RVTY could also be included in the Small-Cap portfolio discussed in the prior post.

Other Healthcare stocks I considered:

1. Medtronic - MDT - $82 - lots of new stuff, but hard to grow the mature cardiac business

2. Zoetis - ZTS - $75 - I guess their animal health products are fine and maybe great, but management is having a hard time telling the story, I need to learn more, disappointed so far

3. Azenta - AZTA - $24 - great collection of small businesses, including cold storage for test samples, buying back stock very quietly, watching

4. Henry Schein - HSIC -$83 - dental supplies, decent idea, has run

5. Smith-Nephew - SNN - $30 - still getting activist pressure, knees have been lagging, these guys have the best products, but are not the best salesmen

6. Avantor - AVTR - $10 - the lab spending cycle will not turn, lower tech than RVTY

7. Alcon - ALC - $67 - drugs for eye care, was lucky enough to know the co-founder (the late Willam Conner, he started Al-Con in Ft. Worth as a single compounding pharmacy in 1945)), interesting if cheaper, always watching

8. Merck MRK - $126 - great long-term story, buy the stock has run,

9. Baxter - BAX - $22 - very slow moving turnaround, boring

10. UnitedHealth Group - UNH - $426 - lots of value guyd own this, but I just don’t understand the accounting

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10 of 12 sectors completed.

Just Consumer Staples and Other remain.

Current sketch of portfolio:

1. Nutrien - fertilizer - strong idea

2. Tractor Supply - farm retail - strong idea

3. Brunswick - boats - strong idea

4. Mohawk Industries - carpet and flooring - marginal idea

5. consumer discretionary - ?????

6. Arthur Gallagher - insurance brokerage - strong idea

7. Rayonier - timber - strong idea

8. Sun Communities - RV and mobile home parks - solid idea

9. Nexstar Media - local TV stations - legal issues, marginal idea

10. Devon Energy - natural gas production - strong idea

11. Jacobs Solutions - engineering and construction - solid idea

12. Roper Technology - software - solid idea

13. Sysco - restaurant supplier - solid idea

14. Tyson Foods - chicken, pork, and beef - solid idea - strong idea

15. consumer staples - ?????

16. consumer staples- ?????

17. Revvity - diagnostics and lab consumables - marginal idea

18. ONEOK - NGL processing - marginal idea

19. Paychex - payroll processing - solid idea

20. Scott’s Miracle-Gro - gardening supplies - solid idea

The portfolio I have been building has strayed into what I would call Big-Cap territory, even though many these days most would call it Mid-Cap. The median market cap is going to be over $20 billion . Maybe that is just too big?

From a straight “bottom-up” process the portfolio I leaned toward has bigger companies like AJ Gallagher, Nutrien, Devon, Tyson, Roper, ONEOK, Medtronic, and Sysco, and Tractor Supply. These bigger cap names just came out on top as I compared them to smaller ideas. Maybe I am just becoming a grumpy old man? Maybe with the market near an all-time high I leaned toward safer companies? Maybe as Big-Cap money chases technology stocks, some of the Big-Caps in other sectors just get cheaper?

Here is an idea I had many years ago. I should take 10 Small-Cap mutual funds that I respect, and choose the best ideas from each. A quick search found a Morningstar article “The Best Small-Value Funds and ETF’s”, written January 20, 2026. The list had most of my favorites, and a few more.

First Eagle, Diamond Hill, Victory Sycamore, AMB River Road, Franklin, Invesco, FPA Four Queens, Boston Partners, WisdomTree, and LSV.

ARZMX, BPSIX, DHSYX, DHMYX, QRSIX, FESRX, FRCSX, SMVSX, LSVQX, VSORX, DES

That is a good list that seems to ignore Morningstar’s current rating and focus on process and the longer-term story.

The portfolio below is built from only those funds. It has a median market cap of $6 billion, and nothing larger than $15 billion.

Maybe this portfolio would be more educational, and more in the spirit of what I started out trying to write.

These are all companies I know very well. A few have run a little more than I would like, but that is true of most portfolios.

Let’s finish the “All-Cap” portfolio first, and then decide how to proceed.

Below is a portfolio with ideas only from those 10 managers Small-Cap funds:

1. Louisiana Pacific - $75 - LPX - $6 Billion Mkt. Cap. - First Eagle, Franklin, Victory Sycamore

2. Hudbay Minerals - $22 - HBM - $9B - Invesco

3. Brunswick - $77 - BC - $5B - Franklin, WisdomTree

4. PVH Corp. - $77 - PVH - $4B - FPA Four Queens

5. The Gap - $19 - GAP - $7B - Franklin, Victory Sycamore

6. Red Rock Resorts - $64 - RRR - $7B - Diamond Hill

7. Simpson Manufacturing - $192 - SSD - $8B - Victory Sycamore

8. Old National Bancorp - $26 - ONB - $10B - First Eagle

9. Matador Resources - $52 - MTDR - $8B - LSV, Invesco, Victory Sycamore

10. Helmerich & Payne - $32 - HP - $3B - Victory Sycamore

11. Rayonier - $21 - RYN -$7B - Franklin

12. Alexandria Real Estate - $49 - ARE - $9B - Diamond Hill

13. Magnite - $21 - MGNI - $3B - Boston Partners

14. Nexstar Media - $179 - NXST - $5B - LSV

15. WillScot - $26 - WSC- $5B - AMB River Road, Franklin

16. AGCO Corp. - $114 - AGCO - $8B - FPA Four Queens, Invesco

17. Vontier - $28 - VNT - $4B - AMB River Road, Franklin, Victory Sycamore

18. Avantor - $10 - AVTR - $7B - Diamond Hill

19. Ingredion - $99 - INGR - $6B - LSV

20. Scott’s Miracle-Gro - $57 - SMG - $4B - WisdomTree

The portfolio has a balance of sectors similar to my All-Cap portfolio. The portfolio above has no utilities and just one technology company.

