It's been a rough go of it recently for my 2023 Tax Loss Selling Recovery Portfolio, which is now in negative territory since inception, down about 4%. That's par for the course for this annual portfolio experiment, and with about six months to go, anything can happen.
The idea behind this annual pursuit is to identify potentially cheap names that were down sharply in in the prior year and might be pushed even lower at year-end as market participants book losses for tax purposes, but could recover in the New Year if selling pressure subsides. The objective is to outperform the S&P 500 and Russell 2000 indexes, and I've taken positions in all of the names.
Here are the criteria for inclusion:
- 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
Tranche 1, released on 11/28, is up 35%, ahead of the S&P 500 (up 6%) and Russell 2000 (down 1%). Meta (META) (up 145%) remains the best overall performer, and jumped 25% since my last update. eBay (EBAY) (flat) has been disappointing so far, but trades at just under 10x 2024 consensus earnings estimates. Qualcomm (QCOM) (down 1%) and Ford (F) (down 2%) have barely moved since the last update.
Tranche 2, released on 11/30, is down 21%, well behind both the S&P 500 (up 8%) and Russell 2000 (down 1%). Kohl's (KSS) (down 34%) continues to suck wind, although it jumped 13% on Friday as markets showed some life, and put some wind in the sails of some decimated retailers. KSS recently reported good first-quarter results beating estimates on both earnings (+ 13 cents vs. -42 cents) and revenue ($3.57 billion vs $3.37 billion). Hanesbrands (HBI) (down 33%), looks like a lost cause at this point, but did pick up 8% on Friday. Paramount Global (PARA) (down 18%) has slipped into negative territory, primarily due to a Q1 earnings miss reported in early May; the company subsequently cut the quarterly dividend 79% to 5 cent/share. MarineMax (HZO) (flat) is back at breakeven thanks to Friday's +7% performance, and now trades at 6.5x 2024 consensus estimates.
Tranche 3, released 12/2 is down 25%, worse than the S&P 500 (up 5%) and Russell 2000 (down 2%) Disaster Vintage Wine Estates (VWE) (down 78%) continues to get hammered, but rose about 8% on Friday. Wolverine Worldwide (WWW) (up 27%) remains the best performer in this tranche, but has declined since the last update, and now trades at less than 7x 2024 consensus estimates. Newell Brands (NWL) (down 29%) has been badly damaged since releasing Q1 results, and soft guidance for Q2 in late April. Last month, the company cut its quarterly dividend by 70%. Elanco Animal Health (ELAN) (down 30%) reported better-than-expected earnings in May (45 cents vs 29 cents consensus), but the market is still not impressed.
With just four names in positive territory, results are disappointing so far, but there's still plenty of time.