Beta than the S&P 600 – May Performance

Beta than the S&P 600 – April Performance
Beta than the S&P 600 – July Performance
Exiting a few positions on the continued Trump rally

May was another rough month for small caps and my portfolio. When will the pain end? My underperformance was driven mostly by two stocks: Cliffs and Diamond Offshore. I added one stock in the month – American Outdoor Brands (AOBC), formally known as Smith and Wesson.

May Performance

My portfolio and the S&P 600 fell although mine fell much further. I’m looking at losses of 3.27% after 5 months while the S&P 600 is down .21% for the year. There’s a reason folks are migrating to indexing – active management and stock selection isn’t easy. There’s still plenty of time left in the year so I will continue on with the plan of slowly but surely adding names to diversify and move away from my position in the index fund.

S&P 600 Performance

Portfolio Holdings

I added American Outdoor Brands in the month. I started with a very small allocation rather than going all in with the first purchase as I have done before (such as Cliffs).

Portfolio Holdings

AOBC seems to be catching some momentum and found a bottom in March. Lots of pessimism around gun sales following Trump’s election due to the lower risk of gun regulation. This led to a selloff in American Outdoor Brand’s stock price and an attractive valuation. My average purchase price was $22.32.

The stock trades at a trailing P/E of 9.95x and a forward P/E of 10x. Revenue and earnings grew in the first quarter and their margins are a bit better than their competitor Sturm Ruger.

The Trump trade unwind is basically complete. Iron ore prices have returned to their pre-election levels. Oil is back below $50 and closed the week at $47.66. With 12% of the portfolio in my Cliffs and Diamond Offshore positions, it’s to be expected the portfolio underperforms with commodity prices falling. I will continue to monitor the positions but see no reason to sell now despite the negative trends in the market.

 

 

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