By a small margin I am going to chose ONEOK - OKE - $87 - 4.9%, over Kinder Morgan. OKE has done an underestimated job of building out an infrastructure in the obscure business of natural gas liquids NGL’s. “Wet” natural gas is often produced alongside oil. Some of this gas is flared, but some is captured and used to make things like ethane (for ethylene in plastics) and propane (for heating). OKE gets a toll for moving these products around. OKE spun off its gas utility in 2014 (One Gas), and started building this pipeline network. With a 5% yield, and significant upside, OKE is much more exciting than any of the traditional utilities. My friends at First Eagle own 2% of OKE.

You can make an argument to own no utility stocks, but I prefer to have a few examples of “risk-off” stocks in the portfolio.

Other Utilities considered:

1. Kinder Morgan - KMI - $32 - 3.7% - still a great long-term story (deregulation), OKE is just a little better, and more misunderstood by investors

2. American Water Works - $133 - 2.6% - one of best stories (50,000 water utilities to acquire), but not quite cheap enough yet, facing some tough state regulators

3. One Gas - OGS - $76 - 3.5% - boring, but now my favorite natural gas distribution utility

4. Evergy - EVRG - $86 - 3.2% - still my favorite electric utility, but far too expensive

5. Northwest Natural - NWN - $48 - 4.0% - my favorite small cap utility, but to close to its high

6. Antero Midstream -- AM - $22 - 4.0% - this is the OKE of Appalachia, but has gotten too expensive

7. Energy Transfer LP - ET - $19 - 7.0% - you get paid extra to deal with the annoying LP tax issues, pass

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Just 3 sectors healthcare, consumer staples, and other, remain.

My mistake in the Technology sector was not holding on to Corning and Intel longer, but that is the life of a value investor. It was a shame to miss Teradyne, because that was a company I know well. Many will consider Zebra an Industrial company, but I think it fits better in theTechnology sector. Roper is my first software company in a long time. Concerns about AI allow us to buy this growing compounder at 16x.

Zebra Technologies - ZBRA - $267 - ZBRA makes tags and labels for retail and industrial. There was boom during COVID and now there is a replacement cycle for hand held devices. ZBRA has the best technology, but sales patterns are unpredictable. There are worries about chip prices, so let’s be a long-term holder.

Roper - ROP - $364 - ROP owns 29 unique small software companies. For example they just bought the leading maker of software for churches. There are risks in acquisition oriented “roll ups”, but I think ROP has a good process of finding small niche businesses.

The top names below are all serious candidates. As some of these companies are tossed out of technology ETF’s, opportunities are appearing.

Other Technology companies I considered:

1. Adobe - ADBE - $220 - software for creative people, almost the perfect anti-AI stock, I want to believe, significant installed base, 12 buys and a massive 27 hold/sells, selling at only 9x, no value guys have added so far

2. Kyndryl - KD - $12 - spinoff of IBM’s cloud business, this could be a “home run” or a bankruptcy, accounting issues are a problem, need to learn more

3. Logitech - LOGI - $97 - 50% share in computer mouses and keyboards, big gamer business, work at home a significant theme, video conferencing, new CEO not as exciting as her predecessor (who now runs apparel company VF Corp.)

4. HP Inc. - HPQ - $22 - this is what is left of Compaq (pc’s and printers), 7x earnings because memory prices are going up, do we need new PC’s to run AI?, none of the value guys are signed up, tough call, unit sales in printers and PC’s down high teens percent

5. CDW - CDW - $122 - maybe CDW is the way mid-size companies implement AI, only 12x, strong balance sheet, buying back stock, maybe the best “sleepy” tech stock

6. Vontier - VNT - $28 - leader is fuel sales technology (gas pumps), spun from Fortive a few years ago, still 2x EV/Sales, worth considering

7. Badger Meter - BMI - $146 - smart cell phone based water meters, what should you pay for almost guaranteed growth, there are 50,000 water utilities that need to modernize, facing some problems right now, worth considering, but sells at 30x,

8. Arrow Electronics - ARW - $197 - stock was $80-$120 for ten years, now it is $200, distributes the low end parts of a chip, all the value guys own this because it is under 40% of EV/Sales, pass for now

9. Software companies - some day I want to study the 20+ software stocks that are showing up on my screens, right now Roper is a simple answer

10. Teradyne - TER - $369 - this is the one we should not have missed at $80 less than one year ago, 50% market share in test/packaging, cannot chase

11. Coreweave - CRWV - $82 - maybe someday this will be a value stock, selling over 12x EV/Sales, too tied to the big LLM guys, I am trying to find the guys selling data center space to enterprise users

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1. Here is a simpler picture of the portfolio so far:

1. Nutrien - fertilizer

2. Tractor Supply - farm retail

3. Brunswick - boats

4. Mohawk Industries - carpet and flooring

5. consumer discretionary - ?????

