My Double-Net Dividend portfolio -- which I also call my "Buying Ugly" group -- has gained 2.1% since its Dec. 31 inception. That might not seem exciting on the surface, but it handily beats the portfolio's benchmark Russell 2000 and Russell Microcap indices, which are both lower.
The Russell 2000 has shed some 3.6% since Dec. 31, while Russell Microcap Index has lost about 6.7%. So, the Double-Net Dividend portfolio is performing decently -- although not as well as it was when I last looked at the group in early March.
Of course, this type of portfolio really needs time to develop, so I'm taking its early results with a grain of salt.
As a refresher, companies included in the portfolio must:
- Trade at between 1x and 2x net current asset value (i.e., current assets less total liabilities).
- Have at least a $250 million market capitalization.
- Have paid a dividend within the past year.
Just 11 names made the cut in our difficult-to-find-value environment, and some are probably unfamiliar to most investors. Of course, that's par for the course in Value Land these days, as you have to turn over a lot of rocks to find a even a few compelling value stocks.
The biggest news for the group so far was the Feb. 17 announcement by China's Tianjin Tianhai of plans to buy portfolio component Ingram Micro (IM) for $38.90 a share. But interestingly, IM has pulled back to about $33 after trading at around $36.50 following the news.
Tianjin Tianhai's offer represents about an 18% premium relative to Ingram's current market price, which suggests there's speculation that the deal might not go through. Those who buy IM here will get an "easy" 18% return if it does, although these situations are never easy.
All told, Ingram is up 7.4% since the portfolio's inception, making it the group's third-best percentage gainer. The big winner so far has been Powell Industries (POWL),which is up more than 26% since I launched the portfolio. POWL announced better-than-expected second-quarter results on May 3, and the stock has risen about 10% since then.
Comtech Telecomm (CMTL) is the group's second-best performer, up 13.3% since Dec. 31. However, CMTL has given back some of the gains it had through early March, when the stock was briefly ahead some 30% from the portfolio's inception.
On the flipside, the biggest loser has been Arctic Cat (ACAT), which has lost some 16.1% since inception. ACAT has had a wild ride so far in 2016, closing as low as $10.41 and as high as $18.72. The company announced worse-than expected fourth-quarter results last Thursday, prompting the stock to drop 8%.
Arctic Cat also suspended its dividend In January (and not for the first time, either). But I'm not dropping ACAT from the portfolio even though it no longer offers a dividend, as I plan no additions or deletions from the group. This is a "Set It and Forget It" portfolio.
As for the group's remaining components, none have had a great deal of excitement in terms of their early performance. The remaining stocks and their approximate performance between Dec. 31 and Friday's close include:
- AVX Corp. (AVX), +5.8%
- PC Connection (PCCC), +2.6%
- Tesco (TESO), +2.5%
- Universal Corp. (UVV), -1.2%
- CSS Industries (CSS), -1.7%
- Movado (MOV), -5.5%
- Miller Industries (MLR), -9.7%
The Bottom Line
Clearly, the stock to keep an eye on in the portfolio is Ingram Micro, given the wide spread between its current price (about $33) and its proposed takeover price ($38.90).
