It's early for sure, but just under a month since its Dec. 18 inception my 2019 Double Net Value Portfolio, is doing its job, so far anyway.
The 22 names in the portfolio are up an average of 7.9% versus a 5.2% increase for the Russell 2000 Index and 5.7% increase for the Russell Microcap Index. Perhaps more importantly, it is outpacing the value component of each index by a greater margin; the Russell 2000 Value Index is up 4.3% and Russell Microcap Value Index is up 5.4%.
The rising tide of the markets, coming off of a bad end to 2018 has lifted many boats, including those with a few holes. For the most part, names in this year's Double Net Value portfolio were beaten up badly in 2018. Indeed, just three -- Rocky Brands Inc. (RCKY) (up 40%), PC Connection Inc. (CNXN) (up 15%) and Universal Corp. (UVV) (up 8%) -- were in positive territory last year. Given that the portfolio is also up 11.5% year to date, I'd venture to say at least some of the names are the beneficiaries of investors taking advantage of the fallout from year-end tax-loss selling.
Since inception, all but one name, Universal Corp. (down 4%), is in positive territory. Dril-Quip Inc. (DRQ) (up 21%) is the top performer on no news. However, it is a great example of a name that foundered in 2018, especially the second half of the year; it fell more than 50% from mid-July to late December and has been recovering ever since. Since bottoming in the $27 range on Dec. 24, Dril-Quip shares are up more than 40%. The company is not expected to be profitable, with the consensus calling for a 12-cent loss for the year. Dril-Quip is expected to return to profitability in 2020 and currently trades for about 50x 2020 consensus estimates, although it is a fairly wide range of estimates.
Infrastructure name Astec Industries Inc. (ASTE) (up 18%) has also recovered somewhat after bottoming in mid-December. The stock had a horrendous 2018 and was down nearly 48%. Most of the damage was done following the announcement of both second- and third-quarter results, when the stock fell 21% and 25%, respectively. Astec currently trades at about 13x forward earnings estimates.
Titan Machinery Inc. (TITN) (up 17%) is the third-best performer so far with a similar performance story; the stock was clobbered in December and has been in recovery mode since. TITN currently trades at about 17.5 X next year's consensus estimates.
Here's how the other members of the portfolio have fared since inception:
Adams Resources & Energy (AE) (+4.7%)
Argan Inc. (AGX) (+1.8%)
Avnet Inc. (AVT) (+10.9%)
AVX Corp. (AVX) (+5.8%)
AXT Inc. (AXTI) (+8.1%)
Benchmark Electronics Inc. (BHE) (+6.8%)
Bridgepoint Education Inc. (BPI) (+1.9%)
Cato Corp. (CATO) (+1.5%)
Flexsteel Industries Inc. (FLXS) (+12.3%)
Gencor Industries Inc. (GENC) (+8.4%)
Hibbett Sports Inc. (HIBB) (+10.2%)
Hurco Cos. (HURC) (+3.2%)
Olympic Steel Inc. (ZEUS) (+3.1%)
PC Connection Inc. (CNXN) (+4.7%)
Powell Industries Inc. (POWL) (+12.3%)
Rocky Brands Inc. (RCKY) (+10.9%)
Tutor Perini Corp. (TPC) (+6.9%)
Vera Bradley Inc. (VRA) (+9.8%)
