Tag Archives: dxm

The V20 Portfolio Week #12: The Value Of Doing Nothing

Summary The V20 Portfolio increased by 5% while the S&P 500 rose 3%. Doing “nothing” has value. Dex Media and Conn’s should release material news in January. Things are looking up as we wrap up the year. The recent rally sent the S&P 500 into positive territory for the year, and the V20 Portfolio benefited as well. Although the market closed early this week, the V20 Portfolio posted a respectable gain of 5% versus S&P’s gain of 3%. There were no major news for any of our holdings and there were no major movers. Quite a boring (but profitable) week I would say. At times like this, I feel that it’s important to review the V20 Portfolio’s philosophy. Doing Nothing In 2015, the V20 Portfolio only entered into seven positions and only completely exited one (Perion Network (NASDAQ: PERI )). To some, this may seem lazy. “What? The Traveling Investor only studied seven stocks and called it a year?” Rest assured that a lot more work was being done behind the scene, much of which I’ve shared with the Seeking Alpha community, such as my Low P/E series or Diamond, Rock, Or Coal series . However, that is not the point. What I’m really trying to say is that there is value in doing “nothing.” When you know that your portfolio contains the best stocks (out of the ones you’ve studied), what’s the benefit of replacing one? There is none. While I’ve looked at hundreds and hundreds of stocks, none of them made the cut to supplant any of our current holdings (including cash). Of course, the reason why it is difficult is the result of V20 Portfolio’s high return objective. It is quite easy to identify a stable company that can return 3% annually, but it’s quite another story to spot a company that can return 20% with reasonable certainty over the long-term. Near-Term Outlook I’ll talk about some near-term catalysts that could impact the V20 Portfolio in the near-term and I’ll save the discussion of 2016 for next week. Dex Media (NASDAQ: DXM ) is nearing its third deadline. After two extensions of the forbearance period, we should receive another update by January 4th, 2016. There is no doubt that any news, both good and bad, will introduce significant volatility to the stock. However, from the portfolio’s perspective, the volatility is restricted to the upside. As of December 24th, 2015, the position only accounted for 0.5% of the total portfolio. Conn’s (NASDAQ: CONN ) will be releasing December 2015 sales data in January. Recently there has been some weakness the retail sector due to poor industry data. U.S. retail sales were below forecasts for the last three reporting periods (September to November). While Conn’s has continued to churn our very good numbers (November comps were up 8%), it is clear that the market is still betting against it given the way the stock has been performing (down almost 50% from its high in July). While I do not think that comps growth can stay elevated at 8% forever (and I don’t think any retailer is capable of such a feat), I do believe that Conn’s will not experience a sales meltdown that many investors have been fearing since it started to tighten its credit policy, and December sales data could be data that can revert investors’ current pessimism. Note: I spend a great deal of time researching every company in the V20 Portfolio (~40% YTD). If you are looking for some ideas that could complement your own portfolio, you can click the “follow” button and be updated with my latest insights. Premium subscribers will get full access to the V20 Portfolio. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

The V20 Portfolio Week #10: Almost There

Summary The search for a hedge continues. Dex Media’s new deadline is Monday, but it could be extended again. With all major events now behind us, it should be smooth sailing ahead. The V20 portfolio is an actively managed portfolio that seeks to achieve annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read last week’s update here ! The bears are back just before we wrap up the year. The V20 Portfolio claimed another victory over the S&P 500 this week, staying virtually flat (-0.4%) versus the index’s decline of 4% this week. With oil hitting historic lows recently, having broken the $40/bbl mark and now testing $35/bbl, there seems to be no end to this commodity slump. Update On Hedging Those of you that follow my weekly updates probably remembered that I was looking for an energy stock to offset the position in Spirit Airlines (NASDAQ: SAVE ). I still have not found any energy stock that would be worthwhile to include in the V20 portfolio, and it looks that I got lucky with this delay. I want to stress the word “luck” because I had every intention to find a good energy company, it’s just that I have been successful thus far. Had I taken a position then, it sure wouldn’t have been pretty. Given the current outlook for oil, has my objective changed? The answer is no. I remain committed to find an offsetting position for Spirit Airlines. Keep in mind that this is not limited to a long on energy stocks, it could also be a short on a less impressive airline, or even futures for a more direct hedge for fuel prices. The reason why I am more inclined to find a long position is simply the result of better risk/reward of a long position on an undervalued energy company. Ideally, the company would earn money during the current downturn, and will hence perform even better when oil rises. So in other words, I don’t want the value of this hedging position to completely offset any gains or losses that I make on Spirit Airlines. Outlook With Conn’s (NASDAQ: CONN ) earnings now behind us, we’ve officially wrapped up Q3 earnings. Going forward, Conn’s will continue to report monthly sales data. Through Q3 earnings, we already know that November sales were up 8% on a same store basis, so growth continues to be strong. Previously there were worries that tightening credit policies would impact sales, this is clear evidence that points to the contrary. There is also the curious case of Dex Media (NASDAQ: DXM ). As always, the stock fluctuated wildly during the week, and I expect this trend to continue going forward. However, because the stock is such a minute portion of the V20 Portfolio, any downside volatility will not significantly impact overall results at all. Even if equity holders lose everything post-restructuring, the V20 Portfolio will only decline by 0.7%. On the contrary, if the restructuring outcome is favorable to equity holders, then its value will skyrocket. As of right now, all stakeholders are still negotiating. Having extended the forbearance period once already, I wouldn’t be surprised if it is extended once again after the deadline passes on Monday. With major events now behind us, the V20 Portfolio is looking to have a strong finish in 2015. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

