An Activist Shake Up… In Real Estate

Disrupting A Trillion-Dollar Asset Class 

Each week, here at Porter & Co., we apply our financial brainpower to uncover the most compelling, highest-upside investment ideas. And with this complimentary issue of the Daily Journal, we open up our spreadsheets to show you how we do it.

An important tool in our analytical toolbox is our stock screens, where we apply a list of criteria – relating to different financial, accounting, and performance parameters – to sift through the 3,000+ publicly traded stocks on U.S. markets. That’s how we identify the tiny fraction of U.S.-listed stocks that offer the best opportunities for creating huge returns.

We often use the results from these screens as a starting point for more in-depth analysis for possible inclusion in The Big Secret On Wall Street portfolio.

This week, we’re revisiting a stock filtering tool we call The 3x Screen. Over the last 25 years, buying an equally-weighted basket of stocks generated from this screen has tripled the return over the overall stock market (the S&P 500). Below we also show the names of significant stocks hitting 52-week highs and 52-week lows – a helpful list that we use to guide our analysis. 

For Partner Pass members, in the Saturday Stock Screen, we’ll highlight an opportunity that we found from the screen that appears particularly compelling – not as an official recommendation, but as a stock that’s on our radar. 

Questions or feedback about our Saturday Stock Screen?… drop us an email at [email protected].

Porter’s 3x Stock Screen 

The 3x Screen was inspired by Porter himself, who challenged the Big Secret On Wall Street analyst team to create a filtering tool to find companies with high capital efficiency, steady revenue growth, and that trade at reasonable valuations… and to backtest the results to ensure the screening criteria selected stocks that generated market-beating gains over time. 

One of the best screens we found in this search applies the following criteria:

1. Return on assets (“ROA”) of at least 15% over the previous five years 
2. Return on equity (“ROE”) of at least 20% over the previous five years
3. Free cash flow (“FCF”) margins of at least 10% over the previous five years
4. Sales growth of at least 5% over the previous five years
5. P/E ratio of 25 or below 
6. Market capitalization of at least $300 million 

We performed a backtest of these criteria on a hypothetical portfolio that held an equal dollar amount of each stock on this list, and rebalanced the portfolio each quarter – to add new stocks that met the criteria, and sell stocks that no longer did. The chart below shows that the stocks selected by this screen delivered a total return of 1,783% over the last 25 years versus a 537% return in the S&P 500, for outperformance of 3.3x. 

As of Thursday’s close, this screen produced the 25 stocks shown in the table below. We have displayed each of the criteria noted above along with each company and ticker symbol, as well as each stock’s beta (a measure of volatility versus the overall market). Note that beta is not used in the screening criteria, but rather to provide a reference point for noting the volatility of the stocks on the list.

Highs And Lows 

Each week, we also monitor any stocks in the market making new 52-week highs. We do this because any stock on its way to generating 2x, 3x, or 10x returns will spend a lot of time making new 52-week highs along the way. Thus, the new 52-week-high list provides an opportunity to flag these potential high performers before they really break out, with a particular emphasis on lower-profile, less widely-followed stocks that might have otherwise gone unnoticed.

Notable stocks making a new 52-week high this week: 

• AbbVie (ABBV)
• Ameris Bancorp (ABCB)
• AECOM (ACM)
• Advanced Energy Industries (AEIS)
• Allegion (ALLE)
• Astera Labs (ALAB)
• Ally Financial (ALLY)
• Amphenol (APH)
• Applovin (APP)
• American Express (AXP)
• Bank Of America (BAC)
• Brookfield (BN)
• Caterpillar (CAT)
• Citizens Financial Group (CFG)
• Carlyle Group (CG)
• Cummins (CMI)
• Coupang (CPNG)
• Evercore (EVR)
• Comfort Systems (FIX)
• GE Aerospace (GE)
• Goldman Sachs (GS)
• JPMorgan Chase (JPM)
• Morgan Stanley (MS)
• Oklo (OKLO)
• Opendoor Technologies (OPEN)
• Planet Labs (PL)
• Reddit (RDDT)
• Radian (RDN)
• Taiwan Semiconductor Manufacturing (TSM)

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“Forget AI” Says Reagan’s #1 Futurist

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We also monitor stocks on the new 52-week-low list. In many cases, the names on this list are there for good reason – the market is often correctly pricing in weak fundamentals. However, once in a while, a great business with excellent long-term prospects finds itself on this list due to a temporary setback. This can create the rare opportunity to buy top-shelf merchandise at bargain-basement prices. 

Notable stocks making a new 52-week low last week: 

• Accelerant (ARX)
• Colgate-Palmolive (CL)
• Casella Waste Systems (CWST)
• FactSet Research Systems (FDS)
• Marsh & McLennan (MMC)
• Morningstar (MORN)
• Nomad Foods Limited (NOMD)
• Pilgrim’s Pride (PPC)
• Perrigo (PRGO)
• StubHub (STUB)
• Molson Coors Beverage (TAP)
• Tradeweb Markets (TW)
• Wendy’s (WEN)

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FOR PARTNERS ONLY

Today’s Saturday Selection is a company that was on the fast train to bankruptcy – until an activist investor intervened. Since then, the founding team has regained control of the board and installed a new CEO. As a result, the opportunity is enormous – this company is aiming to disrupt a multi-trillion-dollar housing industry, yet its market value is only several billion. The new CEO’s compensation is entirely tied to ambitious stock price milestones, aligning leadership directly with shareholder outcomes. With founder oversight restored and disciplined execution at the top, the company now has a chance to fulfill the original vision.

(To become a Partner Pass member, contact Customer Care at 888-610-8895, internationally at +1 443-815-4447, or via email at [email protected].)