What a difference a month makes! My new Double-Net Dividend Portfolio was in negative territory one month after its inception, but is now up some 6.5% and soundly beating its benchmarks.
The group, which I also call my "Buying Ugly" portfolio, consists of smaller-cap stocks that pay dividends and are trading cheaply relative to net current assets. This collection of stocks beat its benchmarks (the Russell 2000 and Russell Microcap indices) during the portfolio's first month, but still turned in a negative performance -- a hollow victory as far as I'm concerned.
However, the group performed very well last month and is now both ahead of its benchmarks and in positive territory The portfolio's 6.5% gain since inception (as of yesterday's close) compares favorably to the Russell 2000's 6.2% drop and the Russell Microcap's 9.3% decline during the same period.
I'm pleased with that performance, but it's been just some two months since the portfolio's launch -- which is but a day to value investors. We value investors seldom receive instant gratification from our investment ideas (and when we do, I typically count it as luck rather than skill).
Nevertheless, the whole idea of this portfolio was to test whether this rag-tag group of companies can outperform its benchmarks in nearly any market environment. The jury's still out on that. Just one name in the portfolio was in positive territory on Jan. 31, but eight of 11 are now.
Arctic Cat (ACAT) -- January's biggest loser -- was down 24% during the portfolio's first month, but rose like a phoenix since then and rebounded some 45%. Investors have apparently moved on from ACAT's bad fourth-quarter results, which came out in late January. Arctic Cat unveiled its 2017 line of snowmobiles on Wednesday, and all the company has to do now is sell a bunch of them.
The portfolio's best performer to date has been Ingram Micro (IM), which has risen 28% since January's end and is up more than 17% since the portfolio's inception. The stock had a big day on Feb. 18, rising 22.6% after agreeing to a $6 billion acquisition by China's Tianjin Tianhai Investment Co. Takeovers are always a possibility with the portfolio's cheaply valued companies.
Watchmaker Movado (MOV) also had a very strong February, gaining 18%. It's now the portfolio's second-best performer, up 16.5% since inception.
Other stocks in positive territory include:
- Tesco (TESO), which has gained 13.7% since the portfolio's launch.
- PC Connection (PCCC), up 9.5%.
- Comtech Telecomm (CMTL) 8.8% higher.
- Powell Industries (POWL), +6.5%.
- CSS Industries (CSS), which is ahead by 2.6%.
On the downside, towing-equipment firm Miller Industries (MLR) is the portfolio's biggest detractor so far, losing 11% since the portfolio's inception. There's been no news behind the drop, but we'll get an update on MLR's fortunes next week when the company releases fourth-quarter results. (Miller currently has no analyst coverage, so there's no consensus estimate.)
Rounding out the "Buying Ugly" portfolio's components are:
- AVX (AVX), down 1.5% since the group's inception.
- Universal Corp. (UVV), off 1%.
Although in negative territory, those two stocks have still outperformed the portfolio's benchmarks.
