Hard to believe it's been 10 months since the inception, of my Triple Net active versus passive portfolio experiment, an idea conceived before we heard the term "Covid" and had any idea what 2020 would bring. The idea itself was simple: to determine whether an active management approach within a deep value subset of the market could outperform a passive approach.
The original screening criteria included the following:
- Market capitalization in excess of $100 million
- No financials or development-stage companies
- Trading at between 2 and 3 times NCAV (NCAV is calculated by subtracting a company's total liabilities from current assets)
The total of 48 qualifying names represent the "passive" portfolio. I then honed this list down to the eight that I found most interesting, which comprise the "active" portfolio. Keep in mind that all eight names in the "active" portfolio are also members of the "passive" portfolio.
The active portfolio (up 35%), continues to outperform the passive approach (up 17%), but both portfolios are outperforming the Russell 2000 Index (up 1%), and Russell Microcap Index (up 7%). Both triple net portfolios, which are value-oriented, are outperforming the Russell 2000 Value Index (down 13%), and the Russell Microcap Value Index (down 10%).
Since the last update one month ago the active portfolio was up about 5%, while the passive portfolio was up about 3%. Value had another good month (R2000 Value up 3.5%, RMicro Value up 5%), but again underperformed growth (R2000 Growth up 5%, RMicro Growth up 6%). Year-to-date, growth (R2000 Growth up 6%, RMicro Growth up 13%) is trouncing value (R2000 Value down 18%, RMicro Value down 17%).
Six of the eight active names are in positive territory. MarineMax (HZO) (up 99%) had another great month (up 14%), and is the top performer, taking over the top spot from Fitbit (FIT) (up 85%). FIT has pretty much been dead money since Alphabet (GOOGL) was announced in November ($7.35/share), but the deal has still not been consummated. Last week, FIT announced that memberships to its Fitbit premium service hit the 500,000 mark. I wonder what the impact on the stock might have been if the company was not range bound due to the GOOGL acquisition?
Astec Industries (ASTE) (up 70%) had a good month, rising 15% on the back of better than expected second quarter earnings (67 cents vs. 62 cent consensus). The company generated $3.31 per share in free cash flow for the quarter, ending with $123 million in cash and short-term investments and just $1.4 million in debt.
Here's how the other active names are doing so far:
Crimson Wine Group (CWGL) (down 18%)
Dril-Quip (DRQ) (down 34%)
Johnson Outdoors (JOUT) (up 40%)
LiveRamp Holdings (RAMP) (up 27%)
National Presto Industries (NPK) (up 11%)
The top performers in the "passive" portfolio, besides HZO (2nd) place and FIT (3rd place), and ASTE (6th place), include Cyberoptics (CYBE) (up 128%), Arlo Technologies (ARLO) (up 89%) OraSure Technologies (OSUR) (up 79%), K12 (LRN) (+66%) nLight (LASR) (+66%), Escalade (ESCA) (up 64%), and American Semiconductor (AMSC) (up 56%).