It's time to wrap up my 2019 Double Net Value Portfolio, which was unveiled last Dec. 19. As usual, the objective was to see if a group of deeper value-oriented names trading at between one and two times net current asset value at the time of portfolio inception could outperform appropriate benchmarks.
It was not a bad year, with the portfolio ending the period up 20.7% versus 21.1% for the Russell 2000 Index and 16.3% for the Russell Microcap Index, which is perhaps the more appropriate benchmark given the size of the names in the portfolio. The Double Net Value Portfolio also bested the value components of both the Russell 2000 (up 17.3%) and Russell Micro (up 15.75%)
Fifteen of the portfolio's 22 stocks ended in positive territory. Powell Industries Inc. (POWL) (up 100%) was the top performer, with a late surge over the past two weeks. POWL is up 27% since Dec. 4 after announcing fourth-quarter results that were much better than expected.
Retailer Hibbett Sports Inc. (HIBB) (up 88%) was the next-best performer, followed by Benchmark Electronics (BHE) (up 67%), which has been on a tear since late May. Rounding out the top five are PC Connection Inc. (CNXN) (up 66%) and Dril-Quip Inc. (DRQ) (up 46%).
Zovio Inc. (ZVO) (down 76%), formerly Bridgepoint Education, was by far the worst performer. Without it, the portfolio would be up 25%, but there's no crying over spilled milk. Construction name Tutor Perini Corp. (TPC) (down 6%) ended in fourth-to-last place, but after falling more than 50% through August, recovered nicely.
Portfolio retailers did well overall; in addition to HIBB, Cato Corp. (CATO) (up 38%) and Vera Bradley Inc. (VRA) (up 27%) held their own.
Here's how the rest of the portfolio has performed since its inception.
AVX Corp, (AVX) (up 29%)
Astec Industries Inc. (ASTE) (up 32%)
Rocky Brands Inc. (RCKY) (up 22%)
Avnet Inc. (AVT) (up 17%)
Gencor Industries Inc. (GENC) (up 10%)
Hurco Cos. (HURC) (up 8%)
Olympic Steel Inc. (ZEUS) (up 7%)
Adams Resources & Energy Inc. (AE) (flat)
Universal Corp. (UVV) (down 1%)
Titan Machinery Inc. (TITN) (down 2%)
Argan Inc. (AGX) (down 4%)
Flexsteel Industries Inc. (FLXS) (down 7%)
AXT Inc. (AXTI) (down 15%)
As a reminder, company screening criteria for inclusion in this tracking portfolio are as follows:
- Companies trade at between one and two times 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.
I hope to be rolling out the 2020 Double Net Value Portfolio later this month. However, pickings are slim, and I may need to go further down the market cap scale in order to generate a sufficient number of names.
