It's the season for wrapping up and starting over on many fronts, but for the purpose of this column, it's to wind down my 2020 Double Net Value Portfolio. It was another decent year for this concept, which consisted of companies trading at between one and two times net current asset value, or NCAV.
The portfolio was up 24.9% since its inception last Dec. 18, which puts it ahead of the Russell 2000 (up 16.2%) and Russell Microcap (up 9.8%). Perhaps more importantly, given its value orientation, the portfolio also bested the Russell 2000 Value Index (up 3.1%) and Russell Microcap Value Index (up 6.4%). However, its performance was not strong enough to outperform the Russell 2000 Growth (up 28.2%) or Russell Microcap Growth (up 36.3%) indices.
The runaway winner was AXT Inc. (AXTI) , up 206%. Much of that gain has occurred over the past month. The stock enjoyed a 23% bump on Nov. 17 after announcing a plan to access China's capital markets by merging two raw materials companies it owns and seeking to list its shares on the Shanghai STAR market.
Protective clothing name Lakeland Industries (LAKE) (up 101%) was the leader for most of the year but has pulled back about 15% over the past six weeks as Covid-19 vaccines have become closer to delivery. Flexsteel Industries (FLXS) also did well (up 59%), swinging back to a profit last quarter after losing money for three consecutive quarters.
Now Inc. (DNOW) (down 46%) and Tessco Technologies (TESS) (down 44%) were the biggest drag on the portfolio. DNOW shares rallied to the $9 level in August, but by late October had fallen back to $4 before closing above $6 on Tuesday. TESS started 2020 in rough shape, falling 27% on Jan. 28 after the company reported a rough fourth quarter and cut its dividend 90%; the shares never recovered.
Here's how rest of the companies fared:
Aware Inc. (AWRE) , up 2%
FutureFuel (FF) , up 16%
Gencor Industries (GENC) , up 11%
Hurco Companies (HURC) , down 15%
Netgear (NTGR) , up 42%
Universal Corp. (UVV) , down 7%
As a reminder, below are the initial selection criteria:
- Companies trade at between one and two times net current asset value (NCAV)
- Minimum market cap of $75 million (down from $150 million last year)
- No development stage pharmaceuticals/biotechs
Next week, I'll roll out my 2021 version of the Double Net Value Portfolio. At this point, it appears that there are about two dozen candidates. However, there are a few repeat offenders from last year.