Closing in on eight months since inception, my 2020 Double Net Value Portfolio is finally back in positive territory as it is up just over 4% since its Dec. 19, 2019, inception. It also has had a nice mini-run since the last update in late June, rising 9%.
This deep value subset, which could only be conceived by the convoluted mind of a value investor (yours truly), is also maintaining a performance advantage over the Russell 2000 Index (down 7.7% since the portfolio's inception) and Russell Microcap Index (down 5.6%). Perhaps more importantly in light of the portfolio's value orientation, it is well ahead of the Russell 2000 Value Index (down 19.8%) and Russell Microcap Value Index (down 18.5%).
Still, just four of the 13 names are in positive territory, meaning the quartet is doing all the heavy lifting. I wish there were more winners, which might lend more credence to the methodology that I've espoused for several years, but this is double-net land and it is a strange place.
Protective clothing name Lakeland Industries (LAKE) (up 136%) continues its solid run and is the best performer by far, and is up another 14% since the June update. LAKE now trades at 2.63x net current asset value (NCAV), but it will be interesting to see how long the company's pandemic-related rise will last.
AXT Inc. (AXTI) (up 40%) remains the second-best performer. Netgear (NTGR) (up 30%) had turned in flat performance as of June but has had a nice run recently, courtesy of second-quarter results reported July 22 that were much better than expected. Netgear crushed the 22-cent consensus earnings estimate by 34 cents. It now trades at 2.41x NCAV and ended the second quarter with $259 million, or $8.73 per share, in cash and short-term investments and no debt. Shares now change hands at 13.5x next year's consensus earnings estimates.
FutureFuel Corp. (FF) (up 22%) also has done well, although you would not know it by looking at the price chart. The company paid a $3 special dividend in April, which has bolstered the total return.
Tessco Technologies (TESS) (down 44%) remains the worst performer, although it is up 23% since the June update.
Performance figures for the rest of the portfolio are below:
Amtech Systems Inc. (ASYS) (down 21%)
Now Inc. (DNOW) (down 26%)
Universal Corp. (UVV) (down 19%)
Aware Inc. (AWRE) (down 14%)
FlexSteel Industries (FLXS) (down 18%)
Hurco Companies (HURC) (down 25%)
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
While the results are OK at this point, the type of names that comprise this portfolio can turn on a dime and there is no resting on laurels here.