Just last week, I listed and discussed the attributes of a value portfolio that I had devised, but failed to provide a computation of its value or a proper title. The value of the portfolio calculated to $128.41, consisting of fourteen companies, averaging $9.17 each. Eleven of the fourteen components are food related and defensive in nature; therefore, it will be coined the "basic food fund" or BFF for short.
One week change in price: In just the last four trading sessions, the BFF shed an additional 14.2%, losing $18.29, to close at $110.12. If the portfolio maintains its present rate of decline, its value will fall to zero within 29 trading days. I'm not trying to be dramatic here, but often, I get pretty disgusted, and hope to see some sort of "carnage climax" to finally get this nightmare over with. In all seriousness, it is no fun to see your holdings get decimated in less than a two month period. I have been reluctant to dump the stocks within the portfolio, worrying more about the prospect of having horrible timing, by selling at the exact bottom, just as the shares begin to rally. It would be sick to watch your stocks skyrocket, immediately after selling them. Sound familiar?
BFF components: Food Processors: Smithfield Foods (NYSE:SFD), Tyson Foods (NYSE:TSN), Bridgford Foods (NASDAQ:BRID), Con Agra Foods (NYSE:CAG), Imperial Sugar (NASDAQ:IPSU), and Sara Lee (SLE). Grocery chains: Safeway (NYSE:SWY), Super Valu (NYSE:SVU), Great Atlantic and Pacific Tea Co. (GAP) and Winn Dixie Stores (NASDAQ:WINN). Quick Service Restaurants: CKE Restaurants (CKE). Regional Airlines: Jet Blue Airways (NASDAQ:JBLU). Office Furniture: Steelcase (NYSE:SCS). Retail Auto Parts: Pep Boys (NYSE:PBY).
Dividend rate: Nine out of the fourteen stocks pay a cash dividend, yielding an average 5.6% return. The nine stocks in order of payout are: SCS at 11.4%, PBY: 9.2%, SVU: 7.6%, CAG: 5.4%, SLE: 5.3% CKR: 4.6%, TSN: 3.6%, IPSU:2.0% and SWY: 1.8%
Price to sales average: BFF's average price to sales ratio is .21.
Price to Book: BFF's average price to book ratio is .86.
Debt to equity: BFF's average debt to equity ratio is .98, including three equities with no debt.
2009 average forward multiple: The fund is selling at 22 times 2009 earnings estimates. Three of the stocks are not included in the calculation, as they are not expected to generate earnings in 2009.
Bottom line: I might be a glutton for punishment, but surprisingly enough, I am still in a buying mood. It's hard to resist the temptation of potentially acquiring additional shares at rock bottom prices. This further buying will allow me the opportunity to dollar cost average, bringing my break even points to more reasonable levels. I will be selective in my buying, focusing only on high relative strength issues within the fund, as it is a futile effort, trying to pick a bottom. Sooner rather than later, the insanity of the markets will begin to abate, and this portfolio will literally skyrocket as bargain hunters buy at will, and those holding short positions all "run to the exits" at the same time, providing the necessary fuel for a monster rally.
Disclosure: Long: SVU, SWY, GAP, WINN, CKR, IPSU, BRID, SFD, TSN, CAG, SLE, SCS, JBLU, PBY.