Winning Value Portfolio Zigzags

 | May 02, 2014 | 11:00 AM EDT
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After the first four months of 2014, the Gad Winning Value Portfolio continues to bounce back and forth. The portfolio, a collection of 10 equally weighted positions, purchased and held for the entire year, remained neutral while the S&P 500 notched a bit higher.

Source: Sham Gad

As of May 1, 2014, the class of 2014 was basically flat while the S&P 500 is up 3% for the year. While the market experienced little volatility, the portfolio had some movement. Bank of America (BAC) went from black to red in the past several weeks, thanks to news that the company had to temporarily suspend its anticipated dividend increase and stock buyback plans. With big banks already on shaky ground with Mr. Market, this news from BAC led to a quick selloff.

In my view, BAC shares have become more attractive. Even accounting for the write-off in the structured notes that BAC discovered it had not done, Tier 1 capital still remains above what the Federal Reserve deems adequate. This unfortunate delay is likely to be temporary.

In opposite fashion, Chesapeake Energy (CHK) and Apple (AAPL) moved from the red to the black. Even though natural gas prices kept climbing higher, CHK shares were being overlooked until recently. A continued sustainable rise in natural gas prices, which is a likely outcome, enhances the value of Chesapeake's unique assets.

Apple announced a strong quarter of iPhone sales along with an increased buyback and a stock split. The market was happy with all of the news and sent shares up by 10% in a week.

The biggest drag on the portfolio continues to be our position in General Motors (GM). While I continue to believe our Class B warrants are a very attractive investment, I realize that value will likely take more time than anticipated. The media has not been favorable to GM lately and, in the short run, the market puts tremendous weight on headlines.

Iridium Communications (IRDM) soared by 10% on Thursday, as its earnings release beat estimates by a penny. The company's unique position as the world's only truly global mobile communications company makes a key provider of services to the government. IRDM's satellite's cover every inch of the Earth's surface meaning that an Iridium signal can be had in the most remote of locations. Up 20%, year-to-date, this $500 million company could continue to stretch its wings for some time to come.  

As you can see, it won't take much for this portfolio to again outperform the market. That may not happen in the next seven months, but these high quality positions will likely stand the test of time for patient investors.

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