6. Arthur Gallagher - insurance brokerage

7. Rayonier - timber

8. Sun Communities - RV and mobile home parks

9. Nexstar Media - local TV stations

10. Devon Energy - natural gas production

11. Jacobs Solutions - engineering and construction

12. Roper Technology - software

13. Zebra Technologies - labels and tags

14. Sysco - restaurant supplier

15. Tyson Foods - chicken, pork, and beef

16. consumer staples - ?????

17. Medtronic - medical devices

18. ONEOK - NGL processing

19. Paychex - payroll processing

20. other - ?????

You could make an argument that the portfolio should have no ideas from this sector. I disagree with that argument. Building a concentrated 20 stock portfolio requires you give some consideration to diversification. Industrials are 17-20% of the average mid-cap value fund, so I at least want to have 5%. So the task is to find the best idea from among 600+ industrial companies.

My best idea is Jacobs Solutions - J - $128. These guys do a nice job of designing and building new manufacturing plants and infrastructure. If you believe in the “re-shoring” story you have to think J will do well. I know I should be buying this stock when backlog is falling and margins are shrinking. That is not the case at J, right now everything is going well. But I have to own something. I can’t use 20 ideas like General Mills and call it a portfolio.

I could cheat and use an auto parts company, but I am not that exciting about selling more cars in this environment. Gentex is a decent idea. I could cheat and own a weird company like WillScot (which make temporary storage containers), but I think I should own at least one “metal-bender”. J does not bend metal, but they build stuff with it, so that will have to do. In many ways J is kind of a “defensive” industrial. When dinosaurs walked the earth, I recommended Caterpillar after their last dividend cut, the stock is up 40x since then. Trying to find an industrial company that could double in the next 3-5 years is a difficult task, so let’s try to find one that will not go down 50%.

For those who must know building data centers is under 5% of J’s business, but building semiconductor plants in the US could be 10-15%.

Other Industrial companies I considered:

1. WillScott - WSC - $27 - storage pods, new management, very close to being in the portfolio

2. Gentex - GNTX - $25 - great mirrors for autos, cheap valuation, close to being in the portfolio

3. Middleby- MIDD - $172 - restaurant equipment, doing well do not want to chase at its high

4. Paccar - PCAR - $121 - big class 8 trucks. maybe a little cheaper, well run

5. AGCO - AGCO - $117 - farm equipment, we have enough exposure to agriculture

6. Lindsay - LNN - $121 - irrigation equipment, maybe to much Brazil exposure

7. Xylem - XYL - $117 - water equipment, great business but still 21x, watch

8. RXO - RXO - $28 - great story, has run a lot, worried about legal liability issues

9. Trinity - TRN - $34 - sorry I just hate the leasing portfolio

10. AECOM - ACM - building government infrastructure, pass

11. Midera Food Processing - MFPVV - $36 - let’s watch this spin from Middleby from the very beginning, I like the business (food processing equipment for meat packers and bakeries), maybe under $25

These days everybody knows exactly where the natural gas is, it is just a matter of getting the proper ROI to drill a new hole. It took me a few years to believe these guys really have 25,000 drill sites in inventory, but they do. The old days of searching for new reserves is basically gone.

The longer-term consumption and export trends for natural gas are just too strong. Oil prices will fluctuate, but natural gas demand is forever.

Energy companies I considered:

1. Pipeline Companies - I will consider these under utilities since the are FERC regulated

2. Helmerich & Payne - HP - $31 - did not like their last acquisition, but they have the best technology, maybe cheaper

3. Atlas Energy - AESI - $15 - semi-crazy guys that built a long conveyor for sand, watching

4. Matador Resources - MTDR - $41 - small producer, waiting for $35, water issues?

5. Halliburton - HAL - $33 - my favorite oil service firm, waiting for $25

6. Phillips 66 - PSX - $175 - waiting for a downswing in refining margins

7. Onintiv - OVV - $52 - formerly Encana, decent natural gas assets, watch

8. Noble - NE - $37 - offshore driller needs higher oil prices, pass

9. Magnolia Oil - MGY - $25 - small cap producer, worth watching

10. Oceaneering International - OII - $39 - my favorite offshore service firm, but waiting for a better price

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    Here is a simpler picture of the portfolio so far:

1. Nutrien - fertilizer

2. Tractor Supply - farm retail

3. Brunswick - boats

4. Mohawk Industries - carpet and flooring

5. consumer discretionary - ?????

6. Arthur Gallagher - insurance brokerage

7. Rayonier - timber

8. Sun Communities - RV and mobile home parks

9. Nexstar Media - local TV stations

10. Devon Energy - natural gas production

11. Jacobs Solutions - engineering and construction

12. Roper Technology - software

13. Sysco - restaurant supplier

14. Tyson Foods - chicken, pork, and beef

15. consumer staples - ?????

16. consumer staples- ?????

17. Medtronic - medical devices

18. ONEOK - NGL processing

19. Paychex - payroll processing

20. other - ?????

I still believe active management is an important part of our capitalist system.

Active management requires a portfolio manager that makes the final decision on what goes into the portfolio. There are a few successful portfolios run by committees, but not many.

How do I get to be a portfolio manager?

My friend taught an investments class at Creighton University in Omaha. He grew up in the house next to Warren Buffett. Mr. Buffett was nice enough to come and talk with his class.

The first question the students asked was:

I want to be a portfolio manager just like you Mr. Buffett, what should I learn?

