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Heller: Triple Net Active Portfolio Wins by a Nose

Strategy of selecting companies at low net current asset values tops benchmarks.

TheStreet’s Jonathan Heller has an update on his 2020 Passive Portfolio Versus Triple Net Active, with one side inching ahead of the other at the tape.

“Active wins again, but just by a hair,” Heller said in Real Money this week.

Heller’s original objective with the contest was to identify a group of companies trading at a relatively low level of net current asset value (between 2x and 3x NCAV), to see if they could outperform selected benchmarks as a group -- the "Passive Portfolio." The idea was also to see whether a hand-selected subset -- the "Active Portfolio" group -- could outperform the "Passive" one.

In the end, the "Active" Portfolio (up 37.5%) ended up just ahead of the "Passive" Portfolio (up 36.4%). “That's hardly a victory, and not nearly as compelling as last year's results,” Heller noted recently on Real Money. “Furthermore, while absolute performance was okay, relative performance was disappointing.”

For comparison:

Russell 2000 Index: up 39.6%

Russell 2000 Value Index: up 55.3%

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Russell Microcap Index: up 50.0%

Russell Microcap Value Index: up 66.1%

Heller noted that all eight "Active" names were in positive territory, there just were not many big winners this year.

“The best performer was Haynes International  (HAYN) - Get Haynes International, Inc. Report (up 134%), followed by Weyco Group  (WEYS) - Get Weyco Group, Inc. Report (up 51%), Sanmina  (SANM) - Get Sanmina-SCI Corporation Report (up 49%), Daktronics  (DAKT) - Get Daktronics, Inc. Report (up 38%), REX American Resources  (REX) - Get REX American Resources Corporation Report (up 17%) and Argan  (AGX) - Get Argan, Inc. Report (up 10%),” he said. “The final two, Culp  (CULP) - Get Culp, Inc. Report, and Madison Square Garden Entertainment  (MSGE) , just limped their way into positive territory, and were up less than 1%, after both being up solidly earlier in the year.”

Of the 27 "Passive" names, all but six were in positive territory.

“Haynes International, one of the Active names, was the top overall performer, followed by Encore Wire WIRE (up 129%), RPC RES  (up 106%), NACCO Industries NC (up 83%), and ScanSource SCSC (up 70%) to round out the top five,” Heller added. “The worst performers included GSI Technology GSIT (down 27%), American Pacific Education APEI (down 18%), and Lakeland Industries LAKE (down 15%).”

Now it's time to get rolling for the 2021 version. Heller revealed the passive portfolio earlier this month and will disclose the active names in coming days. 

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