It is time to say goodbye to my 2021 Double Net Value Portfolio, an annual experimental portfolio of seemingly cheap names relative to net current assets (current assets minus total liabilities). The criteria for inclusion included the following:
- Companies trading at between 1 and 2 times net current asset value (NCAV)
- Minimum market cap $75 million
- No development stage pharmaceuticals/biotechs
Results have been hit or miss over the years; 2020's group was lights out, up nearly 25%. This year's portfolio fell flat on its face after coming out of the gate strong and holding its own into mid-year. The portfolio ended up just over 2%, underperforming the Russell 2000 Index (up 13.6%) and Russell Microcap Index (up 17.9%) as well as Russell 2000 Value (up 26%, and Russell Microcap Value (up 32.4%). It was a miserable second half for the portfolio.
Only eight of the 18 names in the portfolio finished in positive territory. Crimson Wine Group (CWGL) (up 54%) was the top performer, followed by Amtech Systems (ASYS) (up 46%), Now Inc. (DNOW) (up 31%), Acacia Research (ACTG) (up 30%) and Rocky Brands (RCKY) (up 30%). There were no huge winners.
VirnetX Holding (VHC) (down 48%) was the biggest loser. VHC traded above $8 last February and closed Thursday at $2.70. Other names in the bottom five included Dril-Quip (DRQ) (down 40%), Key Tronic (KTCC) (down 25%), Gencor Industries (GENC) (down 16%) and Hurco Companies (HURC) (down 11%).
The expectation with a portfolio of this nature is that there will be a small handful of big winners that will more than make up for the losers. That did not happen this year. As small-cap markets began to fade later in the year, this portfolio of lower-quality names was simply hit harder.
Here's how the remaining companies performed:
Adams Resources & Energy (AE) : up 3%
Avnet Inc. (AVT) : up 26%
Aware Inc. (AWRE) : down 7%
FutureFuel Corp. (FF) : down 16%
Lakeland Industries (LAKE) : down 9%
Network-1 Technologies (NTIP) : up 5%
Powell Industries (POWL) : up 5%
Tutor Perini (TPC) : down 4%
Despite this year's disappointing performance, I do plan on unveiling a 2022 vintage of the Double Net Value Portfolio.