Reviewing the Bargain Basement Portfolio

saleIn this article we review the Bargain Basement Portfolio as of 9/25/2009, 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 the following transactions:

  • 8/7/09 – Dividend of $174.49 ($0.303/share) received for TLH.
  • 8/27/09 – Sketchers, USA (SKX) surpassed the target selling price and was subsequently sold for $51,281.44 – a profit of 156%.
  • 8/27/09 – Proceeds from sale of SKX were used to purchase more TLH.
  • 9/8/09 – Dividend of $332.39 ($0.35174/share) received for TLH.

When the time came to rebalance (end of the 3rd quarter), the positions had the following allocations:

  • Movado Group, Inc (MOV) – 22.07% of the total portfolio
  • PC Connection (PCCC) – 16.55%
  • iShares 10-20 yr Treasury ETF (TLH) – 60.97%
  • Cash – 0.41%

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 15 shares of TLH, proceeds of $1,678.65
  • Sell 250 shares of MOV, proceeds of $3,580.00
  • Buy 1039 shares of PCCC, cost of $5,974.25

During the third quarter of 2009 (the period is considered from 7/3/2009 to 9/25/2009), the following performance was observed:

7/3/09 Value 9/25/09 Value Quarter Gain/Loss Overall Gain/Loss
Bargain Basement Portfolio $132,306.79 173,460.57 31.10% 73.46%
Dow Jones Industrial Average 8,280.74 9,665.19 16.72% 24.29%
S&P 500 Index 896.42 1,044.38 16.47% 28.00%

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.

Photo by timparkinson.


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