I'm tempted to shut down my 2021 Tax Loss Selling Recovery Portfolio less than halfway through its intended life. Performance for the portfolio, which is meant to run for one year, has far exceeded my expectations and currently is up about 49% after just four months.
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 good results in the years I've been running it, but this year is off the charts... so far, that is; hence the thoughts of stopping it now.
Tranche 1, released last Dec. 1, rose 9% since the last update and is now up 52%. It is outperforming both the S&P 500 (up 11.2%) and Russell 2000 (up 24.6%). Designer Brands (DBI) (up 122% since inception) is now the best overall performer after rising another 18% over the past month. DBI, which is trading at a 52-week high, put up better-than expected fourth-quarter results in mid-March. Walgreens Boots Alliance (WBA) (up 46%) also had a good month, rising 15%. WBA enjoyed a solid second-quarter earnings release, exceeding expectations. Pilgrim's Pride (PPC) (up 25%) was fairly flat for the month, while Xerox Holdings (XRX) (up 15%) fell slightly.
Tranche 2, released last Dec. 4, remains the best-performing tranche (up 63%) and is outperforming the S&P 500 (up 11.1%) and Russell 2000 (up 22.6%). Falcon Minerals (FLMN) (up 109%) fell into second place among best performers but has still been a nice surprise. Genesco Inc. (GCO) (up 56%) gave back about 5% over the month. Wells Fargo (WFC) (up 37%) and Townsquare Media (TSQ) (up 50%) moved little since the March update.
Tranche 3, released last Dec. 7, is up 32% and is beating the S&P 500 (up 10,1%) and Russell 2000 (up 19.8%) but was down slightly over the past month. There were no major moves by any of the names in this tranche. Sally Beauty Holdings (SBH) (up 59%) remained the top performer, followed by AerCap Holdings (AER) (up 36%), GIII Apparel (GIII) (up 23%) and Phillips 66 Partners (PSXP) (up 11%). PSXP remains the worst overall performer.
Tempted as I am, I won't be shutting down this portfolio and will let it run its natural course, deep into 2021, until I repeat the process for next year.
