Beta than the S&P 600 – April Performance

My Portfolio – December 2016
Beta than the S&P 600 – June Performance
Beta than the S&P 600 – March Performance

As you will see in the chart below my portfolio took it on the chin in April. The portfolio is now trailing the benchmark by 1.44%! I honestly have not spent enough time managing it or trying to find new names to add. Given my stock selection thus far, maybe that is not a bad thing!

April Performance

The orange line might look a lot like a steep mountain cliff – and Cliffs Natural Resources is mostly to blame.

Beta than the S&P 600

Cliffs went from $12 to a $6 handle in just under two months and iron ore/Cliff’s just can’t seem to find a bottom. I’m still not sold the Trump trade is dead. We do need new roads and bridges in this country. I believe Cliff’s would be a major benefactor if the federal government can get their act together.

Cliffs also paid down some of their debt in the first quarter which is a good thing.

 

Portfolio Holdings

There were no changes in the portfolio during the month. I continue to hold the same names.

As for 1st quarter earnings, most of the companies I’m holding have reported.

Argan

Beat earnings estimates by $,48 or 60%. That’s four quarters in a row they have substantially beat analyst’s earnings estimates. They also beat on revenue expectations. The stock is still down 1.91% for the year and is trading at a forward P/E of 19x which might seem high. But based on the past several quarters, analysts have been too pessimistic.

Cliffs Natural Resources

Cliffs missed analysts’ estimates by $.12 for an EPS of $.06 for the quarter. They beat on revenue expectations for an increase of 51% over the same quarter last year. Part of the reason for the lower earnings was due to a $72 million loss on paying down their debt through tender offers.

Their total debt outstanding fell from $2.23 billion to $1.7 billion in the quarter. The stock is trading at a trailing P/E of 11.44x and a forward P/E of 4.49x. The chart looks very bad but I still hold the shares because it seems like the market has become too pessimistic too fast.

I went into this trade expecting volatility but what I failed to do is enter the position slowly. If I would have initiated a smaller position and then add to it over time, I could have averaged down over the past month. I don’t really want Cliff’s to make-up a bigger portion of the portfolio so I can’t do that now.

Nautilus

Nautilus reported a slight earnings beat. The 1st quarter was expected to be their weakest of the year due to difficult comps against the prior year. They have new products launching later this year should help provide some momentum. This stock has been one of my better picks and is up 7.4% thus far in May.

Diamond Offshore

Diamond has been dragged lower of late as oil has fallen back below $50. Diamond reported an earnings beat of about $.08 and a slight beat on revenue. The stock was hurt when the CEO commented that the offshore sector hasn’t found the bottom yet so the recovery could take even longer. I continue to believe Diamond has weathered the downturn very well and have a strong balance sheet to be ready when the recovery gains strength.

Conclusion

I continue to believe my positions are undervalued versus the overall small-cap index. It was a challenging month for commodities and since Diamond and Cliffs are plays on oil and iron ore, I underperformed. With the recent passing of the new Affordable Care Act replacement in the House, maybe some progress will be made towards corporate tax reform in the near future that will benefit American companies.

COMMENTS

DISQUS: 0