My 2021 Tax Loss Selling Recovery Portfolio gave back about 4.5% over the past month but still has performed relatively well since inception, up about 49%. It is on its last legs, however, and will be retired by November as I begin to put together next year's vintage. As I wrote last week, pickings for the new version are slim at this point, but a lot can change between now and the intended December roll-out.
This annual portfolio experiment starts by identifying potentially cheap names that have fallen sharply during the year and might be pushed even lower at the end of this year as investors harvest losses. By way of reminder, screening criteria include the following:
- 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 of $100 million
The theory is that these names may rebound in the New Year when the selling pressure is off, and so far that has been the case in 2021.
Tranche 1, released last Dec. 1, fell about 5% during the past month and is now up 33% since inception. It continues to outperform both the S&P 500 (up 21%) and Russell 2000 (up 25%). Pilgrim's Pride (PPC) (up 45%) was the best performer over the last month, rising 3% and adding to the previous month's gains brought on by the offer by JBS S.A. to buy the rest of the company it does not already own. Designer Brands (DBI) (up 59% since inception) fell 12% for the month despite solid second-quarter earnings where it beat the consensus on the top and bottom lines. Walgreen Boots Alliance (WBA) (up 33% since inception) was about flat for the month, while Xerox (XRX) (down 3% since inception) fell 12% last month to put in in negative territory and render it the worst performer overall. On Sept 9, XRX left the New York Stock Exchnage to trade on the Nasdaq Global Select Market.
Tranche 2, released last Dec. 4, is up 86% since inception but declined about 2% last month. However, it remains the best-performing tranche as it continues to outperform the S&P 500 (up 21%) and Russell 2000 (up 23%). Wells Fargo (WFC) (up 60% since inception), the best performer last month, was the worst this month, falling 8%. Falcon Minerals (FLMN) (up 112% since inception) was flat for the month but remains the portfolio's overall best performer. The month was fairly uneventful for Townsquare Media (TSQ) (up 79% since inception) and Genesco Inc. (GCO) (up 92% since inception) in terms of performance. Genesco bested second-quarter consensus estimates on the top and bottom lines with its Sept. 2 earnings release, but the market was not impressed and its shares fell 8% that day.
Tranche 3, released last Dec. 7, is up 27% since inception and still is beating the S&P 500 (up 20%) and Russell 2000 (up 22%), but it fell about 6% since the last update. Sally Beauty Holdings (SBH) (up 36% since inception) fell 11%; the most notable news this past month was the appointment of a new CEO on Sept. 1. AerCap Holdings (AER) (up 26% since inception) was down slightly for the month. Phillips 66 Partners (PSXP) (up 31% since inception) and GIII Apparel (GIII) (up 16% since inception) each gave back about 5% for the month.
This portfolio is getting a bit long in the tooth...
