I observed a lot of interesting things while on vacation last week; one that left me scratching my head was the incredibly long line we observed outside the original Starbucks (SBUX) store at Pike Place Market in Seattle during a pre-Alaskan cruise visit to the city. Granted, I've never been a fan of Starbucks coffee, and while I do get the historical significance of that original location you'd have thought that they were giving coffee away. And indeed, they were giving it away -- that is, after you handed over four or five bucks for your drink of choice.
It was quite a week to be away, one during which value enjoyed a fairly rare rally. Over the past week the Russell 1000 Value Index (up 2.75%), Russell 2000 Value Index (up 6.2%), and Russell Microcap Value Index (up 7.9%) outperformed their growth counterparts by 331, 324 and 410 basis points, respectively. While there is still a performance gap year to date between growth and value, last week's action made a dent. It also reinforced the view that value is not dead, not by a long shot.
The rally was felt most in the smaller, distressed value area of the markets. These are companies that have been beaten up significantly yet still offer some component of value, whether they are trading at a low forward price-to-earnings ratio or low multiple of asset value.
United Natural Foods Inc. (UNFI) , a member of my 2018 Tax Loss Selling Recovery Portfolio, rose 30% during the week and is now in positive territory year to date. However, it is still down more than 60% over the past year. Construction name Tutor Perini (TPC) jumped out of net/net land (a company trading below net current asset value) and was up 30%. Despite that move, it still trades at just 1.03x net current asset value. Other distressed value movers for the week included FreightCar America Inc. (RAIL) (up 25%), VOXX International Corp. (VOXX) (up 15%), NL Industries Inc. (NL) (up 13%), Big 5 Sporting Goods Corp. (BGFV) (up 17%) Hibbett Sports (HIBB) Inc. (up 20%) and PICO Holdings Inc. (PICO) (up 8%).
Biglari Holdings Inc. (BH) (up 18%) also got in on the action; despite a nice week, shares are still down more than 40% over the past year. While Biglari recently whittled its stake in Cracker Barrel Old Country Store Inc. (CBRL) to 9.2% of the company, that stake alone, valued at $360 million, is still more than Biglari's current $340 million market cap. Newell Brands Inc. (NWL) (up 7%) continued its comeback; the stock is now in flat year-to-date. NWL currently trades for less than 12x next year's consensus earnings estimates and yields 5%.
Larger value name Corning Inc. (GLW) (up 6%) also got in on the action, as did restaurant name Bloomin' Brands Inc. (BLMN) (up 7%), and Fitbit Inc. (FIT) (up 7%).
We'll see if the value rally continues into this week and through the end of the quarter.
