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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 in each of the past 10 weeks I highlighted a company 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:

Today, I plan to officially kick off this experiment.

As I mentioned previously, and for complete transparency purposes, unlike my Foolish colleagues Jim Royal and Brian Stoffel, who are pioneering their own market-beating portfolios, and own each and every company listed in those portfolio, I only own four of the following 10 names but reserve the right to purchase or sell these names as the Fool's disclosure policy allows.

Without further ado, here's the portfolio:


Cost Basis


Total Value





















Arkansas Best (NASDAQ: ARCB  )




Arch Coal








France Telecom




Xerox (NYSE: XRX  )







Total Commission



Original Investment



Total Portfolio Value



S&P 500 Performance



Performance Relative to S&P 500



Source: Yahoo! Finance.

Buy high, sell higher
One thing you'll notice is that many of these companies have come well off their lows from when I originally highlighted them.

Dell, for instance, has jumped nearly 50% off its lows on confirmed talks that a consortium of buyers, including Silver Lake Partners and Microsoft, could be interested in taking the company private. It appears talks have been ongoing for months and even a failure of the deal could allow it to repurchase an enormous number of shares that'd still be beneficial to shareholders as Dell transitions from a PC company to a cloud-based infrastructure provider.

QLogic shares rallied strongly after it reported third-quarter earnings results that were way ahead of its previous guidance. The news of better-than-expected interconnectivity spending shouldn't come as a surprise, as AT&T recently announced a $14 billion wireless and wireline infrastructure upgrade over the next three years, and Sprint Nextel is expected to use its SoftBank capital infusion on a 4G LTE build-out.

But just because these tech names have jumped doesn't mean I'm counting them out from further upside.

In the news...
In more recent news, we received quarterly reports from both Arkansas Best and Xerox, as well as an analyst upgrade for Dendreon.

Before the bell yesterday, Arkansas Best reported a fourth-quarter adjusted loss of $0.22 on revenue of $537 million. The revenue figure sailed past Wall Street's expectations by nearly $25 million, but its loss was $0.18 worse than expected. Arkansas Best's most pressing issue is its ongoing contract negotiations with its union, but a long-tenured and cohesive management team that can keep costs under control puts my mind at ease that a resolution is nearing.

Xerox reported its fourth-quarter results last week, which showed flat year-over-year sales of $5.92 billion and EPS of $0.30, slightly edging out the $5.88 billion and $0.29 Wall Street had expected. Although Xerox's guidance appears conservative, it's worth noting that its restructuring efforts expanded operating margin by 30 basis points to 10.3% and it appears poised for a big boost in its Medicaid payment processing business next year when the Affordable Care Act goes into full effect.

Finally, Dendreon received a nice boost from Cantor Fitzgerald, which nudged its price target on the biotech company up to $7. Dendreon is facing a pivotal year with Provenge, its late-stage prostate cancer treatment. The European Union is expected to approve or deny the pricey treatment sometime in 2013, but, more important, Dendreon will be looking for ways to partner Provenge with existing and experimental prostate cancer treatments. Combine this with the big cost savings expected to really reflect in Dendreon's bottom line by mid-year, and I think it'll head much higher.

Foolish roundup
With this being the kickoff, I have little to report on performance other than that commission costs have put me in a 1% hole to the S&P 500. I strongly believe, however, that through share appreciation and dividends, this portfolio can outperform the S&P 500 by double digits over the coming year. It looks to be an exciting year!

Is this the year Dendreon turns its fortunes around?
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 nauseous 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.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 05, 2013, at 12:01 PM, thenoffya wrote:

    And DELL is already gone from the portfolio. It's a shame your cost basis is 13.37, the buyout is for 13.65. That's a solid 2% gain in just a few months!

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