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
Xerox
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 | $952.93 | (3.7%) |
| QLogic | $11.46 | 86.39 | $901.91 | (8.9%) |
| Dendreon | $5.97 | 165.82 | $713.03 | (28%) |
| Dell | $13.37 | 74.05 | $985.61 | (0.4%) |
| Staples | $13.48 | 73.44 | $1,167.70 | 18% |
| Arkansas Best | $10.83 | 91.41 | $2,084.15 | 110.5% |
| Arch Coal | $7.03 | 140.83 | $523.89 | (47.1%) |
| Skullcandy | $6.71 | 147.54 | $783.44 | (20.9%) |
| Orange | $11.64 | 85.05 | $784.16 | (20.8%) |
| Xerox | $8.16 | 121.32 | $1,125.85 | 13.7% |
| Cash | $0.06 | |||
| Dividends receivable | $84.53 | |||
| Total commission | ($100.00) | |||
| Original investment | $10,000.00 | |||
| S&P 500 performance | 7.6% | |||
| Performance relative to S&P 500 | (6.5%) |
Source: Yahoo! Finance.
This week’s winner
The top dog this week was, again, the star of this deeply discounted value portfolio, Arkansas Best Corporation (NASDAQ:ABFS). The trucking company soared 18% on the week after announcing that its ABF teamsters had ratified a five-year collective bargaining agreement, and passed a majority of supplements in the ABF National Master Freight Agreement. This news paves the way for Arkansas Best Corporation (NASDAQ:ABFS) to, once again, be cost-competitive with its peers without having to reduce its workforce. Shares have now more than doubled in just the past two months.
This week’s loser
The laggard this week was foreign telecommunications provider Orange SA (ADR) (NYSE:ORAN) (formerly France Telecom), which dipped 4.2% on the week. Although no company-specific news set off the pessimism, regional worries out of Portugal that austerity measures may not stick sent ripples of fear throughout Europe, where the heart of Orange SA (ADR) (NYSE:ORAN)’s revenue stream is located. I purchased Orange in my own portfolio late last year on the high prospects for its emerging market growth coupled with steady European cash flow. While I certainly haven’t liked seeing its dividend get cut by more than 40%, and feel more hiccups may be on the way, I see it as an incredible cash cow at these levels, and am still considering adding to my position.
Also in the news…
In the latest installment of “Dell Inc. (NASDAQ:DELL) of Our Lives,” Carl Icahn announced that he’d arranged for $3.4 billion of the $5.2 billion needed for the debt financing portion of his Dell Inc. (NASDAQ:DELL) leveraged buyout offer. Icahn is counting on independent shareholder advisory group ISS to back his bid (they’ve yet to make their stance on either offer known, but are expected to shortly), which could force Michael Dell to bump his takeover price higher — if anything, at least to match Icahn at his proposed $14 shareholder tender offer. We are now just two weeks away from the shareholder vote, so expect some volatility in shares moving forward.
