Jonathan Heller says his most recent stock trading portfolio is coming to an end for the year, but he already has his eye on a similar portfolio model in the future – with five attractive stocks at stake.
“Over the next few weeks, I will be ending my 2020 triple net asset-to-liability portfolio ‘experiment’ and release the 2021 version,” Heller recently wrote on Real Money. “As a reminder, the idea behind this is my belief that companies that trade at relatively low levels of Current Net Asset Value, or NCAVs, have the potential to provide solid returns, and furthermore, that active selection. among the eligible names may outperform the passive approach of buying them all.
The criteria for Heller’s portfolio model included the following:
- Market capitalization greater than $ 100 million
- No financial companies or in development phase
- Trading between 2 and 3 times the NCAV (the NCAV is calculated by subtracting a company’s total liabilities from current assets)
According to Heller, the 27 names who made the cut last year were included in the passive portfolio. “I then selected eight names from this universe that interested me the most, which make up the active portfolio, and I took positions in all eight,” he explained in Real Money this week.
Currently the Active portfolio (+ 34%) is ahead of the Passive portfolio (+ 31%), but with a few weeks to go, don’t expect things to stay static. Both portfolios are currently ahead of the S&P 500 (up 24%), but behind both the Russell 2000 (up 37%) and the Russell Microcap Index (up 49%).
“Last year, which was the first of this higher value-added ‘experiment’, was a solid victory on an absolute and relative basis,” said Heller. “This year, while absolute returns have been decent, relative returns to the small and microcap indices have been disappointing.”
Heller is already selecting the new 2021 version of its model portfolios. “At this point there are a total of 50 names that can be included in the passive portfolio,” he noted. “This is almost double the total from last year, which should make the selection process for the active portfolio that much more difficult.”
Among the names at stake for inclusion are Sanmina (SANM) – Get the Sanmina-SCI Corporation report (a repeat offender included in the 2020 active and passive portfolios); American well (AMWL) – Get the report from American Well Corporation, and Stratasys (SSYS) – Get the report from Stratasys Ltd..