Nearly 14 months ago I launched the 2017 Double-Net Dividend tracking portfolio, which combined two of my favorite deeper-value attributes -- namely, companies trading at a relatively low multiple of net current assets (double nets) that also paid dividends.
To be included, companies had to have the following attributes at the time of launch:
- Minimum $200 million market cap
- Trading at less than 2x net current asset value (net current asset value is calculated by subtracting total liabilities from current assets).
- Paid a dividend
A rather surprising 10 names made the cut. The last update, in January, revealed some fairly decent results, with the portfolio up about 24.5%. The strong performance has continued since then, and the portfolio is now up 40.5% since inception. That's better than the Russell 2000 (up 21.6%) and Russell Microcap Indexes (up 24%), which are the most appropriate benchmarks in this case.
All but three names in the portfolio are in positive territory since inception. The big winners are Guess? Inc. (GES) (up 134%), Movado Group Inc. (MOV) (up 122%), Shoe Carnival Inc. (SCVL) (up 72%) and Citi Trends Inc. (CTRN) (up 58%). Both GES and MOV have been on fire since the January update and have been the engines behind the portfolio's performance.
CSS Industries Inc. (CSS) (down 36%) has been the biggest laggard. The company is attempting to grow via acquisitions, but so far investors are not buying the strategy. Currently yielding 4.9%, CSS ended its latest quarter with $59 million, or $6.50 per share, in cash and $40 million in debt. It currently trades at about 1.2x net current asset value. The one analyst covering the name is projecting earnings per share of $0.95 next year, putting the forward price-to-earnings (P/E) ratio at 17.
FreightCar America Inc. (RAIL) is flat since inception; the company halted its dividend last fall. FreightCar America remains cash-rich, with more than $9.50 per share in cash and short-term investments and no debt. It currently trades at about 1.8x net current asset value and is expected to return to profitability in 2019.
Rounding out the portfolio are Universal Corp. (UVV) (down 5%), Avnet Inc. (AVT) (up 22%) and AVX Corp. (AVX) (up 12%). The tenth name in the portfolio, West Marine, was acquired last summer for $12.97 a share, providing a 30% return since portfolio inception.
Interestingly, six of the companies have increased their dividends over the past year; they are Avnet, AVX, Universal, Movado, Shoe Carnival and Citi Trends.
