Daily Press (Sunday)

Good turf: The borderline of small and mid-sized stocks

- John Dorfman

I’m partial to small and mid-sized stocks, and I especially like the size that’s right on the border between them.

“Large” in the stock market these days means $10 billion or more in market value, by my classifica­tion. Mid-sized stocks are $1 billion to $10 billion, and small stocks are under $1 billion.

Once a year, I write about stocks that are on the border between small and mid-sized. I call it the Billion Dollar Portfolio.

These stocks generally don’t have a lot of analysts covering them yet. And they usually aren’t heavily owned by big institutio­ns such as pension funds and insurance companies. That creates the possibilit­y of a bump up in value as the institutio­nal crowd gets to know them.

Here are five stocks that are in that sweet spot now.


Apogee Enterprise­s Inc. (APOG) makes architectu­ral glass and metal window frames. Its main market is skyscraper­s, both commercial buildings and apartment buildings. The work-at-home trend induced by the pandemic reduces the need for big office buildings, hence the stock is almost 30% below its high.

It’s doing well lately, with a return on stockholde­rs’ equity of 25% in the past four quarters. The stock sells for a modest multiple — nine times recent earnings. Apogee is a repeat selection, as it was also in this portfolio last year.

Malibu Boats

I bought Malibu Boats Inc. (MBUU) shares personally and for most of my clients in August. So far, I have about a 5% loss. But I expect this stock to bounce back. The company, out of Loudon, Tennessee, makes a wide variety of motorboats and is the market leader in performanc­e sports boats.

It has shown a profit in nine of the past 10 fiscal years (the exception being the first one, fiscal 2014). Of course, a recession is a threat to any consumer-goods company that sells luxuries rather than necessitie­s. A recession is possible in 2024, but is by no means a sure thing.

Boats are an upscale purchase. The wealthiest cohort of Americans has been prospering, even as many others stand still or go backward. One may applaud that trend or decry it, but it shows no sign of reversing.

Sturm Ruger

Sturm Ruger & Co.

Inc. (RGR) of Southport, Connecticu­t, makes rifles, pistols and revolvers. Many of my clients prohibit weapons stocks, so I rarely buy this stock. But many aspects of the company’s financial situation are admirable.

Its debt is only 1% of stockholde­rs’ equity, and it has $50 in cash for every dollar of debt. Its return on equity has been above 20% in 13 of the past 15 years. Threats to the company include litigation from the relatives of mass-murder victims and the possibilit­y of stricter gun-control laws.

Wabash National

Wabash National Corp. (WNC), based in Lafayette, Indiana, makes truck trailers, including refrigerat­ed trailers and tank trailers. It has been profitable in nine of the past 10 years (with a big loss in the pandemic year of 2020).

Profits in 2022 and 2023 have been particular­ly strong. But investors are skeptical that the good times will roll on. Hence the stock sells for only five times earnings — my kind of cheapskate multiple.


WisdomTree Inc. (WT), backed in its early days by hedge-fund star Michael Steinhardt, was a pioneer in the field of exchangetr­aded funds, or ETFs. Bigger fish such as Blackrock and State Street have grabbed much of the market share in this field.

But WisdomTree remains highly profitable, with a 36.9% return on stockholde­rs’ equity in the past four quarters. It recently offered more than six dozen exchange-traded funds. The stock shows a capital loss for the past decade, but is up 73% in the past three years.

The record

The Billion Dollar Portfolio you’re reading about is the 19th one I’ve compiled. The average 12-month gain on the first 18 has been 13.3%, compared to 11.8% for the Standard & Poor’s 500 Total Return Index.

Thirteen of the 18 columns have been profitable, and 11 have beaten 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.

My picks from a year ago did decently, with a 9.9% gain, but didn’t beat the S&P 500 total return, which was 13.1%. Standex Internatio­nal Corp. (SXI) was my best pick, returning 58%. Regenxbio Inc. (RGNX) was my worst, down 27%.

Disclosure: I own Malibu Boats personally and for most of my clients.

John Dorfman is chairman of Dorfman Value Investment­s in Boston. His firm of clients may own or trade securities discussed in this column. He can be reached at jdorfman@ dorfmanval­ue.com.

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