Today I roll the last of my three annual tracking portfolios, the 2021 vintage of my Double Net Value Portfolio, comprised of seemingly cheap names relative to net current assets (current assets minus total liabilities).
I've done this for many years, and the results have been decent. The concept does not work every year -- it has three of the past five years. Last year's portfolio did fairly well relative to the benchmarks. That was a bit of a surprise, as I was not all that impressed with the candidates, and frankly, feel the same way again for this year's, with several repeat offenders in the mix, meeting the following criteria:
- Companies trade at between 1 and 2 times net current asset value (NCAV)
- Minimum market cap $75 million
- No development stage pharmaceuticals/biotechs
This year, 18 names make the cut, up from 13 last year, and they are again equally weighted for tracking purposes. Repeat offenders from last year including Hurco Companies (HURC) , Gencor Industries (GENC) , Tutor Perini (TPC) , Aware (AWRE) , Amtech Systems (ASYS) and Lakeland Industries (LAKE) . Others may have been in past double-net portfolios, or other deep value searches I've referenced.
The biggest name this year is Avnet (AVT) (a repeat offender from two years ago) with a $3.2 billion market cap. AVT trades at 1.58x NCAV, and 12x next year's consensus earnings estimate.
Making an appearance off of last year's Triple Net Value Portfolio, is Crimson Wine Group (CWGL) , which trades at 1.64x NCAV. This company just can't seem to get untracked, and is down about 40% since it was spun out of Leucadia National in 2013. CWGL owns 852 vineyard acres, and has an enterprise value of $112 million.
Other names include Dril-Quip (DRQ) , NOW Inc. (DNOW) , FutureFuel (FF) , VirnetX Holding (VHC) , Rocky Brands (RCKY) , Acacia Research (ACTG) , Adams Resources and Energy (AE) , Key Tronic (KTCC) , Network-1 Technologies (NTP) , and Powell Industries (POWL) . Most of those have appeared in one or more deep value screens I've run over the past several years.
This is not an exciting group for sure, but names don't have to be exciting to get the job done, and we'll see how that goes over the next year. In terms of portfolio statistics, the average market cap for companies in this portfolio is about $470 million, and they currently trade at an average of 1.59 X NCAV.
2021 Double Net Value Portfolio (in order of market cap):
Tutor Perini (TPC)
VirnetX Holding (VHC)
Powell Industries (POWL)
Rocky Brands (RCKY)
Acacia Research (ACTG)
Lakeland Industries (LAKE)
Crimson Wine Group (CWGL)
Adams Resources (AE)
Amtech Systems (ASYS)
Key Tronic (KTCC)
Network-1 Technologies (NTIP)
Aware Inc (AWRE)