Seeking Alpha

The Acquirer's Portfolio - A Year In Review

by: Ryan Boselo

The Acquirer's Multiple Large Cap Portfolio (AMLC) returns 11.18% during the 12 months ending 11/05/18.

AMLC outperformed the benchmark (VIVAX) and the S&P 500 (SPY) by 4.24% and 3.64%, respectively.

The portfolio has a Beta of 1.13 and a forward dividend yield of 1.73%.

Over the previous 12 months the portfolio has earned $2,301.36 in dividends which have been held in cash.


Over the past year I have been writing about and tracking a portfolio I created using Tobias Carlisle’s acquirer’s multiple investing strategies. This post is the third installment of the series in which I aim to keep updated every 6 months. If you would like to review my portfolio construction decisions or gain a better understanding of the methodology and purpose for tracking this approach, please read my previous articles listed below or visit Tobias’ website here.

The Acquirer’s Portfolio – Large Cap

The Acquirer’s Portfolio – Large Cap Q2 Update

As a brief summary of my previous articles, the Acquirer’s Multiple (AM) utilizes a deep value approach to investing that can be expressed as similar to Joel Greenblatt’s magic formula – but inverted. The screen sorts companies that exhibit signs of Mr. market undervaluing their operating earnings in relation to their enterprise value. The calculation is best described as follows:

Enterprise Value / Operating Earnings.The Acquirer’s Multiple® differs from The Magic Formula® Earnings Yield because The Acquirer’s Multiple® uses operating earnings in place of EBIT. Operating earnings is constructed from the top of the income statement down, where EBIT is constructed from the bottom up.

At a basic level, the AM strategy is taking advantage of mean reversion, or specifically, the rate at which a company shifts from hated by Wall Street to loved by Wall Street. In practice this is no easy feat because being a contrarian is hard – zigging when others are zagging is difficult - especially when you are underperforming

To reiterate what I have stated in previous articles and because I think it is important: This is a “set it and forget it for one-year” investing approach that will only be rebalanced once per year around the date of the initial purchase. The performance of the individual equities in relation with their ranking in the screener will dictate when to buy, sell, or hold a position.

Portfolio Performance

The portfolio was funded with a $100k bankroll on 11/6/17, and the funds were dispersed evenly across the top 20 large-cap names listed on the stock screener available at Of the twenty initial positions, only four remain in the AMLC screen as of 11/6/2018. Moving forward, the allocation and number of equities in the portfolio may vary, however, the portfolio will likely never be more concentrated than 10 positions.

The objective of this portfolio is to outperform the Vanguard Value Index Fund (VIVAX) by a low single-digit percentage. For comparison's sake, VIVAX has returned 9.34% per year over the past 15 years. Based on AMLC’s x outperformance during its first 12 months and in combination with Tobias’ historical track record of the (AM) strategies listed on his website I am cautiously optimistic that the portfolio’s outperformance will likely continue for the foreseeable future.

As of 11/05/18, the initial $100k was worth $111,184 (after trading costs), up 11.18%. If I had invested in VIVAX over that period, I would be up only 6.95%, and the portfolio would be worth approximately $4k less, or $106,945. Alternatively, if I chose to invest in the S&P 500 over that period, I would have fared slightly better than VIVAX, up 7.54%, or $107,540.

Last 12 Months

Value of $100K invested on 11/6/17

Acquirer's Multiple (OTCPK:AMLC)



Vanguard Value Index Fund (VIVAX)



S&P 500 (SPY)



As you can see from the prior 12 months' returns, the AMLC portfolio is doing quite well - even outperforming my initial expectations! While this may be great news, this strategy only makes sense if you plan to follow it for at least 10 years (the longer the better) and focusing on short-term performance does more harm than good. This is the main reason why I plan on only providing updates 2-4 times per year.

The AMLC portfolio has paid out dividends totaling $2,301.36 over the previous 12 months and has a forward dividend yield of 1.73%. I have decided to hold the dividends in cash until it is time to rebalance and reallocate the funds at the end of the year (which is now). The portfolio rebalancing will be explained and analyzed in detail in the next article.