Buffett said, “there are 5000 public companies in the United States, start with the A’s”

You really should pause and think about that answer. Where is that class being taught? I do not think you will find it anywhere in the world, except perhaps here.

To be a good portfolio manager you need to understand how to analyze an individual company, but you also have to learn how to put those stocks together into a final portfolio.

I am trying to show you how to build that entire portfolio.

To build the portfolio you have to be a generalist. You cannot learn all 5000 (now closer to 3000) companies. You have to learn to make judgements based on incomplete information.

Making those judgements is a skill you can learn, but you have to work at it. The disastrous alternative is relying on Wall Street analysts to tell you what to own. Those analysts have have a great knowledge of their companies, but you should NEVER EVER trust their judgement on when to buy the stocks they cover.

Mr. Buffett’s answer was not “call up Wall Street and see what they think”, his admonition was clearly to do the work yourself.

I realized as I was writing about Nexstar that a young analyst could take two months trying to understand the company. To be a good portfolio manager you have to learn when you know enough. Then you have to move on, because there is also another idea to consider. This realization is very frustrating. It is easy to think all I need to do is have more time to study the details. That is not the case, the details are not important.

I never said this was an easy process. You need to learn a little about a lot. You should avoid trying to learn a lot about a little.

There is well studied personality trait called “conscientiousness”. Those who have this trait will often find it very difficult to learn a little about a lot.

Instead you should try to cultivate the personality trait often called “openness to experience”. Learn to constantly think about new ideas.

Past performance is no guarantee of future results, but local TV stations still play an important role in our media ecosystem. NXST is in the middle of a complex merger with TEGNA that has a huge upside if/when it gets approved. NXST has done a great job building its own network, The CW, and has started an interesting new venture NewsNation. I could write 10 pages trying to explain this company to you, but that is not the best use of my time. All I want to tell you is this is one company for you to study and learn about.

Communications is the most diverse sector. There are many unique companies in this sector. You could spend a career trying to understand just 10 of these companies. The generalist cannot afford to get bogged down.

Everybody thinks local TV stations are like “buggy-whip” makers, obsolete. Mr. Sook has proven that idea to be wrong. That is all you need to know. Have faith, hallelujah (that is a tough word to spell).

Communications companies I considered:

1. Universal Music NV - UMGNF - $21 - Ackman saw the value, is the music business fixable? - interesting, but complicated, watch very carefully, at $15 we might have to own this

2. Magnite - MGNI - $19 - advertising technology, too complicated, but lawsuit against Google could be a big winner, I am fighting to understand this company, but right now I am losing

3. Verizon - VZ - $42 - the business customers have not shown up, new CEO doing what Wall Street wants, not excited

4. Warner Music - WMG - $27 - I like Universal more, strange foreign owners, former Russian oligarch owns 60%+, Barrow Hanley own 3%

5. Ziff-Davis - ZD - $52 - a strange collection of websites, pass

6. Trade Desk - TTD - $19 - advertising technology, fallen growth stock, took on Google and lost, monitor

7. Roblox - RBLX - $54 - games for kids, hard to judge the child safety risks, but the concept is cool

8. John Wiley - WLY - $49 - academic journals, still concerned about the academic integrity scandal, pass,

9. Walt Disney - DIS - $96 - seems like a value stock, but they have destroyed the

   Star Wars franchise, not really thrilled by new CEO

10. WPP - WPP - $16 - advertising agency, 6% yield, over-leveraged, earnings going straight down, too ugly even for me

11. AT&T - T - $21 - Verizon has a better network, and T-Mobile has better marketing, T is lost in between

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The REIT structure is a horrible way to run a business, but it does invoke a certain discipline. I once sat across the table from the CEO of a medium size hotel REIT as he complained about how the REIT structure put limits on his growth investments, but he later admitted the REIT structure prevented him from buying “stupid stuff”.

Many businesses should never be REIT’s, but some stable businesses can be run as a REIT. My two favorites right now are Rayonier - RYN - $22 - 5% yield - and Sun Communities - SUI - $121 - 4% yield. Neither has big yield, but both have very solid businesses that do not require large capital investments.

RAYN is the second largest timber company in the US. In the private market timber assets sell at about $2200/acre, and RAYN sells at about $1200/acre. RAYN investors are sad they bought Potlatch/Deltic rather than buy stock back. We will remain patient. The CEO is a deal guy, and there was no other logical buyer so he got a good price. The deal gives the combined company more sensitivity to the depressed home building industry. RYN has done a great job of building out two single family communities and North Florida and Georgia.

SUI is the largest owner of RV and mobile home communities. Neither of these is a glamorous business, but SUI is doing a great job consolidating the industry. A new CEO and the sale of the marina business make SUI an exciting story. The war has caused a slowdown in RV sales, but in the long run the parks for both long-term and transient customers are a solid business. There is almost no new capacity being added. Mobile home parks could be solution to the housing crisis if some regulations are changed. SUI has higher end assets that tend toward retired owners.

American Tower, Cubesmart, Lineage, and Alexandria are all solid ideas that are very close to being in the portfolio. Maybe I should be 20% REIT’s. I am not invested in REIT’s because I am making a call on interest rates, but when stocks go down, I pay attention.

