One Person’s Trash Is Another Person’s Treasure Portfolio: Staples, Inc. (SPLS), Dell Inc. (DELL), Skullcandy Inc (SKUL)

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Staples, Inc. (NASDAQ:SPLS) In November 2012, 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 investors 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 felt 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 on each portfolio selection:

Staples, Inc. (NASDAQ:SPLS)Exelon Corporation (NYSE:EXC)
QLogic Corporation (NASDAQ:QLGC)
Dendreon Corporation (NASDAQ:DNDN)
Staples, Inc. (NASDAQ:SPLS)
Arkansas Best Corporation (NASDAQ:ABFS)
Arch Coal Inc (NYSE:ACI)
Skullcandy Inc (NASDAQ:SKUL)
France Telecom SA (ADR) (NYSE:FTE)
Xerox Corporation (NYSE:XRX)

Now, let’s get to the portfolio and see how it fared this week:

Company Cost Basis Shares Total Value Return
Exelon (NYSE:EXC) $31.25 31.68 $1,007.74 1.8%
QLogic (NASDAQ:QLGC) $11.46 86.39 $1,002.99 1.3%
Dendreon $5.97 165.82 $961.76 (2.8%)
Dell (NASDAQ:DELL) $13.37 74.05 $1,060.40 7.1%
Staples (NASDAQ:SPLS) $13.48 73.44 $906.25 (8.5%)
Arkansas Best (NASDAQ:ABFS) $10.83 91.41 $1,064.01 7.5%
Arch (NYSE:ACI) Coal $7.03 140.83 $732.32 (26%)
Skullcandy (NASDAQ:SKUL) $6.71 147.54 $988.52 (0.1%)
France Telecom (NYSE:FTE) $11.64 85.05 $846.25 (14.5%)
Xerox (NYSE:XRX) $8.16 121.32 $1,032.43 4.3%
Cash $0.06
Total commission ($100.00)
Original investment $10,000.00
S&P 500 performance 2.6%
Performance relative to S&P 500 (6.6%)

Source: Yahoo! Finance.

This week’s winner
Audio accessories maker Skullcandy Inc (NASDAQ:SKUL) came out of nowhere on Wednesday to become this week’s biggest gainer, rising more than 8%. The likely culprit behind the rise appears to be optimism heading into its fourth-quarter earnings results, which are scheduled to be released after the closing bell on Thursday, March 7. Given Skullcandy Inc (NASDAQ:SKUL)’s founder and CEO, Rick Alden, stepping up to the plate with former CEO Jeremy Andrus resigning and the company valued at less than seven times forward earnings, shareholders like me feel the stock is quite the bargain at this price.

This week’s loser
On the flip side, office supply superstore Staples, Inc. (NASDAQ:SPLS) was clipped, shedding nearly 7% on the week after releasing disappointing fourth-quarter results. For the quarter, Staples reported a 3% increase in sales to $6.57 billion as profits slipped 72% to just $0.12. Same-store sales fell 5% and, while adjusted EPS of $0.46 topped estimates by $0.01, revenue fell short of the $6.71 billion estimate. The more damaging news was Staples’ 2013 EPS forecast of $1.30-$1.35 versus the consensus of $1.44. If there was a bright spot, it’s that Staples, Inc. (NASDAQ:SPLS) is boosting its quarterly dividend by 9% to $0.12 for a new annual yield of 3.9%. At just 9.3 times this year’s earnings, and with plenty of merger-related benefits from store closures in the Office Depot (NYSE:ODP)/OfficeMax (NYSE:OMX) merger, Staples still appears to be an exceptional value.

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