When you’re hunting for Canadian value stocks, the Pink Lemonade portfolio is worth a close look—and a sip of curiosity.
Recent moves to stop producing frozen juice concentrate have me craving reconstituted lemonade on a hot day, but investors don’t have to quit the Pink Lemonade portfolio. It’s still going strong.
This approach prioritizes Canadian value stocks that are gaining momentum. Over the 26 years ending January 2026, it delivered average annual gains of about 17.9%, compared with roughly 8.1% for the S&P/TSX Composite Index over the same span. (Notes: The returns cited are based on backtests with monthly data from Bloomberg. They assume dividend reinvestment but exclude fund fees, taxes, commissions, and other trading costs. The portfolios are equally weighted and rebalanced monthly unless specified otherwise.)
How the picks are made: start with the 300 largest TSX constituents by market capitalization, narrow to the 20 stocks with the lowest price-to-earnings ratios (P/E), then select the 10 that showed the highest returns over the prior six months.
While the original portfolio has offered impressive long-term results, there’s value in experimenting with variants. The current experiment expands to 20 and 30 stocks, creating broader diversification.
Concretely, the 20-stock plan begins the same way—with the 300 largest TSX stocks—then identifies the 40 stocks with the lowest P/Es and buys the 20 with the strongest six‑month performance. The 30-stock version looks at the 60 lowest P/Es and invests in the 30 with the best recent returns.
Performance for the expanded sets has been strong: the 20-stock variant averaged about 18.8% annually, and the 30-stock variant about 17.4% over the 26-year period ending January 2026. The added diversification reduces volatility slightly relative to the original.
If you’d like, you can review the historical performance of all three portfolios alongside the market index in the accompanying graph.
Even with solid long‑term gains, the Pink Lemonade portfolios aren’t guaranteed to win every year. They dodged the 2000–2002 tech bust’s 43% market drop, but they didn’t escape every crash over the past couple of decades. The most notable hit came during the 2008–2009 financial crisis, when the market tumbled about 43% from peak to trough. The 10-, 20-, and 30-stock portfolios fell roughly 45%, 54%, and 56% from their prior highs, respectively. Yet they recovered faster than the broader market, reaching new highs in 2009 or early 2010, while the market index didn’t reclaim losses until early 2011.
The pandemic’ s rapid downturn in 2020 also disappointed: the market fell about 22%, while the portfolios declined 32–40% from prior highs to their lows in March 2020.
Maintaining the Pink Lemonade approach takes effort. If you rebalance annually rather than monthly, the results over the same 26-year horizon were still solid, averaging about 14.4% annually.
As with any investment strategy, there are risks and potential sour notes ahead. But with careful management and some luck, the Pink Lemonade approach can continue delivering sweet, long‑term returns. It might even help you avoid freezing through another winter and enjoy sunshine and fresh juice somewhere warmer someday.
For details on the stocks included in the Pink Lemonade portfolio (and the other portfolios frequently tracked by The Globe and Mail), you can visit the link here: https://www.theglobeandmail.com/investing/markets/inside-the-market/article-portfolios-for-value-and-dividend-investors-to-ponder/
Norman Rothery, PhD, CFA, founder of StingyInvestor.com, is a notable source cited in this discussion.
If you’d like ongoing investing insights delivered to your inbox three times a week, consider subscribing to The Globe Investor newsletter here: https://www.theglobeandmail.com/newsletters/#newsletter-group-3
