The Dirt Cheap Value Portfolio: A Quarterly Report Card

by: Mark Krieger

Since the “DCVP” was established on 8/12/2011 at a price of $87.05, its owners have been well rewarded, at almost twice the rate of the overall averages. The portfolio now trades 11% loftier at $95.61 versus the DJIA's increase of just 5.3% (11269 to 11869). In terms of my own individual performance, it has definitely been a mixed bag because although eight out of the ten components have all sprouted gains, my two largest holdings (WINN, IPSU) happened to be on the losing side.

The highest percentage gain was garnered by YHOO at 20%, while the dubious distinction for the largest loss belonged to IPSU at 13%. As an added bonus, five companies paid out cash dividends, totaling 34 cents during the quarter.

Where do we go from here? My previous prognostication that the DCVP would reach $100 by the end of the year is being revised upward to $110. In 2012, expect the portfolio to appreciate an additional 27% to $140, based on a improving economy and the possibility of two to three components being swallowed up in M & A activity.

Here is the latest on the components:

Dean Foods (NYSE:DF): The milk processor is slated to release it third quarter results the second week of November. Analysts expect the company’s earnings to fall nearly 30% from 21 cents to 15 cents. Sales are forecasted to rise 9% from $3.05 billion to $3.32 billion. I think the expectations are too low and that DF will surpass estimates. Look for the company to report earnings of 19 cents while upping guidance for the remainder of the year. Don’t be surprised to see the shares travel north of $11 on the good news.

Luby's (NYSE:LUB): The casual diner will be issuing its fourth quarter earnings report on November 9th after the close of trading. Analysts expect it to earn 2 cents a share versus a 1 cent loss on a 25.7% sales gain, from $81.64 million to $102.67 million. Look for a beat when it likely reports earnings of 5 cents on sales of $104 million. A rally back to the low $5s will likely result.

Winn-Dixie (NASDAQ:WINN): Reports first quarter earnings this Monday (see earnings preview dated 10/24.)

Yahoo (YHOO): This one has constantly been spotlighted by Merger & Acquisition activity, and won’t last as we know it. Look for an acquirer to gobble it up by year’s end in the $20- $21 price range.

The other components: Safeway (NYSE:SWY), SuperValu (NYSE:SVU), Steelcase (NYSE:SCS), Pep Boys (NYSE:PBY-OLD), JetBlue Airways (NASDAQ:JBLU) and Imperial Sugar (NASDAQ:IPSU) do not merit any worthwhile commentary at this juncture.

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