Four months since inception, my 2020 Double Net Value Portfolio is performing how you might expect in this environment but is doing better than its benchmarks, which is a hollow victory at this point. Down 21% since its mid-December inception, the portfolio is outperforming both the Russell 2000 Index (down 24.9%) and Russell Microcap Index (down 25%), and more importantly is ahead of the value components of each of those indices, which are down 32.5% and 32.4%, respectively.
Just two out of the 13 portfolio names are in positive territory so far. The best performer, not surprisingly, is Lakeland Industries (LAKE) (up 43%), which makes protective clothing. Lakeland, which closed late Friday at $15.22, saw its shares rally all the way to $21 briefly in late February. Lakeland trades at about 18x next year's "consensus" earnings estimates (with just one analyst weighing in) and 1.92x net current asset value (NCAV).
Semiconductor equipment name AXT Inc. (AXTI) (up 20%), which now trades at 2.11x NCAV, is the only other name with a positive return since inception. In mid-March AXT shares tumbled below $2 each before recovering, closing at $4.25 last Friday.
Furniture maker Flexsteel Industries Inc. (FLXS) (down 58%) is the worst performer at this point. Flexsteel now trades at just 0.59 X NCAV (putting it in net/net territory); it ended its last quarter with $37.4 million, or $4.70 per share, in cash and currently yields 10.45%.
Construction name Tutor Perini Corp. (TPC) (down 53%), the next worst performer, has had a crazy run the last several months. In early March, it was reported that Apollo Global Management (APO) had offered $17 a share for the company, driving Tutor Perini's stock to the $15 level on March 4. Two weeks later, shares plunged to below $3; they closed this past Friday at $6.25. TPC is also now in net-net land, trading at 0.67 X NCAV.
One other note: FutureFuel Corp. (FF) (down 1%) declared a $3 special dividend in late March; this went ex-dividend last Monday.
Performance figures for the rest of the portfolio are below:
Amtech Systems Inc. (ASYS) (down 31%)
Now Inc. (DNOW) (down 51%)
Gencor Industries Inc. (GENC) (down 11%)
Hurco Companies (HURC) (down 26%)
Netgear Inc. (NTGR) (down 13%)
Universal Corp. (UVV) (down 16%)
Tessco Technologies Inc. (TESS) (down 48%)
Aware Inc. (AWRE) (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
Overall, the portfolio's relative performance is OK. However, it is still not very satisfying.