I'm winding down my annual Tax-Loss Selling Recovery Portfolio, a couple weeks early I might add, in anticipation of the new version that will be released in early December. It will be no small feat to whittle the list of qualifiers -- it currently stands at more than 130, though that changes by the day -- into my favorites, but I am up for the challenge. I again plan to release them in three tranches over the course of a week.
The idea behind this annual experiment is to identify potentially cheap names with the following attributes:
- 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
Given their poor performance during the year, these names may be pushed even lower by year-end tax-loss selling. The theory is that they may rebound in the New Year as investors re-engage. This year, I took small positions in all the names, putting a little skin in the game, and closed those positions late on Tuesday.
I am more than pleased with how this year's version performed (up 35.3%). The portfolio gained strength late in its run as markets shook off worries about the pandemic. Still, this band of troubled names really came to life overall.
Tranche 1, released last Dec. 4, was up about 86%, better than the S&P 500 (up 15%), Russell 2000 (up 9.5%) and Russell 2000 Value Index (down 2%). Tupperware Brands (TUP) , up 241%, was the best overall performer, and quite a surprise, rising from the ashes like a veritable phoenix. GameStop (GME) , up 81%, was also a pleasant surprise, as was B&G Foods (BGS) , up 72%. The worst performer in this tranche and overall was Spirit Airlines (SAVE) , down 48%.
Tranche 2, released last Dec. 6, made a nice late surge to finish in modestly positive territory (up 4%). It still underperformed the S&P 500 (up 14%) and Russell 2000 (up 10%), but did better than the Russell 2000 Value Index (down 2%). The bright spot here was The Gap (GPS) , up 45%. Mosaic Co. (MOS) , down 4%, ended on a negative note. However, both Fluor (FLR) , down 15%, and TripAdvisor (TRIP) , down 9%, made late surges that brought them closer to breakeven.
Tranche 3, released last Dec. 9, was up 14% and modestly outperformed both the S&P 500 (up 13%) and Russell 2000 (up 9%) but did much better than the Russell 2000 Value Index (down 2.5%). Gaming headset name Turtle Beach (HEAR) , up 85%, was the best performer, but ended on a down note, falling 21% since Monday. Chemours Co. (CC) , up 40%, was a pleasant comeback surprise, rising from about $7.50 in April to the mid-$22 range. Tenneco (TEN) , down 34%, and AMC Networks (AMCX) , down 31%, were an overall drag on performance during the entire year.
In the end, just half the names were in positive territory, but the success of TUP, GME and HEAR was enough to carry this portfolio across the finish line with very solid performance.
Stay tuned for the release of my 2021 Tax-Loss Selling Recovery Portfolio in early December.