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  1. Home
  2. / Investing

Updating My 2018 Tax Loss Selling Recovery Portfolio

Let's review the performance of all three tranches released in December 2018.
By JONATHAN HELLER
Jul 05, 2019 | 10:30 AM EDT
Stocks quotes in this article: KHC, WGO, UNFI, GIS, BBBY, KRO, GRPN, SKX, MEI, PETS, CHWY

Markets came roaring back over the past month, and that rising tide lifted many boats, including my 2018 Tax Loss Selling Recovery Portfolio, which was up about 8% since the last update. That performance was in-line with the S&P 500, but better than the Russell 2000 (+5%). Since inception, the tracking portfolio of names that were hurt in 2018 is up about 13%

Tranche 1, released on 12/10 made a nice comeback since last month, and is up about 9.8%, better than the Russell 2000 (+7.4%) but lagging the S&P 500 (+12%). Kraft Heinz (KHC) (-34%), the second worst performer overall, was up 14% during the period, but is still widely shunned by the market, which has more than halved shares over the past year. Fears abound that the company may have to cut its dividend again, following its 36% cut back in February. KHC currently yields 5.1%. Winnebago (WGO) (+68%) remains the best performer of the entire portfolio, and also enjoyed a 14% uptick over the month in which it reported better than expected third quarter earnings, but fell short on revenue. United Natural Foods (UNFI) (-38%) continues to slide, and is now trading at 2001 levels. Shares, which slid about 16% since the last update, currently trade at about 5x next year's consensus estimates. General Mills (GIS) (+43%) remained the second best overall performer, and was up 11% for the month.

Tranche 2, released on 12/12 is up 16.3% on average, better than the S&P 500 (+12%) and Russell 2000 (+10%). Bed Bath & Beyond (BBBY) (-6%) had another bad month falling 12%. Shares now trade at 5x next year's consensus estimates, and yield 6.1%. The company raised the dividend 6.25% back in April. Kronos Worldwide (KRO) (+37%) came alive, rising 20% on no news, and is now the fourth best performer. Groupon (GRPN) (+17%) was up slightly for the month.

Tranche 3, released on 12/14 is up an average of 13.3%, better than the S&P 500 (+11.5%) and Russell 2000 (+9%). Skechers (SKX) (+38.5%) had a great month, rising 16%, and is the third best performer. Boise Cascade BCC (+20%) rose 24% during the month, putting itself back into positive territory followings it's May first quarter earnings miss. Methode Electronics (MEI) (+22%) rose 7.3%, about on pace with the S&P 500. PetMed Express (PETS) (-28%) did not participate in the general upswing, falling 11%. PETS now trades at about 9x next year's consensus estimates, and at a 4+ year-low, and is likely suffering from competition from Chewy Inc. (CHWY) , which went public last month.

By way of reminder, qualifying companies had to meet the following criteria:

  • Down at least 30% year to date,
  • Forward price earnings ratios below 15 in the next two fiscal years
  • Minimum market cap $100 million

The resulting list was then whittled down from 200 to 12, and released in 3 tranches of 4 names each in mid-December. To date, 8 of the 12 names remain in positive territory, and are up an average of about 6%. Overall performance is still better than both the S&P 500 and Russell 2000, but the gaps have narrowed considerably.

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At the time of publication, Jonathan Heller had no position in the securities mentioned.

TAGS: Investing | Markets | Stocks | Trading

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