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  1. Home
  2. / Investing
  3. / Energy

Catch These Names in My 'Double-Net' Value Portfolio for 2017

An eclectic mix of 20 companies made my cut of stocks trading at 1x to 2x net current asset value.
By JONATHAN HELLER
Dec 30, 2016 | 11:00 AM EST
Stocks quotes in this article: AVT, TECD, AVX, BHE, UVV, MOV, CROX, TESO, GEOS, CSS, GENC, HURC, ESIO, AE, AXTI, BDE, WMAR, RAIL, FIT, KLIC

A new year means it's time for a new deep-value tracking portfolio. Indeed, over the next several weeks, I will be rolling out a handful of them.

Today we will focus on what I call "double-nets" -- stocks trading at 1x to 2x net current asset value. Last year's version featured double-nets that also paid dividends. Frankly, the first-year performance of that portfolio was disappointing -- it was up 13.2% versus 19.3 % for the Russell 2000 Index and 18.7% for the Russell Microcap Index. For 2017 I'll be dropping the dividend requirement.

Below are the criteria for inclusion:

  • Trades at 1x to 2x net current asset value (current assets less total liabilities)
  • Minimum market cap of $150 million
  • No development stage pharmaceuticals/biotechs

Twenty names made the cut, with market caps ranging from $165 million to $6.1 billion. The average market cap is $1.05 billion, with seven names sporting market caps in excess of $1 billion. All but four are profitable on a trailing 12-month basis. The portfolio has a price to book value of 1.17 and currently trades at about 1.68x net current asset value. Many of the companies hold a decent level of cash, and the average cash to market cap ratio is about 0.22. Last year, double-nets made for fertile ground in terms of acquisitions.

There are some familiar names on the list, including a few I've written about and own. Among them are boating retailer West Marine (WMAR) , FreightCar America  (RAIL) , a very beaten-up Fitbit  (FIT) and Kulicke and Soffa (KLIC) .

The portfolio also includes the following names, in order of market cap.

  • Avnet (AVT)
  • Tech Data (TECD)
  • AVX (AVX)
  • Benchmark Electronics (BHE)
  • Universal (UVV)
  • Movado (MOV)
  • Crocs (CROX)
  • Tesco (TESO)
  • Geospace Technologies (GEOS)
  • CSS Industries (CSS)
  • Gencor (GENC)
  • Hurco (HURC)
  • Electro Scientific Industries (ESIO)
  • Adams Resources & Energy (AE)
  • AXT (AXTI)
  • Black Diamond (BDE)

Universal, Movado, CSS Industries, AVX and Tesco were all constituents of last year's double-net dividends portfolio.

Overall, this is yet another eclectic mix of names, many of which may be unfamiliar to investors. That's not necessarily a negative. Sometimes it pays to look for opportunities within the market's underbelly, areas that are likely not overfished, and where some digging -- along with a strong stomach -- can bear fruit.

I will provide periodic updates on this portfolio.

Here's to a healthy and prosperous 2017!

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At the time of publication, Heller was long WNAR, RAIL, FIT and KLIC.

TAGS: Investing | U.S. Equity | Technology | Energy | Industrials | Consumer | Stocks

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