Go to ...

ModernGraham

Value Investing Research Since 2006

RSS Feed

Monday, June 18, 2018

Bargain Basement Portfolio – Up Over 48% Since Inception!


In this article we review the Bargain Basement Portfolio, which was created on March 27, 2009, and rebalance it to the target allocations.  You can view a more detailed description of the portfolio in the Introduction to the Bargain Basement Portfolio.  Here’s a review of the rules of the portfolio:

  1. Using the Value Line Bargain Basement Screen, select companies that are priced at 75% or lower of Price-to-”Net” Working Capital and have achieved a positive EPS for at least 5 straight years.
  2. Buy shares when the price is 75% or lower, and hold until the price is 150% or higher of “Net” Working Capital.
  3. Maximum number of companies invested at a given time is 5 (target allocation of 20% of portfolio).  If there are more than 5 suitable companies, any purchases will be made in the company with the lowest Price-to-”Net” Working Capital ratio.
  4. Any funds not invested in suitable companies will be invested in the iShares Barclays 10-20 yr Treasury ETF, ticker symbol TLH.
  5. Any dividends received are placed in cash to be reinvested during rebalancing.
  6. Portfolio is rebalanced to target allocations every 3 months.

Since the last update on the portfolio, and prior to the rebalance, there were no transactions; however, when the time came to rebalance (end of the 2nd quarter), the positions had the following allocations:

  • Movado Group, Inc (MOV) – 18.59% of the total portfolio
  • Sketchers, USA (SKX) – 20.43%
  • PC Connection (PCCC) – 19.03%
  • iShares 10-20 yr Treasury ETF (TLH) – 41.6%
  • Cash – 0.36%

The target allocation is 20% for each equity and the remaining funds in the iShares ETF.  As a result, the following transactions were made, bringing the allocations in line with the target.

  • Sell 25 shares of TLH, proceeds of $2,724.50
  • Buy 189 shares of MOV, cost of $1,871.10
  • Buy 243 shares of PCCC, cost of $1,287.90

In addition, between the rebalancing of the portfolio and today, the following transactions were made:

  • Dividend of $0.303 per share of TLH received in the amount of $145.44

During the second quarter of 2009 (the period is considered from 3/27/2009 to 7/3/2009), the following performance was observed:

3/27/09 Value 7/3/09 Value Gain/Loss
Bargain Basement Portfolio $100,000.00 132,306.79 32.31%
Dow Jones Industrial Average 7,776.18 8,280.74 6.49%
S&P 500 Index 815.94 896.42 9.86%

You can view the current portfolio at the Google Spreadsheet I have set up to track the performance.  The spreadsheet provides an overview of the portfolio’s current value, weekly historical value, and a history of the transactions.  As of today, the portfolio is currently up over 48% since inception.

2 Responses “Bargain Basement Portfolio – Up Over 48% Since Inception!”

  1. G
    July 25, 2009 at 2:50 am

    Hi,
    I been searching the site for the def’n of “Net” working captial but no results showed up. Can you please share the calculation or definition of it?
    Thanks,
    G.

  2. July 25, 2009 at 11:04 am

    Sure! “Net” working capital and Net Current Asset Value are often seen interchangeably. We define it as Current Assets less Total Liabilities.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

More Stories From Bargain Basement

About Benjamin Clark