REIT’s I considered:

1. American Tower - AMT - $169 - 4% - stock down from $300, just missed being in the portfolio

2. Cubesmart - CUBE - $41 - 5% - well run, industry consolidating, just missed

3. Lineage - LINE - $45 - 5%, plenty of asset value, just missed

4. Alexandria - ARE - $56 - 5% - controversial, drug industry in chaos, stock is down after a dividend cut, watching carefully

5. Starwood Property - STWD - $17 - 11% - very controversial, I wish I understood their single family strategy better

6. Americold Realty - COLD - $16 - 6% - older assets than LINE, well run

7. Prologis - PLD - $139 - 3% - doing everything right, inflection point is near in industrial warehouses, capacity not being added

8. Weyerhauser - WY - $25 - 3% - not as good as RYN at real estate development

9. Host Hotels - HST - $18 - 5% - great assets, but stock has run

10. Empire State - ESRT - $5 - 3% - let’s watch a pure NY real estate company

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I have worked ahead a little, and added some of the companies I know will end up in the portfolio. There are still about 5 spots still do be decided.

Spring 2026 - Progress - 15 of 20 companies

1. Materials (283 companies is this sector) - 5% - Nutrien - maybe Eastman Chemical, Smurfit Westrock, Graphic Packaging, Alamos Gold

2. Consumer Discretionary (477) - 20% - Tractor Supply, Brunswick, Mohawk, ????? - maybe Thor, The Gap, Norwegian, Oxford, Columbia

3. Financials (687) - 5% - AJ Gallagher - maybe Kinsale Capital

4. REITs (172) - 10% - Rayonier, Sun Communities, maybe Lineage, Cubesmart, American Tower, or Alexandria

5. Communications (216) - 5% - Nexstar Media, maybe Magnite

6. Energy (227) - 5% - Devon Energy, maybe Helmerich & Payne

7. Industrials (606) - 5% - Jacobs Solutions, maybe Gentex

8. Technology - (695 ) - 5% - Roper Technologies, maybe Zebra

9. Consumer Staples - (173) - 20% - Tyson Foods, Sysco, ?????, ?????, maybe Constellation

10. Healthcare - (123) - 5% - ?????, maybe Avantor

11. Utilities - (112) - 5% - American Water Works, maybe Kinder-Morgan

12. Other - 10% - Paychex. ????? maybe WEX, Scott’s Miracle-Gro, WillScott

This is the last segment of the Consumer Discretionary sector. We leave with three solid ideas, Tractor Supply, Brunswick, and Mohawk. The fourth idea remains in doubt for this sector.

Apparel companies I considered:

1. ?????

2. Columbia Sportswear - COLM - $63 - my favorite, no debt, very conservative, strong with retailers, but tariff issues remain

3. Oxford Industries - OXM - $38 - Tommy Bahama and Lily Pulitzer, 7%+ yield, I know I should own this, but the tariff issues are too complicated.

4. The Gap - GAP - $19 - Old Navy and Banana Republic. Will kids buy the brand their grandparents wore?

5. VF Corp - VFC - $17 - Vans, North Face, and Timberland. New CEO turned around Logitech, but not a fashion guy, CEO very promotional and a Cramer regular

6. Levi Strauss - LEVI - $24 - leader in denim, everything going too well, waiting for a bump in the road, new CEO Gass had her problems at Kohls

7. PVH - PVH - $78 - Calvin Klein and Tommy Hilfiger. Brands are not doing so well in the US, but stock is very cheap

8. Canada Goose - GOOS - $9 - winter attire, 1x sales for a very solid brand

9. Wolverine World Wide -WWW - $17 - Hush Puppies and many other cheap brands, will not chase up from $8

10. Capri - CPRI - $19 - Michael Kors and Jimmy Choo for department stores, kind of the old retail concept

11. Kontoor Brands - KTB $83, Wrangler and Lee jeans, doing very well, stock no longer cheap

12. Steven Madden - SHOO - $43 - well run, not chasing

13. Nike - NIKE - $41 - not a fan of direct to consumer strategy, Chjna reliance

14. Ralph Lauren - RL - $407 - the model for everyone else

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Spring 2026 - Progress - 5 of 20 companies

1. Materials (283) - 5% - Nutrien - maybe Eastman Chemical, Smurfit Westrock, Graphic Packaging, Alamos Gold

2. Consumer Discretionary (477) - 20% - Tractor Supply, Brunswick, Mohawk, ????? - maybe Thor, The Gap, Norwegian, Oxford, Columbia

3. Financials (687) - 5% - AJ Gallagher - maybe Kinsale Capital

4. REITs (172) - 10% - up next

5. Communications (216) - 5% -

6. Energy (227) - 5%

7. Industrials (606) - 5% -

8. Technology - (695 ) - 5%

9. Consumer Staples - (173) - 20%

10. Healthcare - (123) - 5%

11. Utilities - (112) - 5%

12. Other - 10% - maybe WEX

Norwegian, Choice, Wynn, and Churchill, are great companies, but each has some unique issues. Red Rock has no problems, but the stock is at its high.

Just for fun, let’s note that my good friends at Goldman Sachs did not like RRR at $40, but now at $67 it is a new buy idea.

For now, none of these companies is a top 20 idea.

Travel and Gambling stocks I considered:

1. ????????

