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

http://www.fool.com/investing/general/2013/07/04/one-persons-trash-is-another-persons-treasure-port.aspx

Sean Williams
July 4, 2013

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

$952.93

(3.7%)

QLogic

$11.46

86.39

$901.91

(8.9%)

Dendreon

$5.97

165.82

$713.03

(28%)

Dell

$13.37

74.05

$985.61

(0.4%)

Staples

$13.48

73.44

$1,167.70

18%

Arkansas Best

$10.83

91.41

$2,084.15

110.5%

Arch Coal 

$7.03

140.83

$523.89

(47.1%)

Skullcandy

$6.71

147.54

$783.44

(20.9%)

Orange

$11.64

85.05

$784.16

(20.8%)

Xerox

$8.16

121.32

$1,125.85

13.7%

Cash

   

$0.06

 

Dividends receivable

   

$84.53

 

Total commission

   

($100.00)

 

Original investment

   

$10,000.00

 

Total portfolio value

   

$10,107.26

1.1%

S&P 500 performance

     

7.6%

Performance relative to S&P 500

     

(6.5%)

Source: Yahoo! Finance.

This week's winner
The top dog this week was, again, the star of this deeply discounted value portfolio, Arkansas Best (NASDAQ: ABFS). The trucking company soared 18% on the week after announcing that its ABF teamsters had ratified a five-year collective bargaining agreement, and passed a majority of supplements in the ABF National Master Freight Agreement. This news paves the way for Arkansas Best to, once again, be cost-competitive with its peers without having to reduce its workforce. Shares have now more than doubled in just the past two months.

This week's loser
The laggard this week was foreign telecommunications provider Orange (NYSE: ORAN) (formerly France Telecom), which dipped 4.2% on the week. Although no company-specific news set off the pessimism, regional worries out of Portugal that austerity measures may not stick sent ripples of fear throughout Europe, where the heart of Orange's revenue stream is located. I purchased Orange in my own portfolio late last year on the high prospects for its emerging market growth coupled with steady European cash flow. While I certainly haven't liked seeing its dividend get cut by more than 40%, and feel more hiccups may be on the way, I see it as an incredible cash cow at these levels, and am still considering adding to my position.

Also in the news...
In the latest installment of "Dells (NASDAQ: DELL) of Our Lives," Carl Icahn announced that he'd arranged for $3.4 billion of the $5.2 billion needed for the debt financing portion of his Dell leveraged buyout offer. Icahn is counting on independent shareholder advisory group ISS to back his bid (they've yet to make their stance on either offer known, but are expected to shortly), which could force Michael Dell to bump his takeover price higher -- if anything, at least to match Icahn at his proposed $14 shareholder tender offer. We are now just two weeks away from the shareholder vote, so expect some volatility in shares moving forward. 

Dendreon (NASDAQ: DNDN) shareholders received the news they've been waiting an eternity to hear late last week: a positive opinion on Provenge by the Committee for Medicinal Products for Human Use, or CHMP. While the European Medicines Agency isn't required to follow the opinion of the CHMP, it often does, giving Provenge a good chance of gaining approval in Europe before the year is out. While it may not seem like much, with competition in the EU over advanced prostate cancer treatments accelerating, this is a big step toward Dendreon moving toward a lower cash burn rate, and could, once again, reignite takeover chatter.

If you notice a bit more cash in coffers this week, it's because we received our quarterly distribution of $0.0575 per share from Xerox (NYSE: XRX) on Monday. Xerox is an extremely sneaky play on the implementation of the Patient Protection and Affordable Care Act