Six months since inception, my 2018 Double Net Value Portfolio is doing its job so far; it is up 18.8% vs. 10.1% for the Russell 2000 Index and 13.7% for the Russell Microcap Index, the most appropriate benchmarks. While my portfolio is trouncing the S&P 500, which is up just 2.6%, such comparisons are meaningless in my view due to the apple-to-orange comparisons of small and microcap stocks to their larger cousins.
The portfolio's performance is driven by Fossil Group Inc. (FOSL) , which has been on fire and is up 300%. Often in my deep-value tracking portfolios, there is a name or two that does most of the heavy lifting, and in this case Fossil has been more than doing its part.
In addition, workplace products name Essendant Inc. (ESND) (up 46%) has staged a nice turnaround since April's update, when it was in negative territory. Much of that is due to takeover activity.
In April, Genuine Parts Co. (GPC) announced intentions to spin off its S.P Richards business to combine with Essendant. Then, last month, Staples took a 9.9% stake in ESND in pursuit of an unsolicited buyout. This one could get interesting, with the Federal Trade Commission requesting information about the Genuine Parts deal for a second time earlier this month. (This brings back memories of the FTC's dealings in the proposed Staples-Office Depot merger from 2015.)
Double nets have been fertile hunting ground for acquisitions over the past few years, but it has been a while since the last one, so we'll see if we ultimately can add ESND to the list.
The other names in positive territory are Digi International Inc. (DGII) (up 40%), Universal Corp. (UVV) (up 24%), Super Micro Computer Inc. (SMCI) (up 17%), Northwest Pipe (NWPX) Co. (up 15%), Big 5 Sporting Goods Corp. (BGFV) (up 12%), Avnet Inc. (AVT) (up 11%), Hibbett Sports Inc. (HIBB) (up 10%), Hurco Cos. (HURC) (up 10%), and Dril-Quip Inc. (DRQ) (up 7%).
The biggest losers so far include CSS Industries Inc. (CSS) (down 41%), Gulf Island Fabrication Inc. (GIFI) (down 36%), Emcore Corp. (EMKR) (down 16%), and Adams Resources & Energy Inc. (AE) (down 11%).
Rounding out performance:
While I am pleased with the results so far, I do understand they are skewed due to FOSL's performance. If FOSL was flat since inception, for instance, the portfolio would be up just 4%. More even performance among a group of selected names would be nice, but this is par for the course in deep-value land.
