Disclaimer: I’m not an investment advisor. I’m just a guy with 30 plus years experience investing. This is for entertainment and informational purposes only. Consult an advisor before making any investments.
Here’s the prompt that I used to create this portfolio
“Act as a conservative value investor in the tradition of Warren Buffett and Benjamin Graham.
Construct a diversified portfolio of small-cap U.S. equities that meet strict value-investing criteria, prioritizing capital preservation first and long-term compounding second.
Investment Framework
Use the following principles:
Warren Buffett–inspired criteria
- Businesses that are simple and understandable (“circle of competence”)
- Durable competitive advantages (moats), even if narrow or local
- Consistent operating profitability over at least 7–10 years
- High return on invested capital (ROIC), preferably above 12%
- Shareholder-friendly management (reasonable executive compensation, prudent capital allocation, share buybacks when undervalued)
- Low reliance on leverage; avoid balance-sheet fragility
Benjamin Graham–inspired criteria (from The Intelligent Investor)
- Market capitalization: $300M–$2.5B
- Price-to-Earnings (P/E): preferably below 15
- Price-to-Book (P/B): preferably below 1.5
- Current ratio ≥ 2.0
- Long-term debt ≤ net current assets
- Positive earnings in each of the past 10 years
- Dividend history or evidence of consistent free cash flow generation
Additional Constraints
- Avoid speculative growth narratives, turnaround stories, or “story stocks”
- Avoid companies dependent on commodity price speculation
- Avoid businesses with opaque accounting or frequent “adjusted” earnings
- Favor boring, durable businesses over exciting ones
Portfolio Construction
- Select 10–15 stocks
- Provide suggested portfolio weights with justification
- Emphasize margin of safety over upside optionality
Output Format
For each stock, provide:
- Ticker and company name
- Industry
- Market cap
- Key valuation metrics (P/E, P/B, EV/EBIT, ROIC)
- Balance-sheet summary
- Brief moat assessment
- Key risks
- Why it qualifies under Buffett & Graham principles
End with:
- Overall portfolio thesis
- Expected long-term return drivers
- Primary risks to the strategy
Do not include disclaimers or generic investing advice.
Focus on analytical rigor, conservatism, and first-principles reasoning.”
Here is Gemini’s Feedback:
Small-Cap Conservative Value Portfolio: 2026 Strategy
This portfolio is constructed using the “Defensive Investor” parameters of Benjamin Graham and the “Quality-at-a-Reasonable-Price” (GARP) lens of Warren Buffett. We prioritize businesses with fortress balance sheets, niche dominance, and owner-oriented management.
Suggested Portfolio Allocations
| Ticker | Company Name | Sector | Weight | Justification |
| EBF | Ennis, Inc. | Industrials | 12% | Zero debt; 42-year dividend history; niche dominance. |
| WEYS | Weyco Group, Inc. | Consumer Discretionary | 10% | Trading below book value; strong cash position; family-managed. |
| SCVL | Shoe Carnival, Inc. | Consumer Discretionary | 10% | Debt-free; high ROIC history; significant margin of safety. |
| NPK | National Presto Industries | Industrials/Defense | 10% | Cash-heavy; critical defense contracts; counter-cyclical appliances. |
| SENEA | Seneca Foods Corp. | Consumer Staples | 10% | Deep value (P/B < 0.6); essential food supply; tangible asset backing. |
| MLR | Miller Industries, Inc. | Industrials | 10% | Global leader in towing; disciplined capital allocation; long dividend streak. |
| UVV | Universal Corp. | Consumer Staples | 10% | 50+ year dividend growth; high FCF; essential supply chain link. |
| IIIN | Insteel Industries, Inc. | Materials | 8% | Debt-free; infrastructure play; high tangible book value. |
| KELYA | Kelly Services, Inc. | Industrials | 10% | Trading near liquidation value; restructuring toward higher margins. |
| Cash | Treasury Bills/Money Market | Liquidity | 10% | Optionality to deploy during market dislocations. |
Individual Stock Analysis
Ennis, Inc. (EBF)
- Industry: Business Equipment & Supplies (Forms/Printing)
- Market Cap: ~$465M
- Metrics: P/E: 10.8 | P/B: 1.4 | ROIC: ~14%
- Balance Sheet: Zero debt. $31M in cash. Current Ratio: >3.0.
