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An Annual Review on the CORA portfolio

The 'boring' crowd outperformed the market

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Steven Chen
Jun 07, 2020
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“The greatest companies in lousy industries share certain characteristics. They are low-cost operators and penny-pinchers in the executive suite. They avoid going into debt. They reject the corporate caste system... Their workers are well paid and have a stake in the companies' future. They find niches, part of the market that bigger companies have overlooked. They grow fast - faster than many companies in fashionable fast-growth industries...

Pompous boardrooms, overblown executive salaries, demoralized rank & file, excessive indebtedness, and mediocre performance go hand in hand. This also works in reverse. Modest boardrooms, reasonable executive salaries, a motivated rank and file, and small debts equals superior performance most of the time.”

- Peter Lynch, Beating the Street

Around this time last year, I shared four picks to illustrate the power of being boring. None of these names are associated with exciting high tech or any buzzword that you may have often heard among the future enthusiasts. Instead, they are conservatively managed, easy to understand and operate in slowly-moving “boring” industries. These companies are:

  • Rollins (ROL, Financial), a global leader in pest control
  • Chemed (CHE, Financial), a leading provider of hospice and plumbing services in the U.S.
  • Atrion (ATRI, Financial), a health care and medical business focused on a diversified range of niche categories
  • Omega Flex (OFLX, Financial): a leading manufacturer of the flexible metal hose

I call this crowd “CORA,” named after the first initials of each stock (similar to the famous “FAANG” group). According to data at GuruFocus, an equally-weighted CORA portfolio delivered a positive alpha of 4% against the S&P 500 over the past 12 months (as of market close on June 5). It is worth noting that the portfolio underperformed FAANG during the same period. Below is the performance summary:

12-month Total Return

1-year Sales Growth

3-year Sales Growth

Return on Assets

3-year Incremental Return on Equity

























Atrion was the only company underperforming the benchmark over the year, which could be attributable to the higher valuation at which the share traded previously and slowing growth (see below).



The capital efficiency has remained super-normal at Atrion. The company’s current return on assets is nearly 15%, mainly thanks to the management’s focus on niches and skillful capital allocation as well as a reputation-based moat in a mission-critical and safety-conscious space. While Atrion possesses a robust defensive position for its economic castle, the business appears to have encountered issues to drive attractive returns out of the expansion. The three-year incremental return on equity capital is 13%, less than the current return on equity of 15.77% and the 10-year median of 18.3%. Moderate growth could lie ahead.

Based on a mid-to-high single-digit average annual growth rate in free cash flow, the current price multiple of Atrion, even after an over 20% drop in share price, does not look too reasonable. As a result, it would not be a surprise to me if the underperformance continues.

Chemed and Omega Flex led the portfolio by a wide margin with more than 30% total return each. The two companies delivered the highest returns on assets among the portfolio. The prospects at Chemed looks particularly attractive to me for its leading position in a stable, highly-fragmented, recession-proof industry. The business demonstrates a proven growth strategy based on consolidation and has earned a 59% three-year incremental return on equity.

Rollins slightly outperformed the S&P 500 over the period. I have been concerned with the share’s hefty valuation for quite a while. In the meantime, the business continued to steadily increase its revenue and operating income as it has each year for more than two decades now. As with the other “boring” stories, things really change very little at Rollins year in and year out – same strategy, same product and service, same industry outlook, same competitive landscape. This enables the management to concentrate on widening the moat and fueling long-term growth.

Disclosure: The mention of any security in this article does not constitute an investment recommendation. Investors should always conduct careful analysis themselves or consult with their investment advisors before acting in the stock market. We own shares of Rollins.

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