By
Jim Mueller
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More Articles
July 1, 2011
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This article is part of our Rising Star Portfolios series.
What a difference one quarter can make. Three months ago, the Messed-Up Expectations portfolio was sitting pretty with 12 out of 15 positions in the black, 14 of 15 beating the S&P 500, and the average position beating the market by 2.75 percentage points.
After a pretty depressing quarter where the market's concerned -- the S&P 500, as measured by SPY, actually ended flat, but was down as much as 4.2% in mid-June -- 11 out of the portfolio's 24 positions are in the black, 10 are beating the S&P 500, and the average position is now trailing the S&P by 1.74 points. Here's the rundown:
|
Position
|
Date
|
Purchase Price
|
6/30/11 Price
|
Gain/(Loss)
|
Difference vs. SPY
(% Points)
|
|
Transocean (NYSE: RIG )
|
11/02/10
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$63.94
|
$64.56
|
0.97%
|
(11.10)
|
|
Power-One (Nasdaq: PWER )
|
11/16/10
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$8.82
|
$8.10
|
(8.16%)
|
(21.48)
|
|
GameStop (NYSE: GME )
|
11/30/10
|
$20.06
|
$26.67
|
32.95%
|
19.95
|
|
Oshkosh
|
12/08/10
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$34.84
|
$28.94
|
(16.93%)
|
(25.55)
|
|
Transocean
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12/09/10
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$70.76
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$64.56
|
(8.76%)
|
(16.96)
|
|
Dean Foods (NYSE: DF )
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12/22/10
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$8.35
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$12.27
|
46.95%
|
41.05
|
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Western Digital
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01/05/11
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$32.78
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$36.38
|
10.98%
|
6.63
|
|
Textron (NYSE: TXT )
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01/14/11
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$24.94
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$23.61
|
(5.33%)
|
(8.35)
|
|
Western Digital
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01/25/11
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$32.18
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$36.38
|
13.05%
|
9.93
|
|
SUPERVALU
|
02/01/11
|
$7.30
|
$9.41
|
28.90%
|
27.02
|
|
Power-One
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02/08/11
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$8.83
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$8.10
|
(8.22%)
|
(8.69)
|
|
Ford Motor (NYSE: F )
|
02/24/11
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$14.57
|
$13.79
|
(5.35%)
|
(7.09)
|
|
Nam Tai Electronics
|
03/10/11
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$7.23
|
$5.46*
|
(24.48%)
|
(26.99)
|
|
Ford
|
03/17/11
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$14.45
|
$13.79
|
(4.57%)
|
(8.75)
|
|
Nam Tai Electronics
|
03/31/11
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$6.38
|
$5.52
|
(13.48%)
|
(13.51)
|
|
Textron
|
04/12/11
|
$27.10
|
$23.61
|
(12.88%)
|
(13.76)
|
|
Power-One
|
04/15/11
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$7.48
|
$8.10
|
8.29%
|
7.85
|
|
Hertz Global Holdings
|
04/21/11
|
$17.18
|
$15.88
|
(7.57%)
|
(6.70)
|
|
Transocean
|
05/13/11
|
$69.41
|
$64.56
|
(6.99%)
|
(5.93)
|
|
Bridgepoint Education
|
05/27/11
|
$22.18
|
$25.00
|
12.71%
|
13.38
|
|
Ford
|
05/31/11
|
$14.69
|
$13.79
|
(6.13%)
|
(4.44)
|
|
Western Refining (NYSE: WNR )
|
06/15/11
|
$15.62
|
$18.07
|
15.69%
|
11.27
|
|
Apple
|
06/21/11
|
$328.62
|
$335.67
|
2.15%
|
0.20
|
|
GameStop
|
06/29/11
|
$26.32
|
$26.67
|
1.33%
|
0.37
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Source: Author calculations. SPY returns are dividend adjusted. *This position was sold and the price displayed is the selling price.
We're eight months into this portfolio and I'm pretty comfortable with the positions, even though they're currently not doing so well. Because I'm looking for companies that are not seeing any love from Mr. Market -- the expectations for the future are low, otherwise I wouldn't be buying them -- it's not too surprising that when the market hits a rough patch, more of the companies I have chosen to invest in are hurt than not. This portfolio is a "value" type of portfolio, given how I'm approaching the picks.
Here's my latest thinking on several of them.
- Transocean is seeing increased demand for ultra-deepwater rigs and for shallower jackup rigs, bringing several of the latter back online. Oil drilling is certainly not going away anytime soon and as rig supply tightens, Transocean should do well.
- Power-One should benefit from Germany's turn away from nuclear power and growing demand for green energy in the U.S., China, and India. It's been positioning itself for that future demand by opening a plant in Phoenix and expanding a plant in China. Of all the companies in this portfolio, this is the one that has me most excited on a long-term basis.
- GameStop is doing well with its customer loyalty program, PowerUp Rewards, and that's helping to drive sales. The company's margins have begun to improve, too. These improvements led me to buy a second set of shares just a few days ago.
- Dean Foods' organic and soy milk lines are helping to drive this company forward. The huge price decreases for store-brand milk, which had been hurting it for so long, are finally beginning to abate somewhat. Now if raw milk prices would only come down!
- Textron is still struggling with its Cessna division, but chief financial officers from several business-plane manufacturers agree that this market will be turning over the next few quarters. I can be patient.
- Ford keeps paying down its debt and strengthening its balance sheet. Talk about reinstating the dividend also has me excited.
- Western Refining is benefitting from a mispricing between two major crude oil prices, helping it keep a wide crack spread and improve margins. It just returned to profitability on a trailing-12-month basis and I expect it to improve on that over the next year, at least.
As this portfolio continues to invest in various opportunities, follow along on my discussion board. If you have any suggestions for companies that might have messed-up expectations priced in, I'd love to hear from you.
This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. See all of our Rising Star analysts (and their portfolios).
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