One Person's Trash Is Another Person's Treasure Portfolio

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:

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

$1,177.23

18.9%

QLogic

$11.46

86.39

$933.01

(5.8%)

Dendreon

$5.97

165.82

$736.24

(25.6%)

Dell

$13.37

74.05

$984.87

(0.5%)

Staples

$13.48

73.44

$920.94

(7%)

Arkansas Best

$10.83

91.41

$1,064.01

7.5%

Arch Coal

$7.03

140.83

$670.35

(32.3%)

Skullcandy

$6.71

147.54

$755.41

(23.7%)

France Telecom

$11.64

85.05

$890.47

(10%)

Xerox

$8.16

121.32

$1,015.45

2.6%

Cash

   

$0.06

 

Dividends receivable

   

$42.56

 

Total commission

   

($100.00)

 

Original investment

   

$10,000.00

 

Total portfolio value

   

$9,190.60

(8.1%)

S&P 500 performance

     

5.1%

Performance relative to S&P 500

     

(13.2%)

Source: Yahoo! Finance.

This week's winner
After tumbling by double digits last week, trucking company Arkansas Best (NASDAQ: ARCB  ) tacked on 14.6% to take the top spot this week. Shares rallied after the company announced a regular $0.03 quarterly cash dividend on Tuesday, payable to shareholders on May 21. Following stronger-than-expected results from many trucking companies, I feel quite confident that once Arkansas Best solves its union issues, it'll be pedal to the metal.

This week's loser
On the flipside, information technology and print services specialist Xerox (NYSE: XRX  ) tumbled 6.2% on the week after reporting uninspiring first-quarter earnings results. For the quarter, Xerox delivered $5.36 billion in total revenue and an adjusted profit of $0.27. Profits topped expectations by $0.03; however, revenue was $130 million shy of expectations. Xerox saw sales at its document technology segment fall 9%, while service revenue jumped 4%. As Xerox continues to transition toward a service-based model, these sales fluctuations will lessen dramatically. As a big catalyst, I'll be looking for the Patient Protection and Affordable Care Act to drastically boost its Medicare processing business next year in California.

Also in the news ...
Surprise! Dell (UNKNOWN: DELL.DL  ) is back in the news! Dell's shares took a hit this week after Blackstone Group announced it was going to bow out of the running to buy the company. Blackstone cited the deterioration in PC sales in recent weeks as the reason for pulling its offers from the table. With only Carl Icahn's partial buyout left on the table, the Dell buyout is looking murkier by the day. However, one positive note, and one of the reasons the dividends receivable column headed higher, is that we collected $0.08 per share for each Dell share we own this week. Ka-ching!

Sticking with the theme of dividends, Staples (NASDAQ: SPLS  ) delivered shareholders a $0.12 quarterly payout last Thursday, also helping to boost our dividends receivable. Staples looks poised to capitalize on the turmoil that will be caused from the merger of Office Depot and OfficeMax stores in terms of store closures. With the addition of Apple accessories in its stores, I'd call Staples a continued bet for strong cash generation.

Let's make it a dividend trifecta this week by also pointing out that Exelon (NYSE: EXC  ) declared a $0.31 quarterly dividend yesterday payable on June 10. The lower dividend is consistent with its previously stated forecast and still packs a 3.3% punch after the nearly 20% move Exelon has made over the previous three months. A colder winter certainly helped to boost energy usage in recent months; however, Exelon will still need to make investments in renewables and further diversify its energy assets if it hopes to maintain its recent momentum.

We can do better
The contrarian and value portfolio bounced a bit this week, thanks in large part to the performance of Arkansas Best, but it still managed to lose ground to the ceiling-less S&P 500. I'm not shocked to see this portfolio underperforming in an environment where investors are willing to take on more risk, but I still think that over the long run, when the market does correct and traders realize we can't go straight up, these companies will be gold -- metaphorically speaking!

Check back next week for the latest update on this portfolio and its 10 components.

Can Exelon move even higher?
As the nation moves increasingly toward clean energy, Exelon is perfectly positioned to capitalize on having the largest nuclear fleet in North America. This strength, combined with an increased focus on balance sheet health and its recent merger with Constellation, places Exelon and its resized dividend on a short list of the top utilities. To determine if Exelon is a good long-term fit for your portfolio, you're invited to check out The Motley Fool's premium research report on the company. Simply click here now for instant access.


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