Just over one month since inception, my 2018 Double Net Value Portfolio is doing its job, so far. Relative performance is nothing to write home about, up about 5.4%, almost exactly matching that of the Russell Microcap Index, and just ahead of the Russell 2000 Index (+4.7%). The portfolio is doing slightly better than the value components of both indices, with the Russell 2000 Value Index up 3.85%, and Russell Microcap Value Index up 4.7% and since this is a value-oriented portfolio, those comparisons are appropriate.
From an absolute performance perspective, however, +5.4% in one month is a blistering pace that cannot continue through 2018.
By way of a reminder, the screening criteria for this "poor-man's value portfolio" are as follows.
- Companies trade at between 1 and 2 times net current asset value (NCAV)
- Minimum market cap $150 million
- No development stage pharmaceuticals/biotechs
All but five names are in positive territory. The big winner so far, is Fossil Group (FOSL) (+39%), which has been the beneficiary of renewed investor interest (including yours truly), after being absolutely pummeled. Rumors of a private equity offer of $15.75/share have boosted the stock over the past few trading days.
Hibbett Sports (HIBB) (+22%) has continued its strong run since bottoming at $9.40 intraday on Aug. 18, in the retail purge that unfairly punished some names. The stock is up more than 270% since then, and we'll get the next update when the company reports fourth-quarter earnings in early March.
Rounding out the early winners are Hurco Companies (HURC) and Dril-Quip (DRQ) , both up about 16%. Hurco had a nice jump on Jan. 5, up 8%, after reporting what appeared to be good earnings, although no analysts follow the name.
The biggest loser so far is Big 5 Sporting Goods (BGFV) (-20%), which was hammered on Jan. 8 (-16%), after dramatically lowering fourth-quarter guidance from earnings of between $0.16 and $0.28 to a loss of between $0.08 and $0.13. Preliminary fourth-quarter revenue was down 8.7% year over year, with same-store sales falling 9.4%. This may be one of the specialty retailers that the market got right, and we'll see if the company can right the ship.
From there, there is nothing remarkable so far, although we are just one month in.
Rounding out the portfolio performance:
- FreightCar America (RAIL) (-5.6%)
- Universal Corp. (UVV) (-4.1%)
- CSS Industries (CSS) (-3.4%)
- Benchmark Electronics (BHE) (-1.2%)
- Adams Resources & Energy (AE) (+.3%)
- Essendant (ESND) (+.6%)
- Gencor (GENC) (+1.2%)
- Actua (ACTA) (+1.3%)
- Gulf Island Fabrication (GIFI) (+2.1%)
- Digi Intl (DGII) (+3.1%)
- Avnet (AVT) (+7%)
- Super Micro Computer (SMCI) (+7.4%)
- Northwest Pipe (NWPX) (+7.8%)
- AVX Corp. (AVX) (+8.3%)
- EMCOR (EMKR) (+8.6%)
Stay tuned for what may be a wild ride from here. When my value-oriented brain began putting together and tracking net/net and later double net portfolios years ago, it was originally to see how such companies would perform in down markets, whether they would hold up better than more mainstream names. It's been years since that's been put to the test.