It's the seventh inning for my tax-loss selling recovery portfolio, and recently it has been knocking the cover off the ball.
At the last update, the portfolio had moved into positive territory on an absolute basis, with mixed performance relative to its benchmarks. During the past two months, though, it has stepped things up. Now up nearly 30% since inception, it has benefitted from solid and somewhat unexpected moves by a couple names.
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-to-earnings (P/E) ratios below 15 in the next two fiscal years
- Minimum market cap of $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 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 last Dec. 4, is up about 73%, better than the S&P 500 (up 12%), Russell 2000 (down 3%) and Russell 2000 Value Index (down 11%). Tupperware Brands (TUP) , up 166% since inception, has done the unthinkable, rising another 66% since the last update, and is now the best overall performer. GameStop (GME) , up 96% since inception, also enjoyed a big move, rising 253% since mid-August on the back of an announced partnership with Microsoft (MSFT) and perhaps some short covering. B&G Foods (BGS) , up 84%, is holding its own, while Spirit Airlines (SAVE) , down 55%, remains the worst overall performer. Including an airline in the portfolio turned out to be a bad move.
Tranche 2, released last Dec. 6, is down 8%, much worse than the S&P 500 (up 12%) and Russell 2000 (up 3%), but is doing better than the Russell 2000 Value Index (down 11%). Even so, two names, The Gap (GPS) (up 24%) and Mosaic Co. (MOS) (up 7%) jumped into positive territory. Both Fluor (FLR) , down 32%, and TripAdvisor (TRIP) , down 30%, continue to suck wind.
Tranche 3, released last Dec. 9, is up 24% and has outperformed the S&P 500 (up 11%), Russell 2000 (up 3%) and Russell 2000 Value Index (down 11%). Gaming headset name Turtle Beach (HEAR) , up 124%, moved up another 15% since the last update and is the second-best overall performer. Chemours Co. (CC) , up 42%, continues to pick up the pace, rising 9% since the last update. After a mini-run, Tenneco (TEN) , down 33%, gave back about 13% since mid-August. AMC Networks (AMCX) , down 38%, had a big day on Sept. 16, rising 21% after announcing a tender offer, but that move is buried in a pretty poor performance overall.
Tupperware and GameStop have lifted this portfolio to new heights with about six weeks to go before I retire it and release a new vintage, but so far, so good.
