I'm rolling out the last of my three annual tracking portfolios, the 2022 vintage of my Double Net Value Portfolio, comprised of seemingly cheap names relative to net current assets (current assets minus total liabilities). I've done this exercise for many years, and the results have been decent at times. The concept does not always work; it certainly did not this year, and the 2022 list is not pretty. Over the years, double nets have been a fairly fertile hunting ground for acquisitions, but it has been a while since we've seen that happen.
Screening criteria include the following:
- Companies that trade at between 1 and 2 times net current asset value (NCAV)
- Minimum market cap $100 million (up from $75 million last year)
- No development stage medical/pharmaceutical/biotech companies
- Minimum share price $2.00
This year, 23 names make the cut, up from last year's 18, and they are again equally weighted for tracking purposes. Repeat offenders from last year include Acacia Research (ACTG) , Avnet Inc. (AVT) (also the largest name with a $3.8 billion market cap), Gencor Industries (GENC) , FutureFuel Corp. (FF) , Lakeland Industries (LAKE) , Now Inc. (DNOW) and VirnetX Holdings (VHC) . Others may have been in past double-net portfolios or other deep value searches I've referenced.
Making an appearance from this year's Triple Net Value Portfolio are CarLotz Inc. (LOTZ) and Immersion Corp. (IMMR) . The question is, "How can they be in both portfolios?" The answer is that when I rolled out the Triple Net Active Portfolio in October both met the criteria for inclusion in that portfolio; since then they have seen their price/net current asset value (NCAV) fall to within double-net range.
Other names in the portfolio include Advanced Emission Solutions (ADES) , American Outdoor Brands (AOUT) (also in my 2022 Tax Loss Selling Recovery Portfolio), Flexsteel Industries (FLXS) , Intervac Inc. (IVAC) , NetGear Inc. (NTGR) , Olympic Steel (ZEUS) , ReneSola Ltd. (SOL) , Richardson Electronics (RELL) , TrueCar Inc. (TRUE) , VOXX International (VOXX) , Vroom Inc. (VRM) , Webco Industries (WEBC) and XL Fleet (XL) .
This is not a high conviction group of names for sure, but that is not atypical. In terms of portfolio statistics, the average market cap for companies in this portfolio is about $523 million and they currently trade at an average of 1.59x NCAV (ironically, the exact same as last year).
Here's the 2022 Double Net Value Portfolio in order of market cap:
American Outdoor Brands
Exagen Inc. (XGN)
Advanced Emission Solutions
I will not be taking positions in all these names, as I've done with my 2022 Tax Loss Selling Recovery Portfolio and 2021 Triple Net Value Portfolio. Double Net Value remains a tracking portfolio and a long-term proof of concept.