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|
|S&P 500 performance||6.7%|
|Performance relative to S&P 500||(10.1%)|
This week’s winner
Thanks to concerns about a potential credit crunch in China, and the somewhat imminent paring back of QE3 by the Federal Reserve, it wasn’t easy to find a gainer last week. Taking the top honors was electric utility Exelon Corporation (NYSE:EXC) with a paltry 2.2% gain on the week. Despite no company-specific news, the reasoning behind the move higher is pretty easy to understand. Exelon Corporation (NYSE:EXC) is a necessity stock in that supplies energy, which will remain in fairly steady demand regardless of whether or not we dip back into another recession. With somewhat predictable cash flow, it’s a wonderful safety net for investors to turn to in times of uncertainty.
This week’s loser
Conversely, with China’s Shanghai Composite swooning as much as 15% in a span of five days, commodity stocks absolutely took it on the chin. For the third-straight week, Arch Coal Inc (NYSE:ACI) was the worst performer, shedding another 12.6%, and is now down nearly 50% from late January. The thesis here is that, if China’s growth slows because loans aren’t available, then demand for coal and other materials will fall. Arch Coal Inc (NYSE:ACI)’s growth plan entailed forging export deals to China and Southeast Asia, so China’s slowing growth is certainly a concern.