Jonathan Heller says his most recent stock trading portfolio is winding down for the year, but he already has an eye on a similar portfolio model going forward — with five enticing stocks in play.
“Within the next few weeks, I’ll be winding down my 2020 Triple Net Active versus Passive Portfolio “experiment,” and releasing the 2021 version,” Heller wrote recently on Real Money. “By way of reminder, the idea behind this is my belief that companies trading at relatively low levels of net current asset value, or NCAV, have the potential to provide solid returns, and furthermore, that active selection from the qualifying names can outperform the passive approach of buying them all.”
Heller’s portfolio model 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)
According to Heller, the 27 names that made the cut last year were included in the passive portfolio. “I then selected eight names from that universe that were most interesting to me, which comprise the Active portfolio, and took positions in all eight,” he explained in Real Money this week.
Currently, the Active portfolio (up 34%) is ahead of the Passive portfolio (up 31%), but with several weeks left, don’t expect things to remain static. Both portfolios are currently ahead of the S&P 500 (up 24%), but behind both the Russell 2000 (up 37%) and Russell Microcap Index (up 49%).
“Last year, which was the first for this deeper-value “experiment” was a solid win on both an absolute and relative basis,” Heller said. “This year, while the absolute returns have been decent, returns relative to small and microcap indexes have been disappointing.”
Heller is already screening for the new 2021 version of his model portfolios. “At this point, there are a total of 50 names that qualify for inclusion in the Passive portfolio,” he noted. “That’s nearly double last year’s total, which should make the process of selection for the Active portfolio all the more challenging.”
Among the names in play for inclusion are Sanmina (SANM) – Get Sanmina-SCI Corporation Report (a repeat offender included in both the 2020 Active and Passive portfolios); American Well (AMWL) – Get American Well Corporation Report, and Stratasys (SSYS) – Get Stratasys Ltd. Report.