- Moat: Consolidation play in a “boring” industry. High switching costs for small businesses reliant on custom forms/labels.
- Qualifies Because: Fits Graham’s criteria of no debt and consistent earnings. Fits Buffett’s criteria of a simple, “unsexy” business with high ROIC.
Weyco Group, Inc. (WEYS)
- Industry: Footwear
- Market Cap: ~$302M
- Metrics: P/E: 12.1 | P/B: 0.93 | ROIC: ~11%
- Balance Sheet: Cash exceeds all long-term debt.
- Moat: Brand equity in mid-tier footwear (Florsheim, Nunn Bush). Distribution network in department stores.
- Qualifies Because: Trading below its liquidation value (Net-Net potential). Conservative family management avoids over-leveraging.
National Presto Industries (NPK)
- Industry: Aerospace/Defense & Household Appliances
- Market Cap: ~$850M
- Metrics: P/E: 21.5 | P/B: 2.2 | ROIC: ~10.6%
- Balance Sheet: Fortress-like. Current Ratio: 3.53. No debt.
- Moat: High barriers to entry in the defense segment (specialized 40mm ammunition manufacturing).
- Qualifies Because: Capital preservation is ensured by a massive cash pile. It acts as a “mini-conglomerate” with uncorrelated revenue streams.
Seneca Foods Corp. (SENEA)
- Industry: Canned Vegetables
- Market Cap: ~$770M
- Metrics: P/E: 13.2 | P/B: 0.5 | EV/EBIT: 8.4
- Balance Sheet: Current assets exceed total liabilities. High inventory value provides a floor.
- Moat: Low-cost producer in a commodity-like but essential category. High regional market share.
- Qualifies Because: Pure Graham “Value” play. The stock price significantly discounts the value of its physical assets (warehouses, plants, inventory).
Miller Industries (MLR)
- Industry: Specialty Industrial Machinery (Towers/Carriers)
- Market Cap: ~$460M
- Metrics: P/E: ~15 (Normalized) | P/B: 1.2 | ROIC: 12%
- Balance Sheet: Aggressive debt reduction in 2025; Current Ratio > 3.0.
- Moat: Dominant global market share in towing and recovery equipment. Niche manufacturing expertise.
- Qualifies Because: It is the “Buffett” style business—the best in a small, necessary niche with a long history of returning capital to owners.
Overall Portfolio Thesis
The strategy seeks to exploit the “Small-Cap Value Premium” by buying companies that the market ignores because they are not “innovative.” We are not buying growth; we are buying retained earnings and tangible assets. By focusing on companies with current ratios above 2.0 and little-to-no debt, we eliminate the primary risk of small-cap investing: insolvency during credit contractions.
Expected Long-Term Return Drivers
- Earnings Yield: The portfolio’s average P/E of ~12 implies an 8% earnings yield.
- Dividends & Buybacks: Over 60% of the selected companies have active repurchase programs or high yields (>4%).
- Mean Reversion: Several holdings (SENEA, WEYS) trade below or near book value, providing upside as valuations normalize toward historical averages.
Primary Risks
- Liquidity Risk: Small-cap stocks can experience high volatility on low volume.
- Economic Sensitivity: While debt-free, firms like MLR and WEYS are sensitive to broader GDP and consumer spending trends.
- Technological Displacement: The “boring” industries (printing, canned food) face long-term secular declines, though the portfolio compensates for this with low entry prices (Margin of Safety).
