Hard to believe it's been eight months since the inception, of my Triple Net active versus passive portfolio experiment, somewhat naively constructed during the good old days, before we knew about murder hornets or were wearing masks in the grocery store. The idea, was to determine whether taking an active approach to buying companies at relatively low multiples of net current assets (current assets minus total liabilities) could outperform an active approach, where constituents were reviewed and hand-selected.
The original screening criteria included the following:
- Market capitalization in excess of $100 million
- No financials or development-stage companies
- Trading at between 2 and 3 times NCAV (NCAV is calculated by subtracting a company's total liabilities from current assets)
The total of 48 qualifying names represent the "passive" portfolio. I then honed this list down to the eight that I found most interesting, which comprise the "active" portfolio. Keep in mind that all eight names in the "active" portfolio are also members of the "passive" portfolio.
The active portfolio approach (up 19%), continues to outperform the passive approach (up 2%), but is also doing better than the Russell 2000 Index (-7%), and Russell Microcap Index (-2%). Perhaps more importantly in terms of relative performance, both triple net portfolios, which are value-based, are currently doing much better than the Russell 2000 Value Index (down 19%), and Russell Microcap Value Index (-16%).
Six of the eight active names are now in positive territory. Since the May update, MarineMax (HZO) (+32%) has made the biggest positive move, as of the last update it was down 1%. The company has benefited from positive sentiment in the boating sector.
While Fitbit (FIT) (up 85%) is still the best performer, other names are beginning to carry their weight. The fear with FIT is the possibility that the deal with Alphabet (GOOGL) may fall through, and if so, I'd expect shares to plummet.
Here's how the other active names are doing so far:
Astec Industries (ASTE) (up 48%)
Crimson Wine Group (CWGL) (down 25%)
Dril-Quip (DRQ) (down 43%)
Johnson Outdoors (JOUT) (up 38%)
LiveRamp Holdings (RAMP) (up 12%)
National Presto Industries (NPK) (up 2%)
The top performers in the "passive" portfolio, besides FIT, include Cyberoptics (CYBE) (+140%), nLight (LASR) (+62%), Axcelis Technologies (ACLS) (+56%), and Astec Industries (ASTE) (+48%).
(Alphabet is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells GOOGL? Learn more now.)
