This year's version of my annual Tax Loss Selling Recovery Portfolio has been on the upswing since the last update. It's still not where I'd like to see it, but since May 1st it is up about 21.5%, outpacing the S&P 500 (+8%) and Russell 2000 (+7%) in that time frame, as lower quality names have bounced back somewhat. However, it is still down about 16% since inception, so there's a long way to go.
The idea behind this annual "experiment" is to identify potentially "cheap" names with the following attributes:
- Down at least 30% year to date
- Forward price earnings ratios below 15 in the next two fiscal years
- Minimum market cap $100 million
Given their poor performance during the year, these names may have been pushed even lower by year-end tax loss selling. The theory is that they may rebound in the new year as investors re-engage. This year, I took small positions in all of the names, putting a little skin in the game.
Tranche 1, released on 12/4 is down about 14%, well worse than S&P 500 (+2%) Russell 2000 (-12%), but outperforming the Russell 2000 Value Index (-25%). Tupperware (TUP) (-25% since inception) has had a nice recovery since the last update (+93%). Spirit Airlines (SAVE) (-59%) remains the worst overall performer, as the industry suffers from the pandemic. B&G Foods (BGS) (+58%) has been a bright spot and the best overall performer as it has risen about 26% since the last update. GameStop (GME) (-31%) is the worst performer since May (-27%). We'll see if the recent election of activist investors to the board of directors following a proxy fight will bear any fruit.
Tranche 2, released on 12/6 is down 32%, much worse than the S&P 500 (+1%) and Russell 2000 (-12.5%). All four names remain deep in negative territory. Gap (GPS) (-26%) however, is on the upswing (+43% since May 1), and got a bounce and some press in late June courtesy of a deal signed with Kanye West. Fluor (FLR) (-30%), Mosaic (MOS) (-36%), and Trip Advisor (TRIP) (-34%) continue to suck wind.
Tranche 3, released on 12/9, by far the best of the 3, is flat for the year, in-line with the S&P 500 (+.2%) and well ahead of the Russell 2000 (-12.6%). Gaming headset name Turtle Beach (HEAR) (+92%) is by far the best overall performer and is up 73% since the May 1 update. Shares rose 17% on June 16th after the company raised its second quarter revenue projections from $42-$47 million to $74-$77 million. Chemours (CC) (-5%) has also had a nice run since May 1 (+30%). Even Tenneco (TEN) (-49%), the second worst overall performer, has joined in the parade, rising 27% since the May 1 update. AMC Networks (AMCX) (-39%) remains in the doldrums.
Progress for sure, but still a long way to go. Things could be worse as 25% of the portfolio is comprised of an airline, two retailers, and a travel-related name. I can't wait to sell out of these names in December in order to fund next year's portfolio.
