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:


Cost Basis


Total Value



























Arkansas Best





Arch Coal










France Telecom














Dividends receivable




Total commission




Original investment




Total portfolio value




S&P 500 performance



Performance relative to S&P 500



Source: Yahoo! Finance.

This week's winner
Supplanting trucking company Arkansas Best -- which has shot to the moon on takeover speculation and a resolution with its union -- was coal miner Arch Coal (NASDAQOTH: ACIIQ  ) . Arch tacked on 7.5% this week following an article from Forbes on Monday that highlighted the company's attempt to forge export partnerships on the West Coast of the U.S. to Asia-Pacific nations like China that have a big demand for thermal coal for electricity-generating purposes. Both India and China are still very early in their industrialization process and the need for coal in these regions is expected to remain robust for at least the next decade, playing perfectly into Arch's strategy.

This week's loser
On the other side of the coin was networking equipment maker QLogic (NASDAQ: QLGC  ) , which tanked 4.8% on the week after disclosing that its CEO, Simon Biddiscombe, had resigned on Friday. In the interim, QLogic's CFO, Jean Hu, will be the acting CEO. Anytime the management of a company changes, it provides a level of uncertainty that's bound to unnerve investors. I'd urge current shareholders (of which I'm one) to remember that QLogic has been consistently profitable for years, has $5 in net cash per share, and is poised to benefit from higher infrastructure spending. Patience will pay off here!

Also in the news...
In this week's episode of "Dells (UNKNOWN: DELL.DL  ) of our Lives," we were privy to the company's first-quarter earnings results -- and here's a hint: They weren't good. Revenue at Dell's laptop segment sank 16% while overall PC-related sales tumbled 9%. Somehow, thanks to growth in its IT segment, Dell was able to deliver a market-topping $14.1 billion in revenue; however, adjusted EPS was only $0.21, which was well below the $0.35 in EPS the Street was expecting. On the offer front, Dell has requested additional information about Carl Icahn's offer, but it certainly appears, following these results, that current shareholders may be more willing to "talk turkey" if it ensures that a buyout occurs.

The story was somewhat similar for office supply chain Staples (NASDAQ: SPLS  ) , which reported its first-quarter results on Tuesday. But, unlike with Dell, investors seem quite pleased with the company's progress in combating online competition. Even with weakness seen in Europe and Australia during the quarter, Staples held to its full-year EPS forecast and plans to utilize its direct-to-consumer operations as the backbone for its future growth prospects. Between plans to shrink its square footage and focus on its Web-based sales, and the pending merger of OfficeMax and Office Depot, which should yield it customers by store attrition, Staples looks to be a company on the mend.

Finally, if you like money, then you're going to love printing service and IT-software specialist Xerox (NYSE: XRX  ) , which declared a $0.0575-per-share dividend on Tuesday. The dividend will be payable to shareholders on July 31, 2013, and marks the second quarter in a row that it'll be paying a stipend of $0.0575. With IT software and services slowly growing into the primary business for Xerox, you can expect sales and cash flow to stabilize and this dividend to grow consistently over the coming years.

We can do better
This marks the third week in a row that this deep-discount and contrarian portfolio has outperformed the S&P 500 and gained ground. Although this week's gains were modest -- and once again fueled by Arkansas Best's incredible run higher -- I'll be looking for continued outperformance over the long run as investors abandon speculative investments and seek out deeply discounted turnaround plays. We can and will continue to do better!

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

Is this the best-positioned energy company?
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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9/27/2016 3:58 PM
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