For these choices, focus more on the balance sheets

ON a hilltop in your town live two people. Joseph has an income of $400,000 a year but little savings. Francois has income of only $90,000 a year but $30 million in the bank.

Who would you rather be? Any sane person would pick Francois. And yet, when they go to pick stocks, many people pay tons of attention to the income statement, and no attention to the balance sheet.

In a modest effort to counteract that cockeyed situation, I compile each year a list of companies that are balance-sheet powerhouses. To qualify, a company must have:

■ A market value of $5 billion or more.

■ Earnings of at least 20 cents a share in the latest fiscal year.

■ Headquarters in the U.S.

■ Debt no more than 10 percent of stockholders’ equity.

■ Current assets at least two times current liabilities.

This year, 34 companies make the Balance Sheet Powerhouse list. I recommend the stocks of three of them.

Moderna

Few people had heard of Moderna Inc. (MRNA) until it developed a COVID-19 vaccine.

The company believes that MRNA, wrapped in lipids (fats), can be used in vaccines to prevent many diseases, not only COVID-19. That claim seems credible to me.

Moderna has $3 billion in cash and $5.3 billion in marketable securities. Its debt is only 7 percent of corporate net worth.

Schneider National

Schneider National Inc. (SNDR) has increased its revenue 17 percent and its earnings 12 percent in the past four quarters. Its debt is only 8 percent of corporate net worth, which I believe will help it withstand any recession that is likely to develop this year. The stock sells for about 11 times earnings, while its average multiple for the past decade has been about 14.

Cirrus Logic

Cirrus Logic Inc. (CRUS), based in Austin, Texas, makes computer chips used for audio and voice transmission. Over the past decade, it has grown its sales by nearly 13 percent a year, and earnings by nearly 12 percent a year.

The past year was even better, with both figures jumping by more than 30 percent. Considering that, I think the stock is reasonably priced at 18 times earnings. Debt is only 9 percent of corporate net worth.

Back again

If you’re an audio buff, you probably know the name Dolby Laboratories Inc. (DLB). It leads all competitors with 12 annual appearances on the Powerhouse list.

Gentex Corp. (GNTX) comes in second, with 11 appearances. Gentex, based in Zeeland, Michigan, makes self-dimming rear-view mirrors for cars.

SEI Investments Co. (SEIC) has made the honor roll 10 times, and Intuitive Surgical Inc. (ISRG) nine times. Arista Networks Inc. (ANET) and IPG Photonics Corp. (IPGP) have made it seven times.

Microsoft Corp. (MSFT) joins the list for a sixth year.

Five-time winners are Epam systems Inc. (EPAM), First Solar Inc. (FSLR) and Veeva Systems Inc. (VEEV).

Four-time winners: Exelixis Inc. (EXEL) and Vertex Pharmaceuticals Inc. (VRTX).

Three-time winners: Advanced Micro Devices (AMD), Cirrus Logic Inc. (CRUS), Cognex Corp. (CGNX), Globus Medical Inc. (GMED), Lancaster Colony Corp. (LANC), Market Access Holdings. Inc. (MKTX), Monolithic Power Systems Inc. (MPWR), Teradyne Inc. (TER), Texas Pacific Land Trust (TPL) and Universal Display Corp. (OLED).

Two-timers: Axon Enterprise Inc. (AAXN), Exponent Inc. (EXPO), Incyte Corp. (INCY), and Zoom Video Communications Inc. (ZM).

Newcomers

Two of the stocks I recommend, Moderna and Schneider National, are newcomers to the honor roll. So are Allegro Microsystems Inc. (ALGM), Copart Inc. (CPRT), Doximity Inc. (DOCS), Graco Inc. (GGG), Storage Technology Corp. (STK) and Tradeweb Markets Inc. (TW).

John Dorfman is chairman of Dorfman Value Investments in Newton Upper Falls, Massachusetts. His firm or clients may own or trade the stocks discussed here. He can be reached at jdorfman@ dorfmanvalue.com.