My annual Tax Loss Selling Recovery Portfolio is finally back in black after another solid month in which it rose 26% since the July update. As value has sprung back to life somewhat, so has this portfolio of names that were crushed in 2019. Now up about 6%, it has more work to do, but the past two months (up 53%) have brought it renewed life.
The idea behind this annual "experiment" is to identify potentially "cheap" names with the following attributes:
- Down at least 30% year to date,
- Forward price earnings ratios below 15 in the next two fiscal years
- Minimum market cap $100 million
Given their poor performance during the year, these names may have been pushed even lower by year-end tax loss selling. The theory is that they may rebound in the new year as investors re-engage. This year, I took small positions in all of the names, putting a little skin in the game. In December, they will be sold, and I'll buy next year's crop.
Tranche 1, released on 12/4 is up about 16%, better than the S&P 500 (+9%), Russell 2000 (-1%), and Russell 2000 Value Index (-12%). Tupperware (TUP) (+57% since inception) has once again soared since the last update (+111%), after putting up better than expected second quarter results. Spirit Airlines (SAVE) (-54%) remains the worst overall performer, as airlines continue to suffer in this environment. B&G Foods (BGS) (+84%) benefited from a good second quarter, and is the second-best overall performer. GameStop (GME) (-23%) had a decent run since the last update (+13%), but has been a disappointment overall.
Tranche 2, released on 12/6 is down 14%, much worse than the S&P 500 (+8%) and Russell 2000 (-1%), but had a nice run since the July update (+26%). While all four names are still under water, Gap (GPS) (-5%) and Mosaic (MOS) (-3%) are inching closer to breakeven. MOS had a great month (+52%), as second quarter earnings of 11 cents handily beat the -1-cent estimate on great potash sales. Fluor (FLR) (-24%) rounds out the foursome.
Tranche 3, released on 12/9, has performed best (+17%), better than the S&P 500 (+7%) and well ahead of the Russell 2000 (-1%). Gaming headset name Turtle Beach (HEAR) (+94%) remains the best overall performer but was about flat for the month. Chemours (CC) (+30%) jumped 38% during the month, and put up better than expected second quarter earnings. While Tenneco (TEN) (-33%) remains in the dump, it had a great month (+53%), and was the beneficiary of much better than expected second quarter results, losing $2.15 versus the -$3.53 consensus. AMC Networks (AMCX) (-34%) was up 8% during the month, but remains a drag on the portfolio.
Another good month, but this is not over yet.