Douglas Gerlach is known for “all-weather” investing—his newsletter urges investors not to try to time the market but to keep their stock allocations fully invested even if the market or economy is in trouble. To make that work, he aims to pick stocks that do well, relative to the market, in good times and bad. According to Mark Hulbert, a longtime tracker of investment newsletter performance, Gerlach and his team had the top-performing stock newsletter model portfolio in 2018, with a 1.7% loss versus a 6.8% loss for the broad Wilshire 5000 index. Over the past 20 years, Gerlach’s portfolio has returned 12.5% annualized versus 7.8% for the index.

Gerlach’s secret? Finding “high-quality” companies that exhibit consistent annual earnings growth (at least 15% annualized over the past five years for small companies and 7% for large companies)…stable profit margins…and clear long-term advantages over competitors. His favorite stocks now…

Dollar General (DG) is a deep-­discount retailer with 15,200 stores in 44 states. It has grown rapidly in recent years by adding new stores in small-town locations. During economic downturns, it attracts additional customers looking to save money. 

Fiserv (FISV) provides essential backroom services such as electronic fund transfers and payment processing for more than 12,000 banks and credit unions. The business should continue to grow steadily as consumers use new services online and through their smartphones. 

O’Reilly Automotive (ORLY) is an aftermarket auto-parts retailer with about 5,200 US stores. As more consumers hang on to aging vehicles, there’s more demand for replacement parts.