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|
|Arch Coal (NYSE:ACI)||$7.03||140.83||$581.63||(41.3%)|
|S&P 500 performance||8.5%|
|Performance relative to S&P 500||(9.1%)|
Shares of printing solutions and IT-management specialist Xerox Corporation (NYSE:XRX) took the top honors this week, advancing 6.8%, after receiving positive comments from research firm Brean Capital. Brean commented that it believes Xerox Corporation (NYSE:XRX) remains attractive based on its cash flow, and reiterated its “buy” rating and $10.50 price target on the company. I see the coming explosion in Medicaid patients – especially in California, where Xerox Corporation (NYSE:XRX) processes all Medicaid claims – due to the implementation of Obamacare as the biggest boost to Xerox Corporation (NYSE:XRX)’s bottom line moving forward.
This week’s loser
Coal miner Arch Coal Inc (NYSE:ACI) took the dubious honor of portfolio goat for a second-straight week, matching Xerox Corporation (NYSE:XRX)’s 6.8% gain with a 6.8% weekly loss of its own. The story here continues to be much of the same: coal prices and demand remain weak as renewable energies are gaining prominence, with most being now just as cost-effective as coal (if not cheaper in some cases). Arch Coal Inc (NYSE:ACI)’s case was hurt even further when metallurgical coal producer Alpha Natural Resources, Inc. (NYSE:ANR) predicted that further mine closures would be needed in the U.S. to stem oversupply and poor pricing.