Tag Archives: amex

The V20 Portfolio: Week #31

The V20 portfolio is an actively managed portfolio that seeks to achieve an 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 the last update here . Note: Current allocation and planned transactions are only available to premium subscribers . Over the past week, the V20 Portfolio declined by 5% while the SPDR S&P 500 ETF (NYSEARCA: SPY ) dipped by 0.3%. Portfolio Update It would appear that the saga of Dex Media (NASDAQ: DXM ) (OTCMKT: OTCPK:DXMM ) will soon come to an end. It was my hope that the management could come to an amicable agreement with lenders given the company’s massive cash flow. Unfortunately, we cannot control the outcome of the negotiation and according to the most recent press release from company, an agreement has been reached with lenders, the outcome being that equity holders will be completely wiped out. Evidently the thesis has failed to play out, but the risk of total loss was something that we accepted all along. For myself, what’s troubling is that the management voluntarily defaulted for reasons that are still unclear to me. When the company defaulted in 2015 by withholding an interest payment, the company still had plenty of cash and was on track to generate more. What really boggles my mind is that the management was somehow able to gain support from both senior and junior debt holders. To put things into perspective, the management withheld $8.9 million of cash interest back in September from junior debt holders and pushed the company into default. Now that negotiations are finished, junior debt holders will get wiped out save a $5 million payment and warrants on the new equity. Clearly it was absolutely not in their interest to consent, yet the improbable has occurred. In any case, Dex Media will likely be a write-off unless a miracle happens in court. While this investment has been a failure, the impact on the overall results of the V20 Portfolio has been minimal, which is one of the reasons why the investment was attractive in the first place, as the downside was limited when the position was viewed in the context of the whole portfolio. The V20 Portfolio began the year with just 0.5% of assets being allocated to Dex Media. On to better news. Our sole insurance company reported Q1 earnings and as expected, the company continued to demonstrate strong growth and profitability. The market reacted favorable as well, boosting the stock by roughly 10% since earnings as of close on Friday. Turning our attention to Conn’s (NASDAQ: CONN ), the company recently reported April sales data, meaning that now we have all the sales numbers for Q1. Overall, sales grew 8% year over year from $296 million to $319 million. While growth will continue to add value in the long-run, the company must show some improvement in the credit segment in the near term to get rid of the negative sentiment surrounding the stock. Spirit Airlines’ (NASDAQ: SAVE ) performance mirrored the sustained pessimism in the airline industry, shedding 6.5%. In comparison, AMEX Airline Index declined 3.9%. This has occurred despite Spirit Airline’s leading profitability and growth potential. Due to our earlier trim, the position has declined to less than 10% of the overall portfolio, hence more capital will be allocated to Spirit Airlines. Click to enlarge Disclosure: I am/we are long CONN, SAVE, DXMM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. 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 #30

The V20 portfolio is an actively managed portfolio that seeks to achieve an 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 the last update here . Note: Current allocation and planned transactions are only available to premium subscribers . Bonus: Recently I was interviewed by Investor In The Family , a podcast that touches on all facets of the investment world. I talked about some of my investment philosophies and why the V20 Portfolio was able to outperform. I will dedicate another piece to elaborate on certain points, but you can listen to the podcast today right here . Over the past week, the V20 Portfolio declined by 3.7% while the SPDR S&P 500 ETF (NYSEARCA: SPY ) slipped by 1.3%. Portfolio Update Despite beating earnings on Tuesday, Spirit Airlines’ (NASDAQ: SAVE ) stock shed 11.6% over the past week. The decline reflected the general pessimism towards the airline industry, as demonstrated by AMEX Airline Index’s 2.9% drop. I believe that the biggest contributor to the loss was rising oil prices. While fuel expense was still down quarter on quarter, the rallying commodity market will inevitably increase the price of fuel should the current uptrend persist. This is a macro factor that every single airline is exposed to, but I believe that Spirit Airlines will be among the least affected. Its strong operating margin (~20%) means that increasing fuel prices will be less damaging to the firm’s bottom line. To illustrate, a 500 bps increase in fuel expense as a percentage of revenue will wipe out 25% of operating profits for Spirit Airlines, whereas the same increase will erase 50% of operating profits of a company running on a 10% operating margin (e.g. Virgin America). Despite the fact that oil was climbing to new highs, Conn’s (NASDAQ: CONN ) was not able to benefit. Given disappointing retail sales in March (-0.3% actual vs +0.1% expectation), sentiment may worsen next week. While we should not be overly concerned with these month-to-month reports, it is still worthwhile to understand how macro factors can affect investors’ perception in the short term. One company that did directly benefit (at least from a market perspective) from climbing oil prices was our helicopter transportation company. While shares have appreciated, it is very possible that the company’s oil and gas revenue will continue to deteriorate in 2016. In the long-run, rising oil prices will still benefit the company by increasing demand for air transportation. However, this does not preclude the company from suffering short-term setbacks. The market has been efficient enough to recognize that distinction, at least over the past couple of weeks. The title of being the second biggest position, which belonged to Spirit Airlines, was usurped by an insurance company when we carried out our major transformation at the beginning of April. Thus far, shares have traded sideways. No matter how well the company performs in Q1 and Q2, Investor sentiment may not reverse until hurricane season passes given the company’s exposure in Florida. In that sense, next week’s earnings release may not be as important as you think. Performance Since Inception Click to enlarge Disclosure: I am/we are long CONN, SAVE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.