A year in the life of a trending value portfolio

It’s kind of hard to believe but almost a year ago I introduced the trending value quant portfolio. Since I’m coming up on a rebalancing and I’ll start work on the new portfolio this weekend I wanted to take a look back and see how last year’s portfolio performed. Also, I’ll point out some highlights and lowlights in the portfolio.

Lets start with performance. Below is a snapshot as of this morning of the performance of the trending value portfolio from June 14,2013.

I use a $100K portfolio starting value because FINVIZ has a feature where it automatically calculates the individual share counts needed to make an equal weighted $100K portfolio for you. Makes life easier then I can scale the values as needed for my real portfolio in my brokerage account.

The Gain% column in the table shows the price only gain since June 14, 2013. The price only change is 20.8%. The portfolio had an initial dividend yield of 1.5% which brings the total return for the trending value portfolio to 22.3% with 10 days to go to complete the year. The closest benchmark to the trending value portfolios is the IWM ETF. In the same time frame IWM has a total return of 14.96%. And since everyone always likes to compare to the SP500, the SPY ETF is up about 19% in the same time frame. The performance of the trending value portfolio is right in line with its historical average.

Managing this portfolio throughout the year was relatively easy. If you compare the stock list above to that in the original post you will find a few differences. During the year, Arkansas Best Corp (ABFS) changed its name to Arc Best Corp (ACRB). You wouldn’t have needed to anything in your brokerage account. The change was automatic. You would just have changed your tracking portfolio like I did in FINVIZ. Next, DEG had a 4:1 stock split during the year. Again, nothing for you to do in your brokerage account. You would just need to update your initial share count and buy price or you would get an inaccurate gain calculation. Lastly, and always the most tricky are mergers. One of the stocks, First Financial Holdings (FFCH) experienced a merger during the year. SCBT merged with FFCH at the end of July 2013. FFCH shareholder received 0.4237 shares of SCBT for every share held of FFCH. All of this is handled automatically by your brokerage as usual, you just update your tracking portfolio to the ownership in the new company. Now, according to the quant portfolio rules, see here, if prior to the merger FFCH’s share price had come within 95% of the offer price we would have sold the shares and replaced the stock in the portfolio. Well, I totally missed this at the time and just stuck with SCBT in the portfolio.

Now, take a step back and look at the performance of some of the individual names. There are a couple of real dogs. HGG is down 46% over the year. It started out great, going from 16.88 to just over 20 and then cratered. It’s come back a bit, off 27% from the lows, but still not pretty. MX was another early star that has not done well since its initial run. And TA was a dog pretty much from the beginning as well. Of course, we have some real beauties on the other side of the ledger. GPRE lead the way with a 115% gain, followed by ArcBest with a gain of 113%., then GNW with a 61% gain. These three were pretty much straight up since the beginning. Then there are the stocks which pretty much no investor would touch on their own. There was a Greek shipping stock in the portfolio, two Argentinian stocks, and two hard drive companies. Do you remember the headlines surrounding some of these themes last year? Would you have been able to hold these names? Do you think you could have beat the portfolio by stock picking within this portfolio? Maybe, but history says no. Most investors can’t even make the initial investment in such a portfolio.

In short, a very good performance for the trending value portfolio from June of last year. Now on to next year.