Today’s news: A performance review of the Buy Low Opportunities Portfolio; Guess (GES) joins the Buy Low Opportunities Portfolio as a Strong Buy.
When I began writing Cabot Undervalued Stocks Advisor in October 2015, the folks at Cabot and I were in easy agreement on creating a Growth Portfolio and a Growth & Income Portfolio. We talked about various concepts that could be appealing and lucrative for a third portfolio, and we settled on creating a Buy Low Opportunities Portfolio.
Since that time, the Buy Low Opportunities Portfolio has gone through more of a transition than the other two portfolios, which are more classic and straight forward in concept. I had to spend more time studying price charts and sell strategies, so that I could improve the timing of the buys and sells, and optimally waste less time waiting for stocks to rise. (It’s an art, not an exact science, and there’s constantly room for improvement.)
One new thing that I began doing about a year ago was moving stocks from the Buy Low Opportunities Portfolio into the Growth or Growth & Income Portfolios if they’d retraced their previous highs (my target prices), but I wasn’t ready to sell them. The three stocks* that made that change were Delek U.S. Holdings (DK), PBF Energy (PBF) and Vertex Pharmaceuticals (VRTX).
The average holding period for the original Buy Low Opportunities Portfolio stocks has been 8.9 months vs. 10.6 months for the other two portfolios.
You might be surprised to learn that the 27 stocks that began their tenure in the Buy Low Opportunities Portfolio achieved an average annualized return of about 24.1%*, whereas the 36 stocks that began their tenures in the Growth Portfolio and Growth & Income Portfolio achieved an average annualized return of about 20.6%*.
Here are the 10 most spectacular wins and losses* from the Buy Low Opportunities Portfolio since October 2015, including dividends earned:
And by the way, Delek U.S. Holdings (DK) is listed twice because I was in and out of it twice in less than a year.
* All comments on portfolio holdings and performance data refer to stocks that have been sold from the Cabot Undervalued Stocks Advisor portfolios, and do not include current portfolio holdings.
BUY Guess, Inc. (GES)
This spring, several specialty retail stocks landed on my pre-screened “waiting in the wings” list. I always stop and take notice when several stocks from any one industry land on the list, because that’s a big hint that there’s going to be good capital appreciation potential there.
Today I’m adding Guess, Inc. (GES –yield 4.5%) to the Buy Low Opportunities Portfolio—a global apparel retailer and a small-cap stock with a market capitalization of just $1.6 billion.
The company reported first-quarter results on the afternoon of May 30, and the market trashed the stock yesterday, with GES falling about 19%! Curious, because several analysts raised their price targets yesterday, and several more raised their earnings estimates.
Prior to the quarterly report, analysts expected full-year profits to grow 38% and 22% this year and next year (January year-end). This morning, consensus estimates are higher, reflecting EPS growth of 44% and 30%. Those numbers will adjust a bit more in the coming days. Corresponding price/earnings ratios (P/Es) are 19.5 and 15.0.
The long-term debt–to-capitalization ratio is very low at 4%. The dividend yield is hefty at 4.5%. There’s no recent history of the company raising the payout.
As you can see in the price chart, GES broke past long-term price resistance in March, rose to 26, then gave back all its gains yesterday. Buy now for the rebound to 26, where the stock will still be significantly undervalued. Strong Buy.