This article is part of our Rising Star Portfolios series.

If a company you ran was on a list like this, should you be pleased or upset?

Last weekend, Barron's published its annual Barron's 500 list of the top 500 publicly traded U.S. and Canadian companies and graded their performance for the past year. The list used three metrics to rank the companies: cash-flow-based return on investment for the past three fiscal years, cash-flow-based ROI for the past fiscal year, and sales growth for the past fiscal year.

Perhaps not too surprisingly, most of the companies I've picked for my Messed-Up Expectations portfolio showed up. Fortunately, most were near the bottom, even though pleasure might not be your first reaction.

Company

Rank

Recent Price

Current FCF Growth Expectations*
Dean Foods 331 $12.28 9.6% / 4.8% / 0%
Ford Motor (NYSE: F) 207 $15.26 3.3% / 1.6% / 0%
GameStop (NYSE: GME) 333 $25.93 7.5% / 3.8% / 0%
Hertz Global Holdings 382 $16.77 (5.6%) / (2.8%) / 0%
Oshkosh (NYSE: OSK) 1 $30.08 46.7% / 23.4% / 2.5%
Transocean (NYSE: RIG) 468 $67.48 10.8% / 5.4% / 0%
SUPERVALU (NYSE: SVU) 482 $10.94 (21.3%) / (10.6%) / 0%
Textron (NYSE: TXT) 496 $24.81 4.8% / 2.4% / 0%
Western Digital (NYSE: WDC) 6 $38.45 11.6% / 5.8% / 0%

Source: Barron's.
*Presented in the format of annual growth rates for the next five years, the following five years, and then terminal growth rate, discounted at my usual 15% hurdle rate. Rates are what is required to make the output of a DCF model match the recent share price.

Why am I happy that most showed up in the lower half of the list?

Well, the question to ask is, how should management react to a company's ranking in this list? Should Charles Szews, CEO of Oshkosh, be happy for making the No. 1 ranking, or worried that the only direction available is down if concerns over military spending come true? Those high, priced-in growth expectations come from having generated just $38.4 million in free cash flow over the past four quarters.

Conversely, should Transocean CEO Steven Newman be disappointed over last year's results and ranking, or excited about the opportunity? Having listened to the most recent conference call, I think he's feeling much more the latter. In fact, I just purchased some more shares.

Barron's even calls out this tension in its article. "While ranking high in our survey signals success, bringing up the rear could mean opportunity." The ranks, obviously, are backward-looking. Considering that my investment methodology is looking at current expectations and judging whether the market is too pessimistic looking forward, I come down on the side of "opportunity."

To learn more about messed-up expectations investing, visit my discussion board, especially this post.