One Person's Trash Is Another Person's Treasure Portfolio

Last November, I announced my intention to create a portfolio of 10 companies that investors had effectively thrown away and given up on, in the hope of showing that deep-value investing, and contrarian thinking, can actually be a very successful investing method. I dubbed this the "One Person's Trash Is Another Person's Treasure" portfolio and, over a 10-week span, I highlighted companies that I thought fit this bill and would expect to drastically outperform the benchmark S&P 500 over the coming 12 months. If you're interested in the reasoning behind why I chose these companies, then I encourage you to review my synopsis of each portfolio selection:

Now, let's get to the portfolio and see how it fared this week:

Company

Cost Basis

Shares

Total Value

Return

Exelon

$31.25

31.68

$1,114.82

12.6%

QLogic

$11.46

86.39

$856.99

(13.4%)

Dendreon

$5.97

165.82

$673.23

(32%)

Dell

$13.37

74.05

$995.97

0.6%

Staples

$13.48

73.44

$1,061.21

7.2%

Arkansas Best

$10.83

91.41

$1,571.34

58.7%

Arch Coal

$7.03

140.83

$698.52

(29.4%)

Skullcandy

$6.71

147.54

$820.32

(17.1%)

France Telecom

$11.64

85.05

$912.59

(7.8%)

Xerox

$8.16

121.32

$1,091.88

10.3%

Cash

   

$0.06

 

Dividends receivable

   

$42.56

 

Total commission

   

($100.00)

 

Original investment

   

$10,000.00

 

   

S&P 500 performance

     

10.4%

Performance relative to S&P 500

     

(12%)

Source: Yahoo! Finance.


This week's winner
Leading the pack for a second week in a row was trucking company Arkansas Best , which added an additional 12% on top of last week's 58% gain. The impetus for the move was peer YRC Worldwide confirming it had submitted an initial proposal to acquire Arkansas Best, which it's had an interest in acquiring for quite some time. Although details aren't available with regard to what YRC would be willing to offer, I'd have to assume by Arkansas Best declining to initiate talks that shareholders can expect its value to rise even further with a tentative deal now in place with the Teamsters union.

This week's loser
On the other hand, it was "bury your head in the sand" time for Dendreon shareholders, who saw their stock lose 14.3% of its value this week after another disappointing quarter. Although Dendreon's loss widened to $0.48 per share, it met the Street's estimates. Sales of its advanced prostate cancer treatment Provenge, however, fell 18% to just $67.6 million, well short of the $80 million Wall Street expected. Dendreon blamed increased competition and a lack of favorable reimbursements from insurers as the reason sales have stagnated. It's quite apparent that Dendreon really needs that European approval if it's going to have any chance at being profitable.

Also in the news...
In this week's episode of "Dell's of Our Lives" we learned that activist investor Carl Icahn and Southeastern Asset Management have teamed up to offer the most creative bid yet. Under their proposal, shareholders would receive $12 per share in cash or additional shares and would hold a stub (which as of yet hasn't precisely been valued) that would remain the public portion of the company. Both Icahn and Southeastern feel this is a smart way to play a prospective turnaround, assuming Dell's board of directors changes, that is! Perhaps by next week we'll have better details into Icahn and Southeastern's offer.

Office supply chain Staples made waves this week, hitting its highest level in three months, on news that it plans to become the first major retailer to offer 3-D printing systems for sale. For the low, low price of $1,299.99, you can now buy a Cube 3-D printer made by 3D Systems from Staples' website. The trend toward 3-D printing certainly has investors excited, as there are plenty of practical applications around the household. More than that, however, these 3-D printers could be a prudent move for small businesses looking to mock up designs before committing to production.

Finally, after the bell yesterday, coal miner Arch Coal and Meritage Midstream announced a joint venture to be known as the Black Thunder Terminal. The goal is to create a rail terminal capable of handling and storing crude oil, as well as handling rail loading and marketing services to the Powder River Basin and downstream refiners. For its portion, Arch will contribute reclaimed land and existing rail infrastructure assets with Meritage contributing the capital to build and operate the crude oil terminal. Consider this just another in a series of ways Arch is branching out from traditional mining to stabilize its cash flow.

We can do better
For a second week in a row this portfolio outperformed the S&P 500 in spite of ongoing new highs for the index. Although I'm happy to see this combination of companies getting back toward breakeven, I still understand that there's a long way to go. Over the long run, though, I fully believe calmer heads will prevail and investors will send these deeply discounted companies markedly higher.

Check back next week for the latest update on this portfolio and its 10 components.

Is this biotech company on life support?
Shares of Dendreon had surged in recent months, with the stock gaining new life from the depths of late 2012. Has the company really solved its underlying problems, or are investors setting themselves up for more disappointment? Our premium research report on Dendreon answers these questions, and many more, while also outlining just how Dendreon intends to regain its former glory. Claim your copy by clicking here now.

The article One Person's Trash Is Another Person's Treasure Portfolio originally appeared on Fool.com.

Fool contributor Sean Williams owns shares of QLogic, Dell, Skullcandy, and France Telecom, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of 3D Systems, Dendreon, France Telecom, Skullcandy, and Staples, and has the following options: Short Jan 2014 $36 Calls on 3D Systems and Short Jan 2014 $20 Puts on 3D Systems. The Motley Fool recommends 3D Systems, Exelon, and France Telecom. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Socially Responsible Investing

Invest in companies with a conscience.

View Course »

Investing in Real Estate

Learn the basics of investing in real estate.

View Course »

Add a Comment

*0 / 3000 Character Maximum