The Value Portfolio Holds Its Own

 | Mar 07, 2014 | 2:05 PM EST  | Comments
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It's time for the monthly check-up of the 2014 Gad Winning Value Portfolio. February has been a good month for U.S. equities. After a slip in January, the S&P 500 came back last month, erasing all of those losses and then climbing higher. As of Thursday's close, the index has clocked in a 2.9% return year to date for 2014.

The 2014 Value Portfolio -- a collection of 10 equally weighted, individually selected securities that I choose based on value -- continues to hold its own. While the class of 2014 is up just 2.6% so far, over time I believe the portfolio will do better than the market indices.

The big anchor so far year to date was the decline in our General Motors Class B warrants positions. These warrants a holder to buy one share of General Motors (GM) for $18.33 until 2019. With GM shares trading for some $37, the warrants are deep in the money -- but, because GM shares are down nearly 10% year to date, the warrants have followed course.

For what it's worth, in the next couple years I believe GM shares will be trading for significantly more than they are today, and I view the warrants as a very attractive way to benefit from that upside. Investors today looking to consider a position may wish to look closer here.

Zinc producer Horsehead (ZINC) finally began making a move, and the stock will likely end the year in very good fashion. Excellent management and an ultra-low-cost zinc-processing facility coming up will significantly fuel cash-flow growth.

The two sleeping giants in the portfolio are Deere (DE) and Potash (POT). One makes farm equipment, the other sells fertilizer. Both rely on the strength of the agricultural sector, and currently agriculture doesn't have too many fans. But I believe this is one of the most fundamentally sound sectors on a go-forward basis. Agriculture represents economic strength and security the world over, and Deere and Potash are simply two of the most dominant in the space.

Natural gas prices continue to surge in 2014, but shares of Chesapeake Energy (CHK) have not. Regardless, as Chesapeake continues to monetize assets, those assets are clearly more valuable in an environment of higher natural gas prices.

On the whole, against a frothy environment, the fundamentals supporting this portfolio are very favorable. That should work out very well this year, especially if the overall market takes a step or two back.

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