Time will tell. The benefit (or consequence) of patience is in full effect for the Winning Value Portfolio in 2015. Out of our 10 picks, eight are down year to date, one is flat, and one is showing a strong positive return. In baseball terms, our batting average in 2015 is terrible.
For those unaware, at the start of each year, I select 10 equities to create an equally weighted stock portfolio. Unless one of our picks runs afoul of the law, they are held for the duration of the year. This is year four of the portfolio and it is shaping up to be our worst by far. Over the last three years, we have not had a losing year, returning 16%, 57%, and 7% from 2012 to 2014, respectively.
Year to date, as of July 31, the class of 2015 was down more than 19% compared with increases of 2.4% and 3.1% for the S&P 500 and Wilshire 5000, respectively:
Four of our holdings -- Chesapeake Energy (CHK), POSCO (PKX), Cheniere Energy (LNG) and Murphy Oil (MUR) -- are energy- or commodity-related stocks in a sector that has been a terrible place to invest thus far in 2015. Unfortunately, I don't see any light at the end of the energy tunnel for 2015 and absent a massive shock in the oil markets or acquisition activity, it's highly likely that these four picks will be significant underperformers this year.
A discouraging quarterly report from Whole Foods (WFM) caused the market to sour on the stock, sending the shares down in the last several days. While I believe the long-term prospects for Whole Foods remain favorable, the remainder of the year is likely to be uneventful for the share price. In a recent article, Barron's continued to be favorable on Whole Foods citing a $53 valuation based on discounted cash flow analysis.
Despite the performance of the portfolio, the valuations of most of the stocks appear to be as compelling as ever. In all likelihood, many of them will become part of the 2016 class and, in the due course, become significant winners as the gap closes between intrinsic value and market value.
Winning Value Portfolio holding Bank of America (BAC) was recently added to Jim Cramer's charitable trust, Action Alerts PLUS. In a recent note, Cramer and co-portfolio manager Jack Mohr cited their belief that "the company has the potential to realize an incredible amount of inherent earnings power."