One Person's Trash Is Another Person's Treasure Portfolio
In November 2012, 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 investors 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 felt 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 on each portfolio selection:
Now, let's get to the portfolio and see how it fared this week:
Company | Cost Basis | Shares | Total Value | Return |
|---|---|---|---|---|
Exelon | $31.25 | 31.68 | $981.45 | (0.9%) |
QLogic | $11.46 | 86.39 | $1,008.17 | 1.8% |
Dendreon | $5.97 | 165.82 | $1,102.70 | 11.4% |
Dell | $13.37 | 74.05 | $1,001.16 | 1.1% |
Staples | $13.48 | 73.44 | $988.50 | (0.1%) |
Arkansas Best | $10.83 | 91.41 | $997.28 | 0.7% |
Arch Coal | $7.03 | 140.83 | $859.06 | (13.2%) |
Skullcandy | $6.71 | 147.54 | $951.63 | (3.9%) |
France Telecom | $11.64 | 85.05 | $911.74 | (7.9%) |
Xerox | $8.16 | 121.32 | $969.35 | (2.1%) |
Cash | $0.06 | |||
Total commission | ($100.00) | |||
Original investment | $10,000.00 | |||
Total portfolio value | $9,771.10 | (2.3%) | ||
S&P 500 performance | 0.3% | |||
Performance relative to S&P 500 | (2.6%) |
Source: Yahoo! Finance, author's calculations.
The week's winner
Dendreon was by far the biggest winner this week, adding to momentum that its pricey prostate cancer treatment, Provenge, will get approved in Europe sometime this year. Cantor Fitzgerald upped its price target on Dendreon last week to $7 and noted that sales expectations for Provenge were simply too low. Keep in mind, as well, that Dendreon's restructuring should result in big savings in the second half of 2013, making it easier for the company to turn a profit if it can garner an EU approval.
The week's loser
This was definitely not coal miner Arch Coal's week. The company reported its fourth-quarter results on Tuesday and they weren't even close to Wall Street estimates -- missing on EPS by $0.17 with an adjusted loss of $0.42. In a typical case of seeing the good in the bad, Arch has about 90% of its projected production locked in for 2014, as well as close to half of its 2014 production. The keys points here are that thermal prices and demand are stabilizing and that Arch is keeping production low in order to cut down on expenses. It wasn't a great report by any means, but I'm not deterred.
Also in the news...
Dell agreed to a formal leveraged buyout by Silver Lake Partners and Microsoft for $13.65 per share on Tuesday. Shareholders will now get to vote on whether or not to accept the deal. Although I wish Dell would have stayed public because, over the long-term, I can see it returning more to shareholders than the pop caused by this buyout, we still have a chance at receiving a few additional quarters of dividends, as well as the possibility of a special dividend from Dell to sweeten the deal for voting shareholders and entice them to vote "yes."
France Telecom suffered through a pretty bad week as well, falling victim to political worries in Spain and Italy. France Telecom, whose Orange mobile unit derives a good chunk of revenue from Europe, already cut its dividend and warned shareholders of an expected drop in cash flow late last year. Still, its efforts to push into the Middle East and Africa lead me to believe this is actually a very inexpensive cash cow.
We can do better
For the week I ceded an additional 1.6% to the S&P 500 and now find myself in a 2.6% hole to the broad-based index. Have no fear, however, as I fully expect this group of diversified investor trash to fully transform into 10 separate golden nuggets within a year.
Check back next week when we examine the latest pressing news affecting the portfolio.
Is this the year Dendreon puts the pieces together?
Dendreon's run over the past four years witnessed sub-$5 share prices skyrocket to 10-bagger status before tumbling all the way back down below $5, as its revolutionary prostate cancer vaccine Provenge became a lightning rod of debate. But where does that leave investors -- other than a bit nauseated from the roller-coaster ride? Our own David Williamson answers this question, and many more, inside our brand new premium research report on Dendreon. Inside, he details every key issue facing the company and outlines just how Dendreon intends to regain its former glory. The report also comes with a full year of analyst updates, so claim your copy of this exclusive report today by clicking here now.
The article One Person's Trash Is Another Person's Treasure Portfolio originally appeared on Fool.com.
Fool contributor Sean Williams owns shares of QLogic, Dell, Skullcandy, and France Telecom, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Dendreon, Staples, and France Telecom. Motley Fool newsletter services have recommended buying shares of Exelon and France Telecom, as well as writing puts on Exelon, and creating a synthetic covered call position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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