As we hit the home stretch with the 2018 Tax-Loss Selling Recovery Portfolio -- I'll be unveiling this year's version in December -- it appears as though the portfolio is finishing strong. The winners are far outpacing the losers at this point, and the past month has been solid
Tranche 1, released last Dec. 10, is up about 17.7% versus 12.9% for the S&P 500 and 6.9% for the Russell 2000. Winnebago Industries Inc. (WGO) (up 123%) has solidified its position as the top overall performer courtesy of last Wednesday's better-than-expected fourth-quarter earnings release and 15% rise that day. Kraft Heinz (KHC) (down 43%) can't seem to shake off a horrible year and remains in the doldrums, trading at 11x next year's consensus estimates and yielding 5.6%. Following a solid but short-lived uptick last month, United Natural Foods Inc. (UNFI) (down 50%) cratered after reporting worse-than-expected fourth-quarter results. General Mills Inc. (GIS) (up 36%) gave back some ground after posting mixed first-quarter results.
Tranche 2, released last Dec. 12, is up 13.9% on average after a very solid month, and is now better than the S&P 500 (up 12.8%) and Russell 2000 (up 9.4%). Bed Bath & Beyond Inc. (BBBY) (up 20%) was the catalyst here, rising about 40% since last month's update. Part of that bump was due to the hiring a former Target Corp. (TGT) executive as its new CEO, announced Oct. 10, which provided a 22% boost. Kronos Worldwide Inc. (KR) (up 15%) and Groupon Inc. (GRPN) (down 0.3%) were flat for the month.
Tranche 3, released last Dec. 14, is up an average of 44.7%, better than the S&P 500 (up 12.3%) and Russell 2000 (up 8.5%) after a solid month. This improvement primarily was driven by the performance of PetMed Express Inc. (PETS) (up 18%), which rose 40% since the last update due largely to better-than-expected second-quarter results. Boise Cascade (BCC) (up 53%) had another solid month, rising 16% on no news. Skechers U.S.A. Inc (SKX) (up 61%) was also up for the month despite taking some heat last week after better-than-expected second-quarter results were muted by weaker earnings guidance. Methode Electronics Inc. (MEI) (up 47%) was down slightly over the month but remains a solid performer overall.
By way of reminder, qualifying companies had to meet the following criteria:
- Down at least 30% year to date,
- Forward price-to-earnings (P/E) ratios below 15 in the next two fiscal years
- Minimum market cap $100 million
The resulting list was then whittled down from 200 to 12 and released in three tranches of four names each in mid-December.