Six months since inception my 2021 Tax Loss Selling Recovery Portfolio is halfway home and continuing to perform better than I would have expected, up 53%, after rising about 3% over the past month
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 Dec. 1, was about flat since the April update and is now up 51%. It is outperforming both the S&P 500 (up 13.7%) and Russell 2000 (up 24%). Designer Brands (DBI) (up 131% since inception) remains the best overall performer in all tranches and was up another 5% over the past month. DBI is a beneficiary of the run-up in apparel stocks. Xerox Holdings (XRX) (up 7%) gave some gains back during the month and is the worst overall performer. It was a fairly boring month for the remaining names, Walgreens Boots Alliance (WBA) (up 41% overall) and Pilgrim's Pride (PPC) (up 22%).
Tranche 2, released on Dec. 4 and up 70% so far, remains the best-performing tranche and is outperforming the S&P 500 (up 13.6%) and Russell 2000 (up 22.8%). Falcon Minerals (FLMN) (up 95%) remains the second-best overall performer. Genesco Inc. (GCO) (up 68%) rose 8% over the month and hit a 52-week high, another beneficiary of the uptick in apparel names. Wells Fargo (WFC) (up 57%) jumped 15% during the month as bank stocks got a boost. Townsquare Media (TSQ) (up 51%) fell about 5%.
Tranche 3, released on Dec. 7 and up 39% so far, is beating the S&P 500 (up 12.6%) and Russell 2000 (up 22.1%) and had a decent month, rising 5%. Sally Beauty Holdings (SBH) (up 70%) remained the top performer in the tranche and is trading at about 10.5x next year's consensus estimates. GIII Apparel (GIII) (up 45%) had a good month, rising 12% and yet another beneficiary of the positive recent action in apparel stocks. Phillips 66 Partners (PSXP) (up 20%) rose 11% during the month despite worse-than-expected first-quarter results. AerCap Holdings (AER) (up 41%) rounds out this tranche.
It was the apparel stocks this month that propelled the portfolio higher; we'll see how long their run lasts.
