Beta than the S&P 600 – May Performance

Beta than the S&P 600 – July Performance
Beta than the S&P 600 – March Performance
Beta than the S&P 600 – February Performance

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.