Some people want to invest in the stock market, but don't want to be too daring.

For the slightly conservative investor, I compile a collection of stocks that I think may be suitable. I call it the Sane Portfolio.

There are a dozen stocks in this portfolio, and I refresh the membership list once a year. To get in, a stock must meet seven criteria, described below. Once in, a stock stays in unless it flunks one of the seven criteria.

Over 22 years, the Sane Portfolio has averaged an 11.40% annual return. That is slightly better than the Standard & Poor's 500 Total Return Index, with an average return of 10.30%.

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.

In the past 12 months, the Sane Portfolio chalked up a 17.06% return, which trailed the index at 20.09%. The star performers were Mueller Industries Inc. (MLI, Financial), up 72%, and Encore Wire Corp. (WIRE, Financial), which advanced 70% and was acquired. The worst performer was Archer-Daniels Midland Co. (ADM, Financial), down 30%.

Eligibility hurdles

To be eligible for the Sane Portfolio, a stock must leap seven hurdles. None is especially difficult by itself, but few companies can jump all seven.

The hurdles are:

• Market value of at least $1 billion.
• Debt less than stockholders' equity.
• Return on stockholders' equity of 10% or better.
• Stock price less than 18 times per-share earnings.
• Stock price less than 3 times per-share sales.
• Stock price less than 3 times book value (corporate net worth per share).
• Five-year earnings growth averaging 5% per year or better.

This year, eight “Sane” companies retain their eligibility, leaving four vacant spots to fill.

Winning streaks

D.R. Horton Inc. (DHI, Financial), the nation's largest homebuilder, is back for a fifth year. Right now, the number of homes being sold is low, but the average selling price is high, about $487,000. If mortgage rates come down a peg or two, we should see a jump in home sales.

Back for a fourth year is Nucor Corp. (NUE, Financial). A pioneer in recycling, it's the largest U.S. steel company. Over the past decade Nucor has increased its revenue at better than a 10%-a-year clip.

Also a four-timer is Paccar Inc. (PCAR, Financial), which manufactures heavy trucks under the Kenworth and Peterbilt brands. Paccar owns about 30% of the U.S. heavy-truck market, second only to Daimler-Benz Group of Germany, which makes the Freightliner brand.

Three timers

Entering its third year is Mueller Industries Inc. (MLI, Financial), which makes metal and plastic parts such as rods, tubes, valves and refrigerator coils. It has shown a profit in each of the past 30 years (also true of Paccar). Mueller has barely any debt.

Boise Cascade Co. (BCC, Financial) also returns for a third year. It produces engineered wood products, plywood and lumber products. If the housing industry improves in the next year or two, that will help Boise.

Back for seconds

Archer-Daniels Midland Co. (ADM, Financial), an agricultural-products processor, returns for a second year. This is a low-margin business, but the stock currently trades at 0.34 times the company's sales, which is a bit cheaper than usual.

Also back for seconds is W.R. Berkley Corp. (WRB, Financial), the only financial stock on this list. It's a property and casualty insurer that has posted a return on stockholders' equity of 15% or better four years in a row.

Fertilizer maker CF Industries Holdings Inc. (CF, Financial) completes the list of returnees. It had a rough year last year, but managed to stay on the roster.

Newcomers

No longer eligible are Amkor Technology (AMKR, Financial), which was in the portfolio for three years, Columbia Sportswear Co. (COLM, Financial), which was in for two, and Coterra Energy Inc. (CTRA, Financial), which lasted only one. In addition, Encore Wire was acquired, creating a fourth vacancy.

Since Coterra fizzled, the portfolio has no energy stocks. I'm inserting EOG Resources Inc. (EOG, Financial), a big oil and gas producer with lots of Texas acreage.

The list currently has no retailers. Enter Academy Sports & Outdoors Inc. (ASO, Financial), which sells sporting equipment, mainly in the South and Midwest.

The Sane Portfolio is also naked in the technology area, now that Amkor has fallen out. (Many tech stocks sell for more than 18 times earnings.) In goes Photronics Inc. (PLAB, Financial) of Brookfield, Connecticut. It makes photomasks, used in making integrated circuits and flat screen displays.

For my final pick, I'll go with Monarch Casino & Resort Inc. (MCRI, Financial), which has grown its revenue at an 8% annual clip for the past decade.

John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at [email protected].