2. Red Rock Resorts - RRR - $67 - solid results, but the story is moving just a little too slow to make it a buy at the current price

3. Norwegian Cruise - NCLH - $21 - great business, but I worry about the new management team, could overspend on marketing

4. Choice Hotels - CHH - $113 - great business, but I worry about weak franchisees and the new CEO, still could try to buy Wyndham again

5. Wynn Resorts - WYNN - $100 - great LV properties, I wish I could trust the Macau business, are the Chinese really gambling or just getting cash outside the Mainland

6. Churchill Downs - CHDN - $86 - horse racing doing well, but the historical racing business is a problem

7. Boyd Gaming - BYD - $90 - simple story at only 12x, but RRR is slightly better

8. Penn Entertainment - PENN - $21 - decent casinos, but sports betting is challenged, pass

9. MGM Resorts - MGM - $49 - takeover rumors, lots of financial engineering, pass

10. Genius Sports - GENI - $6 - I wish I could understand, will consider again under “other” sector, a little concerned about short seller Muddy Water’s report on Sportsradar -SRAD - $15

11. Alaska Air - ALK - $54 - missed it at $35, nice young fleet of planes, SA puts this stock in industrials, not me

The goal is simple. Find another Brinker’s -EAT - $170, the stock has been more than a triple in just the last two years. QSR is a solid idea, but not that exciting.

Sometimes the best answer is PASS.

Restaurants I considered:

1. ????????

2. First Watch - FWRG - $11 - love the food, love the breakfast until 3pm concept, but the balance sheet is just too shaky

3. Shake Shack - SHAK.- $56 - still expensive at 1.8x EV/Sales, a little too much aggressive NY vibe

4. CAVA Group - CAVA - $83 - the concept is just so good, I was a fan of Zoes which they acquired, but there is just no valuation argument possible, but under $60?

5. Arcos Dorados - ARCO - $8 - McDonald’s franchises in South America and the Caribbean. Just not ready to do companies headquartered in Uruguay, 75% of sales, 8x EBITDA, great valuation, decent balance sheet

6. BJ Restaurants - BJRI - $54 - just can’t chase up from $30,

7. Restaurant Brands - QSR - $71 - 3.5% yield, very well run, reasonable and safe, but a little boring

8. Cheesecake Factory - CAKE - $77 - the model right now for running restaurants, can’t chase

9. Chipotle Mexican - CMG - $31 = Ackman is gone, maybe some food quality issues, still 27x, pass

10. Bloomin Brands - BLMN - $8 - the food is ok, the balance sheet is not, old locations

11. Domino’s Pizza - DPZ - $295 - to me DoorDash has hurt the pizza business

12. Wingstop - WING - $150 - trying to grow too fast?

13. Jack in the Box - JACK - $12 - the franchisees are hurting, Mexican has been sold

14. Cracker Barrel - CBRL - $46 - obvious problems, decent locations

15. Portillo’s - PTLO - $4 - great food, bad growth plans

16. Wendy’s - WEN - $8 - not buying the turnaround

17. McDonalds - MCD - $271 - worth considering, down to 21x, I like QSR more

With credit spreads still near all-time lows there is not a chance in hell that I want to own any of the lenders, but there still some non-lenders to consider.

AJ Gallagher - AJG - $214 is one of my favorite investment ideas. The insurance brokers have no balance sheet risk, they just get a fee. I learned how important insurance brokers were when I was given the task for of finding the best E&O (errors and omissions) policy for Prudent Bear’s board of directors. There were 10 carriers to choose from, and all you could really do was go with the choice of the insurance broker. AJG has a 5% market share of global insurance, and there are 60,000 small insurance brokers to acquire. Reasonable folks might prefer Aon, Willis Tower, or Brown & Brown, but AJG is the simplest company is a great industry.

Other Financial stocks I considered:

1. Kinsale Capital - KNSL - $308 - specialty insurance, big position of one of my favorite value guys Ron Baron, the focus is on excess and surplus lines, not a big fan of “picking up dimes in front of the steamroller”, but I need to learn more

2. Lazard - old school investment bank being restructured by a former Obama guy (Peter Orszag), 4.5% yield, some value guys have owned for a long time, I liked the old story more than the new story, pass for now

3. WEX - WEX - $128 - payment systems and software for truckers, I will consider this stock when I consider an “Other” sector, not really a financial stock, difficult company to understand

4. Moelis - MC - $67 - a new school boutique investment bank, the founder is an old Drexel Burnham guy, maybe under $50 this could be a cheap stock, I like guys trying to beat big fat Goldman and Morgan

5. Fiserv - FISV - $48 - just because the stock is down 75% does not automatically make it a value stock, still 3x EV/sales, the activist are making big changes, I need to learn more

6. Renaissance Re - RNR - $299 - very difficult industry to understand, these are the guys I want to own, but the stock never goes down, second tier companies (like Everest or Arch) are too risky

7. Chubb - CB - $323 - the only big insurer I trust to actually pay claims, at 12x it is a reasonable big cap to own, but not exciting

8. Cullen Frost - CFR - $146 - the only regional bank I trust, not cheap at 14x, if you must own one bank try CFR, the only Texas bank to survive the 1990’s because of a very unique risk averse culture

9. Old National - ONB - $24 - a solid bank in Evansville, Indiana (go you Purple Aces, and the memory of the great Jerry Sloan), cheap at 9x, but not cheap enough, my favorite bank MidWestOne Financial got bought out at a 50% premium a few months ago, lets try to find another, ONB is a favorite of First Eagle which owns very few banks, boring but solid lenders, ONB still a $10 billion dollar bank so I would like to find another small one

10. FirstCash Financial - FCFS - $227 - the world’s greatest financial institution, a pawn shop, business has been great and I jumped off too soon, too expensive now, all I can do is watch and cheer them on

