I now present third and final tranche of the 2023 Tax Loss Selling Recovery Portfolio, my annual experiment designed to identify profitable names that were crushed during the year and could rebound in the New Year.
Newell Brands (NWL) (down 43% year to date) was in turnaround mode a few years back, selling off brands and paying down debt. Newell stock rebounded nicely after a pandemic-related selloff, approaching $30 a share in mid-2021. Then inflation hit, demand fell and the stock found itself trading under $13. Newell shares currently trade at about 8.5x and 7.5x 2023 and 2024 consensus earnings estimates, respectively. Debt has been cut from $10.5 billion at the beginning of 2018 to $5.8 billion at the end of the most recent quarter. Newell shares yield 7.17%.
Elanco Animal Health (ELAN) (down 54%), which makes health products for pets and farm animals, has been around since 1954 and was spun off by Eli Lilly LLY in 2018. Growth concerns and narrowed guidance have slammed Elanco stock, which trades at 12x and 11x 2023 and 2024 consensus earnings estimates, respectively. There is significant debt of $5.9 billion to go along with $460 million in cash.
Wolverine World Wide (WWW) (down 62%) was crushed early last month, dropping 34% on Nov.8 after reporting worse-than-expected third-quarter earnings (48 cents a share versus a 55-cent estimate) and lowered fourth-quarter guidance due to bloated inventory. Looking past what will likely be a fourth-quarter loss, shares of the footwear and apparel maker trade at 6x and 5x 2023 and 2024 consensus earnings estimates, respectively. Wolverine World Wide shares currently yield 3.57%, courtesy of the 10-cent quarterly dividend.
Last but not least is Vintage Wine Estates (VWE) (down 70%), which debuted in June 2021 via a merger with special purpose acquisition company Bespoke and has had an awful run in 2022. Generally, investors have been uninterested in the handful of available wine stocks, but Vintage Wine has absorbed the most damage. A first-quarter earnings surprise (five cents a share versus a two-cent estimate) sent Vintage Wine shares up 24% on Nov. 10, yet the stock is still down 70% for the year. The company ended its latest quarter with about $45 million in cash and $321 million in debt. Vintage Wine has been growing through acquisitions (hence the debt), but does have something to show for it, namely the ownership of 945 vineyard acres (about 1.5 square miles). VWE trades at 13x and 9x 2023 and 2024 consensus earnings estimates, respectively.
Here in its entirety is the 2023 Tax Loss Selling Recovery Portfolio:
Tranche 1: Meta Platforms (META) , eBay (EBAY) , Qualcomm (QCOM) , Ford Motor (F)
Tranche 2: MarineMax (HZO) , Hanesbrands (HBI) , Kohl's (KSS) , Paramount Global (PARA)
Tranche 3: Newell Brands, Elanco Animal Health, Wolverine World Wide, Vintage Wine Estates
I'll provide updates on its performance as 2023 progresses.