“There are simple answers, just not easy ones,” Ronald Reagan once said.
In stock investing, a simple, risky but surprisingly effective technique is to buy the cheapest stocks out there.
That’s the point of my Robot Portfolio, a hypothetical portfolio in which the stocks are chosen by a computer, not by judgment.
Over the past 27 years, this hypothetical portfolio has cumulatively returned 1,461%, compared with 781% for the Standard & Poor’s 500 Total Return Index. On a compound annual basis, that’s 10.7% versus 8.4% for the index.
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.
How it works
My Robot starts with all U.S. companies with a market value of $500 million or more. It eliminates those with debt higher than stockholders’ equity (corporate net worth). It also eliminates companies that have been unprofitable in the latest four quarters.
Then it simply picks the 10 stocks with the lowest price/earnings ratio (stock price divided by per-share earnings). These are deeply unpopular, out-of-favor stocks.
Over the years, the Robot has had major triumphs and tragedies. It showed a 97% return in 2009, 72% in 2013 and 67% in 2000. Conversely, it lost 61% in 2008, 31% in 2007 and 20% in 2018.
Obviously, this is a risky and volatile way to invest. The Robot picks some stocks I wouldn’t touch with a 10-foot pole. It picks others I like. Most importantly, it gets me to look at some stocks I would otherwise ignore.
New lineup
Here’s the new Robot lineup for 2026.
The cheapest stock on the list is Fluor Corp. (FLR), an engineering and construction company based in Irving, Texas. It’s known for doing large projects, especially for the energy and chemical industries. The stock sells for about two times earnings.
Next-cheapest, at less than three times earnings, is Pursuit Attractions and Hospitality Inc. (PRSU). It offers glacier tours in Canada, Alaska and Iceland, with lodging and dining thrown in.
Cal-Maine Foods Inc. (CALM), the largest U.S. egg producer, sells for three times earnings. Earnings can be volatile based on changes in egg prices and the price of corn (chicken feed).
Also at three times earnings is SM Energy Co. (SM) of Denver, Colo. It produces oil and gas in Texas and Utah. Its fortunes have waxed and waned, but it’s doing well lately.
Back from last year’s list is Steel Partners Holdings LP (SPLP), which sells for less than four times earnings. It’s a publicly traded limited partnership with interests in industrial products, defense, energy, banking and youth sports.
Boyd Gaming Corp. (BYD) also trades for less than four times earnings. Unlike most casinos, it tries to cater especially to a Hawaiian clientele, in Las Vegas and other locations. You won’t find oxtail soup in most casinos, but you will here.
Just a whisker over four times earnings is Civitas Resources Inc. (CIVI). It’s a Denver-based oil and gas company that drills mostly in Colorado. Based on the Altman Z-score, a measure of financial strength, this company is in distress.
In the same valuation zone is Lincoln National Corp. (LNC), the sixth-largest U.S. life insurance company. Over the past decade, this stock has typically sold for nine times earnings.
A precious metals dealer, ASA Gold and Precious Metals Ltd. (ASA) sells for a little over four times earnings. Recent price strength in gold and other metals should help this stock.
Completing the Robot roster is Rayonier Inc. (RYN) at 4.3 times earnings. It’s a real estate investment trust that owns more than 2 million acres of timberland.
A bad year
The Robot’s performance in 2025 was regrettable: a loss of 13.7% in a year when the S&P 500 returned 17.9%. Relative to the index, it was the Robot’s second-worst year ever (after 2007). In terms of absolute return, it was the fifth-worst year.
Most of the picks sank last year, with the worst losses coming from FMC Corp. (FMC, down 70%) and Vital Energy (VTLE, down 42%).
Clearly, this sort of investing is not for the faint of heart. Of course, you might be able to improve on the computer’s results by cherry-picking. But sometimes the most successful robot stocks are the ones that seem least likely.
I continue to believe in buying out-of-favor stocks. Stocks advance by beating expectations, and low expectations are easier to exceed.
Disclosure: I own call options on Fluor in a hedge fund I manage. I own Cal-Maine Foods personally and for most of my clients.