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Summary The V20 Portfolio underperformed the index. Weight has not shifted from MagicJack to Conn’s, although it could happen after Q3 earnings. Spirit Airlines was added to the portfolio. Oil companies could be on the radar in the future. 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 ! Unfortunately it was another week of underperformance for the V20 Portfolio. Over the past week, the V20 Portfolio declined by 2.1% versus S&P 500’s minute gain of 0.17%. The biggest contributor to the decline was none other than Conn’s (NASDAQ: CONN ), the repeat offender. Its shares dropped from $23 on Monday to $19 at Friday’s close. Considering that the stock represented 28% of the V20 portfolio, a 17% decline definitely put a dent in our returns. Still No Shift In Portfolio Two weeks ago I mentioned that our position in MagicJack (NASDAQ: CALL ) was getting a bit bloated. You may be wondering, why did I not shift some of the weight to Conn’s. There are two reasons. The first one is that I don’t think the stock declined enough to warrant additional purchases. From the last purchase price of $23, the stock “only” declined by 21%. I say “only” because Conn’s has been so volatile that these movements don’t surprise me at all. As the company won’t have much news (other than sales releases) between now and Q3 earnings (December), the stock may continue to fluctuate wildly, meaning that there could be more headwinds for the stock over the short term. Secondly, MagicJack remains undervalued. Although it is not as attractive as before due to the substantial increase in share price (~40%) over the last little while, its Q3 earnings may serve as a strong catalyst for the market to push its shares to fair value. Considering that Q3 results are only a bit over a week away (November 9 th ), holding MagicJack still makes sense. That being said, if MagicJack appreciates substantially (20%+) without any change in fundamentals, then the weight should shift towards Conn’s as planned in the near future. New Position The new position is Spirit Airlines (NASDAQ: SAVE ) and you can read my analysis here . This investment is a rather unconventional one as value investors typically don’t like airlines. As Richard Branson puts it: “If you want to be a millionaire, start with a billion dollars and launch a new airline.” However, I think that the stock’s post-Q3 decline was completely unwarranted and the company still has a lot of growth potential as evident by its fleet expansion. One of the concerns was that the company’s revenue growth declined (driven by pricing pressure). It seems that investors underestimated competitive forces in the market and didn’t realize that if revenue growth stayed constant, the company would’ve earned 70% more than 2014, a quite unrealistic number in a competitive market. For that reason, I believe that what had transpired was very normal, hence the post-earnings crash provided an excellent opportunity for the V20 Portfolio to get some exposure to the airline industry. The Weeks Ahead Perion Network (NASDAQ: PERI ) will be releasing Q3 results on November 3rd. While not as significant as MagicJack, the stock still makes up a healthy chunk of the portfolio (> 10%), so I do expect some volatility on Tuesday. As mentioned earlier, MagicJack, which accounts for over 30% of the portfolio, is set to release Q3 results in less than two weeks. No matter the outcome, it will have a large impact on the overall portfolio. Unfortunately, high volatility is one of V20’s characteristics, an idea which I’ve emphasized since the beginning of this series . Because the V20 Portfolio now includes a fairly cyclical position (Spirit Airlines) that is prone to external shocks (i.e. oil), I will be looking at commodity investments that can offset movements in oil. I’ve debated about whether I should include oil stocks in the V20 Portfolio, as I’ve never considered them to be core holdings. However, now that Spirit Airlines exist in the portfolio, I believe some commodity exposure can be justified, as it can be treated as a hedge against the airline industry. Scalper1 News
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