Today I am winding down my 2021 Tax Loss Selling Recovery Portfolio, which finished strong, gaining about 5% since my September update. Since its early December inception, the portfolio finished up 55.8%, and did extremely well relative to the benchmarks (see below).
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, and that was the case in 2021.
Tranche 1, released on Dec. 1, fell about 2% since the last update, to end up 30%, outperforming both the S&P 500 (up 25%) and Russell 2000 (up 27%). Designer Brands (DBI) (up 65%) was the top performer. Pilgrim's Pride (PPC) (up 45%), and Walgreen Boots Alliance (WBA) (up 26%) also contributed. Xerox (XRX) (down 14%) was the worst performer in this tranche and overall, and the only name in negative territory.
Tranche 2, released on Dec. 4, finished strong, rising 11% over the past month, and ended up 107%, easily outperforming the S&P 500 (up 25%) and Russell 2000 (up 26%). Falcon Minerals (FLMN) (up 174%) was this tranche's (and the entire portfolios) overall best performer. Genesco (GCO) (up 94%), Townsquare Media (TSG) (up 82%) and Wells Fargo (WFC) (up 77%) also performed well.
Tranche 3, released on Dec. 7, rose 2% over the month to end up 30%, beating the S&P 500 (up 24%) and Russell 2000 (up 25%). This tranche was fairly unexciting. Phillips 66 Partners (PSXP) (up 41%) was the top performer; on Wednesday, Phillips 66 (PSX) announced on that it will acquire the PSXP shares it does not already own. AerCap Holdings (AER) (up 40%), Sally Beauty Holdings (SBH) (up 23%), and GIII Apparel (GIII) (up 16%) round out this tranche.
Overall, a fairly solid performance, above my expectations, and I look forward to rolling out my 2022 Tax Loss Selling Recovery Portfolio in early December.
