Last November, I announced my intention to create a portfolio of 10 companies that investors had effectively thrown away and given up on, in the hope of showing that deep-value investing, and contrarian thinking, can actually be a very successful investing method. I dubbed this the "One Person's Trash Is Another Person's Treasure" portfolio and, over a 10-week span, I highlighted companies that I thought fit this bill and would expect to drastically outperform the benchmark S&P 500 over the coming 12 months. If you're interested in the reasoning behind why I chose these companies, then I encourage you to review my synopsis of each portfolio selection:
Exelon QLogic Dendreon Dell Staples Arkansas Best Arch Coal Skullcandy France Telecom XeroxNow, let's get to the portfolio and see how it fared this week:
| Exelon | $31.25 | 31.68 | $995.07 | 0.5% |
| QLogic | $11.46 | 86.39 | $857.85 | (13.4%) |
| Dendreon | $5.97 | 165.82 | $645.04 | (34.8%) |
| Dell | $13.37 | 74.05 | $994.49 | 0.4% |
| Staples | $13.48 | 73.44 | $1,077.36 | 8.8% |
| Arkansas Best | $10.83 | 91.41 | $1,710.28 | 72.8% |
| Arch Coal | $7.03 | 140.83 | $716.82 | (27.6%) |
| Skullcandy | $6.71 | 147.54 | $804.09 | (18.8%) |
| France Telecom | $11.64 | 85.05 | $839.44 | (15.2%) |
| Xerox | $8.16 | 121.32 | $1,061.55 | 7.2% |
| Cash | $0.06 | |||
| Dividends receivable | $45.30 | |||
| Total commission | ($100.00) | |||
| Original investment | $10,000.00 | |||
| Total portfolio value | $9,747.35 | (2.5%) | ||
| S&P 500 performance | 7.1% | |||
| Performance relative to S&P 500 | (9.6%) |
Source: Yahoo! Finance.
This week's winner
It certainly wasn't a great week for the broad-based S&P 500, which dipped 2.4% over the past five trading sessions. That didn't seem to matter much to network equipment manufacturer QLogic (NASDAQ: QLGC ) , which added on 3.7% this week following a restructuring plan announcement on Tuesday. The company's plan involves job cuts and streamlining its operations in order to save $20 million annually. Although it'll incur some negative impact on its GAAP earnings in the interim, I highly doubt this changes the long-term outlook or consistent profitability that drew me to own QLogic in the first place.
This week's loser
In spite of no company-specific news, audio accessories maker Skullcandy (NASDAQ: SKUL ) took it on the chin this week, down 5.4%. Skullcandy is in the midst of trying to turn around falling sales in a highly competitive environment. With its health intricately tied to Apple and the remainder of the smartphone industry, Skullcandy will need to see steady smartphone sales growth if it hopes to meet its own sales targets this year. If the shares in my personal portfolio are any indication, I believe management is making the right moves to position itself for future growth.
Also in the news...
In this week's episode of "Dells (NASDAQ: DELL ) of Our Lives," Dell's board of directors sent a 39-page rebuttal to the Carl Icahn camp noting that his proposed $12-per-share dividend offer would be about $3.9 billion short of funding. Previous to this rebuttal, Carl Icahn had stated that if Dell's board didn't go along with his partial buyout proposal, he and Southeastern Asset Management would seek to elect a new 12-person board of directors. Needless to say, this made-for-TV drama still has a long way to play out.
Xerox (NYSE: XRX ) made waves yesterday when it announced the purchase of LearnSomething, a digital education company operating primarily in the pharmaceutical and health care industry, for an undisclosed sum. This is a continuation of Xerox's deeper move into information technology with regard to the health care sector. Acquisitions like this set Xerox up for success by normalizing its cash flow against the natural ebb and flow of the economic cycle and allow it to pay out the robust 2.6% yield that shareholders are currently privy to.
Finally, office supply chain Staples (NASDAQ: SPLS ) declared a second-quarter cash dividend of $0.12 (matching its previous quarter) payable on July 18, 2013, to shareholders of record on June 28, 2013. Staples, as I've noted over the past couple of months, looks like it'll benefit domestically in a big way by picking up customers who get displaced by the ongoing Office Depot and OfficeMax merger, which will result in store closures. Staples has all the tools to really surprise Wall Street analysts moving forward.
We can do better
Although the S&P 500 and this portfolio of deeply discounted value names both fell last week, this marked the fifth straight week that we managed to outperform the S&P 500. While we still have quite a ways to go to catch the S&P 500, which is still up about 7% from when we first began this experiment, I feel encouraged by this rebound and suspect investors will see the value in these 10 names over the long run.
Check back next week for the latest update on this portfolio and its 10 components.
It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.
No comments:
Post a Comment