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Spring 2026 - Progress - 5 of 20 companies

1. Materials (283) - 5% - Nutrien - maybe Eastman Chemical, Smurfit Westrock, Graphic Packaging, Alamos Gold

2. Consumer Discretionary (477) - 20% - Tractor Supply, Brunswick, Mohawk, ??? - maybe Thor

3. Financials (687) - 5% - AJ Gallagher - maybe Kinsale Capital

4. REITs (172) - 10%

5. Communications (216) - 5%

6. Energy (227) - 5%

7. Industrials (606) - 5% -

8. Technology - (695 ) - 5%

9. Consumer Staples - 20%

10. Healthcare - 5%

11. Utilities - 5%

12. Other - 10% - maybe WEX

PulteGroup is my favorite homebuilder (I like their Del Webb business), but even at just 12x times I cannot pull the trigger. Of course Mr. Buffett just bought homebuilder Taylor-Morrison for 130% of sales, and roughly book value. I hate the mortgage portfolios of all the major homebuilders. If the homebuilder stocks get even cheaper, I will have to learn more.

There are several interesting suppliers that are easier to understand, and even cheaper than the builders themselves. Right now my favorite is Mohawk - MHK - $109. MHK is the leading maker of carpeting and flooring. MHK has done an admirable job of making small acquisitions to consolidate the industry. MHK has more earning leverage than the homebuilders when the housing business recovers. LPX is a very close second choice.

There are several smaller supplier that are interesting ideas and need more work.

Everyone knows we need to build more single family homes. The question is which stock will benefit the most. I hope the fear of higher interest rates will keep these stocks cheap for awhile.

Other homebuilder related stocks:

1. Louisiana-Pacific - LPX - $75 - LPX used to be a sawmill, but now primarily makes fiberboard siding. LPX has bought back half its shares. Valuation is very tricky. This is a very tough call, MHK wins because it is easier to understand.

2. PulteGroup - PHM - $122 - maybe under $100

3. Simpson - SSD - $192 - Connectors and fasteners to build houses, great technology to build sturdier houses, but 20x is probably to much, interesting

4. Trex - TREX - $46 - great technology to make recycled material into decks and railings, new CEO has an engineering background, great turnaround story but a little expensive, monitor

5. Hayward Holding - HAYW - $15 - pool equipment, too tough to judge the technology, Pentair is a tough competitor, pass

6. Fortune Brands - FBIN - $41 - a spinoff of tobacco maker American Brands, an activist has been making significant changes but the brands are old and have been losing share. pass

7. Builders FirstSource - BLDR - $76 - factory built home parts, this is a controversial company that is challenging conventional home building methods, I need to learn more

8. Masterbrand - MBC - $9 - a cabinet maker spun off from Fortune Brands, too leveraged, but could be a home run, in 1981 I did an audit here for the old Beatrice Foods, pass

9. Masco - MAS - $72 - good brands, well managed, just a little too expensive at 18x, pass

10. Owens Corning - OC - $123 - insulation and roofing, more of a commodity supplier with less upside, pass

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Spring 2026 - Progress

1. Materials (283) - Nutrien - (maybe Eastman Chemical, Smurfit Westrock, Graphic Packaging, Alamos Gold)

2. Consumer Discretionary (477) - Tractor Supply, Brunswick, Mohawk (maybe Polaris, Louisiana-Pacific, or Simpson), restaurant, travel, apparel)

3. Financials (687) -

4. REITs (172) -

5. Communications (216) -

6. Energy (227) -

7. Industrials (606) -

8. Technology -

9. Consumer Staples -

10. Healthcare -

11. Utilities -

For 30 years I have watched Brunswick - BC - $ slowly, but surely, dominate the boat business. They now have roughly a 50% market share in important categories. The tariff program should be a long-term positive, and hurt their Japanese competition. Selling at only 120% of sales and 12x EV/EBITDA near the bottom of the boat cycle, the stock is still cheap. Mastercraft just paid 110% of sales and 12x EBITDA for for tiny Marine Products. BC will have an investor day this August, and should be ready to tell a good story.

I know consumer confidence is low and consumer balance sheet are stretched, but that is when you have to buy these stocks. To me BC is a straightforward choice, but the key question if whether to add either PII or THO.

I wish I could understand Subaru.

Other companies I considered:

1. Polaris - PII - $71 - 4% yield, this a very complex company, maybe 50% of the business is commercial (including agriculture), the tariff situation ia also very confusing, PII has sold Indian Motorcycle but the terms deal is a little cloudy, maybe 2026 is the “trough”, but only maybe, 82% os sales is a nice price, balance sheet is a problem, but the Indian sale provides some relief

2. Thor - THO - $77 - at 50% of sales, and book value for a company with a 50% market share this is stock you should own. but this is a company with limited public disclosure, can I really understand this company? This company is a struggle

3. Winnebago - WGO - $29 - 5% yield, 60% of book value, I worry about WGO’s distribution network, I prefer THOR

4. Mastercraft - MCFT - $23 - the Marine Products acquisition is certainly well timed, kind of disappointed they used stock, small cap worth watching

5. Ferrari - RACE - $355 - I am more of a Toyota guy, but it takes almost 2 years to get a Ferrari delivery, the EV story clouds the picture, down from $500, Italian companies are not always shareholder friendly, a decent speculation

6. Camping World - CWH - $8 - 14% of the US RV market at retail, part-time TV personality Marcus Lemonis is no longer CEO, this could be a bankruptcy or a $30 dollar stock, too much risk

