Seven months since inception, my 2021 Tax Loss Selling Recovery Portfolio is now up about 62% since inception, after rising about 6% since the May update.
This annual portfolio "experiment" starts by identifying potentially cheap names that have fallen sharply during the year and might be pushed even lower at the end of this year as investors harvest losses. By way of reminder, screening criteria include the following:
- Down at least 30% year to date
- Forward price-to-earnings (P/E) ratios below 15 in the next two fiscal years
- Minimum market cap of $100 million
The theory is that these names may rebound in the new year when the selling pressure is off. This annual experiment has provided some fairly solid results in the years I've been conducting it, and so far, so good with the 2021 vintage.
Tranche 1, released on 12/1 was down about 3% over the past month, and is now up 47%. It continues to outperform both the S&P 500 (up 16%) and Russell 2000 (up 28%). Designer Brands (DBI) (up 106% since inception slipped about 10% over the month, despite reporting much better than expected (+12 cents versus 18 cent loss consensus). Xerox (XRX) (up 15%) was flat, and remains the worst performer in the overall portfolio. Pilgrim's Pride (PPC) (up 18%) gave back about 5% for the month, while Walgreen Boots Alliance (WBA) (up 46%) was up slightly.
Tranche 2, released on 12/4 (up 94%), remains the best performing tranche, and padded that lead after rising 15% since the May update. It is outperforming the S&P 500 (up 16%) and Russell 2000 (up 26%). Townsquare Media (TSQ) (up 109%), rose 39% and now trades at an all-time high. The company reported better than expected first quarter results om May 10th, and has been on the upswing ever since. Falcon Minerals (FLMN) (up 130%) is now the top performer, after rising about 10%. FLMN now yields 8%. Genesco (GCO) (up 90%) also had another solid month, benefitting from much better than expected first quarter results (+79 cents versus 53 cent consensus loss) and is trading near a four Year high. Wells Fargo (WFC) (+55%) was flat for the month.
Tranche 3, released on 12/7 (up 45%) is beating the S&P 500 (up 15%) and Russell 2000 (up 26%) and was up about 4% since the last update. Phillips 66 Partners (PXSP) (up 48%), had another great month, rising about 20%, and it now yields 8.5%. Sally Beauty Holdings (SBH) (up 62%) remains the best performer in this tranche. The month was uneventful for GIII Apparel (GIII) (up 42%) and AerCap Holdings (AER) (up 32%).
I am already thinking about next year's portfolio. At this point, however, pickings are slim. Given the year we've had, there are currently not a lot of names that fit the portfolio criteria. That should change by the time I'd roll out next year's vintage, but who knows?
(Designer Brands is a holding in TheStreet's Stocks Under $10 portfolio. Click here to learn more about this portfolio, trading ideas and market commentary product.)