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:

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.