This year's Tax Loss Selling Recovery Portfolio, just two months since inception, is doing better than I would have expected, at this point anyway. Up nearly 24%, much of that gain has occurred over the past month, and that comes with a huge resurgence in small caps (Russell 2000), and retail. I do not expect that pace to continue, and don't view the early results as a victory. The purpose of this annual portfolio is to select a group of names that were beaten up during the year (down at least 30%), but are expected to have price-earnings ratios below 15 the following two years. Heading into year-end, these make potentially good candidates for further selling pressure, as investors harvest tax losses. The theory is that these names might prosper in the New Year.
Tranche 1, released on 12/1 had a great month, and is now up 24%, after ending last month up less than 1%. It is outperforming both the S&P 500 (up 5.7%) and Russell 2000 (up 21.2%). Designer Brands (DBI) (up 53% since inception) took off, rising 64% as retail sprang back to life. DBI is currently the second-best overall performer in the portfolio. Last month it was the worst overall. Walgreens Boots Alliance (WBA) (up 29%) also had a good month, rising 20%. Pilgrim's Pride (PPC) (up 8%) made its way out of negative territory, while Xerox (XRX) (up 6%), was about flat for the month
Tranche 2, released on 12/4 (up 39%) is outperforming better the S&P 500 (up 5.6%) and Russell 2000 (up 20%). It was up 25% for the month. Falcon Minerals (FLMN) (up 59%) remains the best overall performer in all tranches, and rose about 7% for the month. Townsquare Media (TSQ) (up 47%), rose 52% for the month, and is now back to pre-Covid levels. On January 25th, the company announced that it was buying back 10 million shares from Oaktree Capital Management at a 19% discount. Retailer Genesco (GCO) (+39%) also jumped into positive territory after rising 47% for the month. Wells Fargo (WFC) (+12%) rounds out this tranche.
Tranche 3, released on 12/7 (up 8%) is beating the S&P 500 (up 4.7%) but trailing the Russell 2000 (up 19.3%). Sally Beauty Holdings (SBH) (up 26%) was up 22% for the month, and remains the best performer here. G-III Apparel (up 15.6%), enjoyed the retail rebound, rising 18% for the month, putting it in positive territory. AerCap Holdings (AER) (flat), and Phillips 66 Partners (PSXP) (down 9.3%) rounds out this tranche, the latter is the only name in negative territory overall.
The rise in retail has been a tailwind for the portfolio. We'll see if that trend continues as we start to get fourth quarter results.
(Wells Fargo is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells WFC? Learn more now.)
