Six months since inception, my 2020 Double Net Value Portfolio has sprung back to life in this bizarre market environment. While still down 4.7% since its mid-December inception, it has made a remarkable comeback, and is outperforming both the Russell 2000 Index (down 12.8%) and Russell Microcap Index (down 11.1%), and more importantly is ahead of the value components of each of those indices, which are down 22.7% and 21.5%, respectively. I'd be much happier with this multi-year annually devised portfolio if it was in positive territory, but perhaps we can get there.
While just three out of the 13 portfolio names are in positive territory at this point, others are close to breakeven. The best performer, not surprisingly, remains protective clothing name Lakeland Industries (LAKE) (up 107%), a beneficiary of Covid-19. LAKE has rallied 35% after reporting much better than expected first quarter earnings ($1.07 versus $.15) on June 9. LAKE still trades at just 2.01x net current asset value (NCAV) and 20x next year's consensus estimates. Current year consensus estimates ($2.02) are nearly double next year's ($1.06), given the huge ramp up in sales due to the virus.
Semiconductor equipment name AXT Inc. (AXTI) (up 33%), is also in positive territory. AXTI currently trades at 2.64x NCAV,
The worst performer is communication equipment name TESSCO Technologies (TESS) (down 55%). The company has been weak since the inception of this portfolio, and cut the dividend 90% back in January. The company suffered a huge earnings miss last quarter (-$1.65 versus -$.15 consensus), and now trades at 1.21x NCAV.
Construction equipment company Gencor Industries (GENC) (+.3%) has fought back since March (+22%) to get back to about even, and currently trades at 1.23x NCAV. The company ended its latest quarter with $121 million, or $8.30 per share, in cash and short-term investments, and no debt.
Construction name Tutor Perini Corp. (TPC) (-10%), has had a crazy run; as of the April update, it was down more than 50%. It now trades at 1.17x NCAV, and trades at less than 6x next year's consensus estimates.
Performance figures for the rest of the portfolio are below:
Amtech Systems Inc. (ASYS) (down 24%)
Now Inc. (DNOW) (down 23%)
Netgear Inc. (NTGR) (flat)
Universal Corp. (UVV) (down 20%)
Aware Inc. (AWRE) (down 10%)
FlexSteel Industries (FLXS) (down 43%)
Hurco (HURC) (down 25%)
FutureFuel (FF) (up 13%)
As a reminder, below are the initial selection criteria:
- Companies trade at between one and two times net current asset value (NCAV)
- Minimum market cap of $75 million (down from $150 million last year)
- No development stage pharmaceuticals/biotechs
The portfolio has staged nice comeback since the last update, but then again so have the markets.
