The Dirt Cheap Value Portfolio: Getting Cheaper, Way Cheaper

by: Mark Krieger

I hate to say it, but this portfolio is out of control. Wednesday's late implosion in the markets (thanks to an underwhelming FOMC statement) was especially hard on the “DCVP” as it went into freefall mode. All ten components were absolutely hammered as the stock market gods decided to trounce this group in merciless fashion.

At the end of the day, the DCVP lost 4%, nearly twice the DJIA loss of 2.5%, closing at $83.16. It now stands 8.5% lower than last week’s close of $90.84! To say the portfolio is in total disarray and shambles is an understatement, at this point, extreme fear is no doubt causing massive destruction and carnage. There is definitely blood in the streets that the smart money is capitalizing on as it buys at these insane levels.

Although feeling rather "twisted", I am not yet ready to check myself into the "rubber room", but suppose having something in common with the Federal Reserve Open Market Committee can't be all bad. You see, they are intent on twisting short term treasuries for long term ones, and I am just being plain twisted.

A quick glance at the components:

Luby's (NYSE:LUB): The stock made a new 52 week low and is now a mere 50 cents from a five year low. Management seems to be asleep at the wheel, as its stock meanders into a crevasse. CEO Pappas should contemplate taking this bad boy private.

Yahoo (NASDAQ:YHOO): Despite news that another bidder (Hellman & Friedman) has entered the arena to take YHOO private, the shares still managed to sink. There are now three Private Equity firms officially in the hunt for YHOO, including: Silver Lake Partners, Providence Equity Partners and Hellman & Friedman. Why anybody would sell now is beyond reasoning, especially with the company so close to receiving a bid.

Winn-Dixie (NASDAQ:WINN): With its stock only 45 cents from an all time low of $5.95, can’t somebody just end the misery and acquire this company! Management has been doing the same thing over and over again (continued remodels versus returning cash to shareholders) and expecting different results and we all know what that is called. Let’s try something different for a change.

SuperValu (NYSE:SVU): The Southern California strike was averted, although it is funny how the shares dropped on the threat, but never rebounded when the strike chances were eliminated. The shares now offer a fat 5% dividend yield and are only 47 cents from attaining a new historical low. The supermarket chain should come to the realization that it is in drastic times, and consequently start taking some drastic measures.

Safeway (NYSE:SWY): The shares made a new 52 week low, as sellers just kept piling on. The good news is the company is able to get “more bang for its buck” when repurchasing shares in the open market at such depressed prices - a keeper.

Imperial Sugar (NASDAQ:IPSU): A Motley Fool article referencing the sugar producer, as a “monster stock” and potential “ten bagger” didn’t help its cause as its shares are now a mere 9% above last month’s $6.50 low. What will get this stock moving? I wish I knew, other than the obvious, but that’s not going to happen. After all, I don’t want to start sounding like a broken record. This one is a special situation hold.

Steelcase (NYSE:SCS): The company reported second quarter earnings that were two cents shy of estimates and lowered its guidance on its third Q prospects from 22 cents to a range of 17 to 21 cents. It partially blamed the earnings shortfall on increased commodity costs. Lighten your position on this - it is not going anywhere soon.

Dean Foods (NYSE:DF): The milk producer’s share price now sits only 14% above its all time low of $7.13. Management needs to come up with a better plan to take this company out of the abyss.

Pep Boys (NYSE:PBY): A bullish Motley Fool article failed to pep up the auto parts merchant. Although its shares are close to its 52 week low of $8.18,this one is a keeper, as Management and the Board are aligned with the best interests of the shareholder.

Jetblue (NASDAQ:JBLU): There is some light at the end of the tunnel, brightened by falling oil prices, new routes and strict cost controls. The stock's positive risk reward ratio deems it a compelling holding at this juncture.

Disclosure: I am long SVU, SCS, PBY, YHOO, WINN, SWY, SVU, LUB, DF, IPSU, JBLU.