The V20 Portfolio – Relative Calm

Summary The V20 Portfolio declined by 0.51%, less than S&P 500’s gain of 0.04%. The share repurchase program will continue to support Conn’s. I wouldn’t worry too much about MagicJack. Despite lower activation, the company continued to produce good cash flow. The V20 portfolio is an actively managed portfolio that seeks to achieve annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read last week’s update here ! The S&P 500 was essentially flat this week, rising only 0.04%, beating the V20 Portfolio’s performance of -0.51%. While the V20 Portfolio didn’t beat the index, considering its historical volatility, the “decline” was inconsequential. Portfolio Update Our biggest position, Conn’s (NASDAQ: CONN ), continued to rally, rising 5% from $25.72 to $27.02. This echoes my sentiment in my previous update, that the company’s share repurchasing activity will continue to buoy the share price. As the company inches closer to its Q3 earnings in December, it would appear that investors are quite optimistic (or at least more optimistic than before). Month to date, shares have risen by 42% from its low in October. Last week I also mentioned that we should pay attention to the consumer sentiment index, which could impact investor expectations, especially for the retail sector. Recently we’ve seen several retail stocks fall (e.g. Walmart, Best Buy). The final consumer sentiment index for November was 91.3, which was higher than October’s reading of 90.0. This hasn’t stopped investors from dumping retail stocks however. Fortunately for us, Conn’s buyback program will offset this near-term downward pressure. MagicJack (NASDAQ: CALL ), previously our largest position, continues to account for a substantial portion of the entire portfolio (~20%). It was quite surprising when I heard of news of a short attack on the stock. MagicJack can possibly take the title for the worst short candidate in the world with its high cash balance and high cash flow generation. These are the reasons why I still want the V20 Portfolio to get some exposure to the stock in the first place. I haven’t bothered to write a piece rebuking the short pitch, since it doesn’t reveal anything that we don’t all know already. The facts are right, but everyone is entitled to their own interpretation. Ever since day one, I believed that MagicJack’s value is derived from a core group of customers that will renew year after year. Now that shares have appreciated from a few months ago, more value has to come from growth. But this doesn’t change the fact that the company still has a good business (albeit declining) that is generating cash flow year after year. Furthermore, growth opportunities come at almost no cost to MagicJack. There aren’t expensive projects that would require a truckload of cash or any upfront commitments that would put a drag on the company’s current operation if things don’t go their way. In other words, the company can’t really lose with these expansions Looking Ahead Conn’s will report Q3 earnings next month. From a sales perspective, we know that Q3 numbers will experience a boost from new stores. The company releases monthly sales data, so the revenue increase should be expected. The determining factor will be the company’s bad debt expense, which forecasts future delinquency rates. The company has made significant improvements in its credit policy, so I believe that the number could improve. After all, the company is now lending to more credit-worthy customers. Dex Media (NASDAQ: DXM ) is still undergoing restructuring negotiations. The forbearance period was supposed to expire on Monday, but it was extended since the negotiation is still ongoing. It would seem that the forbearance period is really just a legal nuisance, and could be dragged on while negotiations take place. Nevertheless, I do believe that Dex Media is very close to its end-game, and shareholders will soon know the results of the restructuring. The amended forbearance period expires on December 14th, so keep your eyes peeled for any new developments. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.