Ten picks hoppingly good in ’21

THE Bunny Portfolio is hopping again — bouncing to a 36.6 percent return in the past year.

I named this hypothetical portfolio after the Energizer Bunny of battery-commercial fame, which is “still going” long after you would expect it to lose its energy. The companies in the Bunny Portfolio have done well in the past, but investors doubt their future.

Translating this concept into numbers, a Bunny stock must have a market value of $250 million or more and show five-year average earnings growth of 25 percent or better, yet sell for 12 times earnings or less. Those numbers show that investors don’t believe the great growth of the past can be sustained.

It’s a 10-stock portfolio, picked each December by formula. Among qualifying stocks, the formula chooses the five with the fastest historical growth, and the five with the lowest ratio of stock price to earnings. Here are the 10 stocks:

B. Riley Financial Inc. (RILY) is a financial company out of Los Angeles. It does investment banking, auctions and liquidations, and appraisals. It also owns a stake in United Online and magicJack.

Bio-Rad Laboratories Inc. (BIO) is back for a second year, after posting a 28 percent gain last year. I like medical testing companies such as this because I think we have entered a world in which more people will be tested for more things, not just COVID-19, more of the time.

Business First Bancshares Inc. (BFST) in Baton Rouge, Louisiana, focuses on lending to small and midsized businesses and also does personal banking. For a small bank, it has a large securities portfolio, worth about $1 billion.

Commercial Metals Co. (CMC), out of Irving, Texas, is a steel producer and metals recycler in the U.S., Poland and China. It’s a big maker of rebar and other steel products used in nonresidential construction. I figure it should benefit from the recently passed infrastructure bill.

CTO Realty Growth Inc. (CTO), based in Daytona Beach, Florida, is a real estate investment trust that owns mainly commercial properties in the South. Investors figure that working from home is the new normal, so this stock is very cheap, selling below book value.

Enova International Inc. (ENVA) is a consumer loan company based in Chicago that does business via the Internet. It lends mostly to non-prime consumers and small business, who it says are “frequently underserved by traditional banks.”

Gray Television Inc. (GTN), based in Atlanta, has given investors a 1,176 percent return over the past decade, far above the 358 percent for the S&P 500. Investors are skeptical because internet advertising is hogging the ad revenue growth. Nonetheless, Gray managed 17 percent revenue growth last year and 15 percent over the past decade. I like that Gray owns TV stations in 94 markets and is No. 1 in 70 of them.

Northeast Bank (NBN) is a banking company in Portland, Maine. It has made a lot of Paycheck Protection Program loans and collected hefty fees for doing so.

PennyMac Financial Services (PFSI) is another repeat; it was up 17 percent last year. It does mortgage servicing for Fannie Mae and Freddie Mac. They are government-sponsored enterprises; PennyMac isn’t.

SmartFinancial Inc. (SMBK) is a bank holding company in Knoxville, Tennessee. While earnings have grown fast, I would say they’ve grown from puny to respectable. I think interest rates will rise over the next two years, helping SmartFinancial and most of the banks and lenders on this list.