One quarter since inception, my 2022 Double Net Value Portfolio (down 5%) is not too far out of line with the Russell 2000 Index (down 4.2%) or Russell Microcap Index (down 3.5%). This annual portfolio of companies trading cheap relative to net current asset values has had decent results over the years, up until last year. Early on, this vintage was struggling mightily but has gained a great deal of ground recently.
Screening criteria for inclusion included the following:
- Companies that trade at between 1 and 2 times net current asset value (NCAV)
- Minimum market cap $100 million (up from $75 million last year)
- No development stage medical/pharmaceutical/biotech companies
- Minimum share price $2.00
Just nine of the 23 names in the portfolio are in positive territory so far.
The best performer so far is Olympic Steel (ZEUS) (up 40%), which has gotten a big boost since reporting better-than-expected fourth-quarter earnings ($2.79 a share versus $2.17 consensus) in late February. In addition, Olympic Steel increased its quarterly dividend 350% from two cents to nine cents. ZEUS now trades at 1.99x NCAV. Other early winners include Intevac Inc. (IVAC) (up 35%), NOW Inc. (DNOW) (up 32%), Webco Industries (WEBC) (up 28%), FutureFuel (FF) (up 28%) and TrueCar (TRUE) (up 0%).
The biggest drag so far is e-commerce used auto retailer Vroom (VRM) (down 73%), which hit an all-time low earlier this month after reporting a bigger-than-expected loss (94 cents a share versus a 77-cent loss consensus). VRM now trades at 0.65x NCAV and is among the worst all-time performers in the history of this portfolio experiment. Other names bringing up the rear include XL Fleet (XL) (down 44%), CarLotz (LOTZ) (down 39%), VirnetX Holding (VHC) (down 38%) and American Outdoor Brands (AOUT) (down 26%). AOUT is currently trading at 1.38x NCAV and 7x next year's consensus earnings estimates.
Rounding out the portfolio:
Avnet (AVT) : up 11%
Richardson Electronics (RELL) : up 6%
VOXX International (VOXX) : up 3%
ReneSola Ltd. (SOL) : down .2%
Advanced Emissions Solutions (ADES) : down 3%
Lakeland Industries (LAKE) : down 6%
Immersion Corp. (IMMR) : down 8%
Gencor Industries (GENC) : down 10%
Netgear (NTGR) : down 13%
Flexsteel Industries (FLXS) : down 17%
Acacia Research (ACTG) : down 22%
Exagen (XGN) : down 23%
One quarter down, three to go, early results inconclusive.