Three months since inception, the 2019 Double Net Value Portfolio, my annual deep-value tracking experiment, continues to perform fairly well and is up about 16.8%. It is still outpacing both the Russell 2000 (up 13.2%) and Russell Microcap (up 13.1%) indices and also is doing better than the value component of each index, which are up 10.4% and 10.9%, respectively.
All but three of the 22 names are in positive territory so far, with Bridgepoint Education Inc. (BPI) (down 13%) bringing up the rear. BPI fell 34% on March 7h after releasing worse-than-expected preliminary fourth-quarter results and revealing it will restate results for both the three- and nine-month periods ended Sept. 30, 2018. Markets typically hate that kind of uncertainty, and BPI suffered as a result.
Other names in the red at this point include Cato Corp. (CATO) , which has had a rough run lately, and Adams Resources & Energy Inc. (AE) (down 1%).
Specialty retailer Vera Bradley Inc. (VRA) has jumped to the head of the leader board (up 60%) courtesy of some positive news released last week. Titan Machinery Inc. (TITN) is holding its own in second place, up 41%.
Dril-Quip Inc. (DRQ) (up 40%) has put together a solid run so far, with about half the gain occurring on Feb. 27 after the company posted a lower-than-expected loss and an increased backlog.
Hibbett Sports Inc. (HIBB) (up 28%) is quietly staging a solid run, coming off December lows. HIBB, which currently trades at 1.49x net current asset value, is expected to release first-quarter earnings this Friday, with consensus estimates calling for earnings per share of 39 cents on revenue of $283 million. With little analyst coverage, HIBB earnings releases can be real barn burners.
Olympic Steel Inc. (ZEUS) , which was up about 20% with its February update, has given nearly all of that performance back on no news.
Here's how the rest of the portfolio has performed thus far.
Argan Inc. (AGX) (up 26%)
Avnet Inc. (AVT) (up 18%)
AVX Corp. (AVX) (up 16%)
Flexsteel Industries Inc. (FLXS) (up 5.5%)
Gencor Industries Inc. (GENC) (up 13%)
Hurco Cos. (HURC) (up 13%)
Powell Industries Inc. (POWL) (up 14%)
Rocky Brands Inc. (RCKY) (up 13%)
Astec Industries Inc. (ASTE) (up 25%)
Universal Corp. (UVV) (up 4%)
Tutor Perini Corp. (TPC) (up 10%)
AXT Inc. (AXTI) (up 8%)
PC Connection Inc. (CNX) N (up 26%)
Benchmark Electronics Inc. (BHE) (up 21%)
As a reminder, company screening criteria for inclusion in this tracking portfolio are as follows:
- Companies trade at between 1x and 2x net current asset value (NCAV), which is computed by subtracting total liabilities from current assets
- Minimum market cap $150 million
- No development-stage pharmaceuticals/biotechs
The NCAV calculation disregards the potential value of a company's long-term assets, which may create a margin of safety, depending on the particular situation.
