Six months since inception, my Triple Net active versus passive portfolio experiment, conceived at a time when "social-distancing" was not yet a thing, continues to provide some interesting results. The idea, that could have only been conceived in the warped mind of a value investor, was to determine whether taking a scattergun approach to buying companies at relatively low multiples of net current assets (current assets minus total liabilities), could outperform a more active approach. Of course, inherent in the argument is the belief that either group should also outperform the markets over the long-term.
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 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.
The active approach is still winning. That portfolio, comprised of Astec Industies (ASTE) (+13%), Crimson Wine Group (CWGL) (-21%), Dril-Quip (DRQ) (-45%), Fitbit (FIT) (+94%), Johnson Outdoors (JOUT) (+12%), LiveRamp Holdings (RAMP) (-5%), MarineMax (HZO) (-1%), and National Presto Industries (NPK) (flat), is now in positive territory (+9%) and is outperforming the passive portfolio (-3%). During that same time frame, the Russell 2000 Value Index is down 21% while the Russell Microcap Value Index is down 22%. (The Russell 2000 Index, which includes both growth and value components is off 13%, while the Russell Microcap Index has fallen 10%).
Since the last update, (HZO) has made a nice move to the upside (+73%), after the boating sector was bid up in early April on sentiment that the sector was oversold.
The top performers in the "passive" portfolio, besides FIT, include Cyberoptics (CYBE) (+104%), OraSure Technologies (OSUR) (+104%) nLight (LASR) (+54%), Axcelis Technologies (ACLS) (+45%), Astec Industries (ASTE) (+33%), and Onto Innovation (ONTO) (+24%).
FIT is still carrying the active portfolios' outperformance, having been boosted by Alphabet's (GOOGL) November $7.35 takeout bid.
While this experiment in active versus passive value is still inconclusive, it is still nice to see both groups of triple nets outperforming.