7. Subaru - FUJHY - $8 - I wish I could understand this, they make decent cars and are starting to buy back stock, I will regret not digging further, 70% of sales are in the US, Japan is 15%,

8. Ford - F - $15 - I just cannot live with the finacing risk, pass

9. Harley-Davidson - HOG - $26 - HOG has a 38% share of the US motorcycle business, after a very complex transaction with their finance business I wanted to believe this story, BUT the new CEO comes in from Topgolf, I would have preferred Bozo the Clown, I am sure Mr. Starrs is a nice man but that is not what HOG needed, I wanted an operating guy, not a guy to redesign the logo, the tariff complications are significant

10. Gentex - GNTX - Seeking Alpha puts the auto parts companies in this sector, but I will consider them in the Industrials sector.

If you look only at valuation, either Thor or Subaru is the easy choice.

But Brunswick is the company I know I understand

Tractor Supply - TSCO - $31 - is a well managed retailer supplying everyday needs to rural consumers. TSCO is part Home Depot, part auto supplies, part clothing, part pet store, and part general merchandise. The one thing TSCO does not sell is big tractors that plant or harvest crops. Yes, you can buy a chicken coop and the chicks, like our Vice-president just did. TSCO has been adding pet vaccination services to their stores. My guess is that about half of TSCO’s sales are consumables, but the other half is lawn & garden, truck parts, or other more discretionary purchases. When there is uncertainty in the farm economy, the purchase of things like tools slows down. Tariffs, and fear of counter tariffs, have made the farming business very uncertain over the last year.

For the previous 5 years TSCO was perceived as a growth stock, often commanding a multiple of over 30x. Today it is just another cyclical retailer selling at 15x. I do not want to own a portfolio full of “broken” growth stocks, but I can tolerate a few. The risk/reward is just too attractive.

Many of the other retailers have already had a good run (see Macy’s), so I am happy to have an “ag” retailer selling near its low.

The other retailers I considered:

1. The Gap - GAP - $22 - more cash than debt, CEO came from Mattel two years ago, earnings have recovered, but what is the next trick, maybe a little worried they will buy something stupid, only .70x EV/EBITDA, worth thinking about at only 10x

2. CarMax - KMX - $51 - well run used car business, but they have an arrogant attitude about their financing business, I fear I might be underestimating Carvana, Starboard is trying to fix things, mixed feelings

3. Etsy - ETSY - $75 - lots of small artists really need this company, but do consumers need the products, tariff issues are complex, need expectation to be a lower, maybe under $50

4. Ollie’s Bargain Outlet - OLLI - $83 - the new Big Lot’s (which faded into bankruptcy), a close-out retailer selling near its low, need to learn more

5. American Eagle - AEO - $17 - the Sydney Sweeney stuff is fading, there is an important women’s lingerie brand buried in this company, maybe interesting if cheaper

6. Home Depot - HD - $327 - just cannot get excited at 22x

7. Kohl’s - KSS- $17 - founder Herb Kohl used to sack my parents groceries, I know the complete history of this company, but I worry they have wrong about fashion for a long time, KSS tried to step up in quality and failed, the turnaround is difficult, watching

8. Macy’s - M -$25 - missed this one under $15, need expectations to fall, pass

9. Target - TGT - $135 - not a fan of their grocery business, pass

10. Advance Auto - AAP - $61 - the auto fleet is old, but the competition in just too tough, lots of old locations, pass

11. Dollar General - DG - $115 - I love the small store rural concept, but the charges of systematically overcharging customers are just too serious, pass

    A company like Kohl’s, or Target, would be a more conventional value stock. We are not here to be conventional. It is difficult to make a call on the average US consumer right now. There will a better time to buy typical retailers. Right now the opportunity is down on the farm.

Listed below is my rough breakout of the 7 different sub-sectors. We will examine each separately. We take a big jump from a difficult to understand sector, to one of the most straightforward sectors.

The consensus is that consumer balance sheets are stretched, but the “high end” consumer is still spending. I really hate having a consensus view, but that is all I have. I am slightly convinced the low consumer sentiment readings are skewed by TDS (Trump Derangement Syndrome). However, I hate making investment decisions based on political ideas. Let’ focus on the stocks near their 5-year lows, and see what we find.

Right now one name I know I will include is Tractor Supply - TSCO - $31, but let’s do that in the next post.

My 7 sub-sectors of Consumer Discretionary:

1. Retail (Tractor Supply, Advance Auto, CarMax)

2. Vehicles (Brunswick, Harley-Davidson, Gentex)

3. Home Building (Mohawk, Pulte, Trex)

4. Restaurants (First Watch, Shake Shack, Wendy’s)

5. Apparel (Columbia, Oxford Industries, PVH Corp.)

6. Travel (Norwegian Cruise, Choice Hotels, Alaska Air)

7. Other (gambling, appliances, furniture) Whirlpool, Red Rock, Arhaus

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Spring 2026 - Progress

1. Materials (283) - Nutrien - maybe Eastman Chemical, Smurfit Westrock, Graphic Packaging, Alamos Gold

2. Consumer Discretionary (477) - Tractor Supply, Brunswick, Mohawk, ???

3. Financials (687) -

4. REITs (172) -

5. Communications (216) -

6. Energy (227) -

7. Industrials (606) -

8. Technology -

9. Consumer Staples -

10. Healthcare -

11. Utilities -