To gain a better understanding of which positions are moving the portfolio I have provided a breakdown of the five best performing and five worst performing investments over the past 12 months. My hope is that be digging a little more into these companies and examining their past performance in relation to their ongoing business development I can gain a better understanding of the market’s perspective on the businesses’ future cash flows and their relative valuation measurement.




12-month return


12-month return

LG Display Co. Ltd. ADR


Express Scripts


Lear Corp.


United Continental


Fiat Chrysler


Vale S.A. ADR


Magna International


Viacom Inc. CI B


AU Optronics Corp. ADR


Humana Inc.


Let’s take a look at the portfolio gainers:

Express Scripts Holding Co. (ESRX)

Sector: Healthcare > Industry: Healthcare Plans

Express Scripts Holding Company has been the best performing stock in the portfolio over the past 12 months. In fact, (ESRX) has returned 60.76%, turning the initial $4,970 investment into nearly $8,000. After gaining 25% in Q1, ESRX pulled back some and traded sideways during Q2 and Q3. However, from August to November ESRX returned 26.84% making it the best performing equity in the portfolio for Q4! Analysts are estimating earnings of $2.66 per share (41% YoY Growth) for the period ending December 2018.

United Continental Holdings Inc. (UAL)

Sector: Industrials > Industry: Airlines

United Continental Holdings Inc. (UAL) is the second-best performing stock in the portfolio over the past 12 months with a return of 49.32%. Since the beginning of 2017 UAL has made incremental progress towards improving their financial position and operational effectiveness. In the Q3 earnings call and presentation management reiterated their full-year 2018 earnings guidance of $8.00 - $8.75 and maintained their 2020 earnings guidance of $11-$13 per share.

Vale S.A. ADR (VALE)

Sector: Basic Materials > Industry: Iron Ore Mining

Vale S.A. ADR (VALE) has performed exceptionally well over the previous 12 months - returning 46.25%. While much of the return came from Q1 (24%), (VALE) has sustained and gained on its market capitalization by nearly 10% in both Q2 and Q4. Unfortunately, iron ore has reduced in price by roughly 4% YoY but management has stayed confident stating that they have high-quality iron ore that demands a premium. Furthermore, management’s primary focus in relation to capital allocation is to return capital to shareholders through the distribution of dividends and stock buybacks which, according to their Q3 earnings call, will be executed on a case by case basis. Management has also reiterated that the big jump in performance will come sometime in 2020 when base metals will drive 30% of their revenues.

Viacom Inc. CI B (VIAB)

Sector: Cyclical Consumer Goods & Services > Industry: Entertainment Production

Viacom Inc. CI B (VIAB) has also performed admirably over the previous 12 months, returning 34.04%. Like Express Scripts returns, Viacom’s market capitalization experienced the biggest change in Q1 (29.24%) and Q4 (11.41%) and was relatively unchanged in both Q2 (-3.07%) and Q3 (-3.96%). Much of Viacom’s gains can be attributed to their (so far) successful turnaround strategy which is focused on developing the domestic market, revitalizing paramount pictures, and increasing their digital footprint.

Humana Inc. (HUM)

Sector: Healthcare > Industry: Managed Healthcare

Finally, from the gainer’s in the portfolio, is Human Inc. (HUM) which has returned 28.34% over the previous 12 months. In fact, Humana has had a positive return in all four quarters; Q1 5.75%, Q2 6.79%, Q3 12.42% and Q4 1.09%. In the Q3 earnings call, management was keen on attributing their recent performance to the quality and ability of their associates, which have world-class engagement levels. This engagement in combination with their omnichannel approach to consumer convenience and health improvement is likely to drive an improved customer experience in the years ahead.

And now, let’s look at the losers:

LG Display Co. Ltd ADR (LPL)

Sector: Technology > Industry: Display

LG Display has been (by far) the worst performer in the portfolio. Over the past 12-months (LPL) has returned -41.94% turning the initial $5,000 investment into about $2,900. After losing over 25% of market value in the first 6 months, LPL has continued its losses and has racked up an additional -22% return since May 6, 2018. However dismal the return, management is keyed in on improving their OLED TV segment, which saw a turnaround to profit in Q3 of this year. Furthermore, management is engaged in a long-term LCD project, which is focused on shifting from low-cost LCD to high value-add products.

Lear Corp. (LEA), Fiat Chrysler (FCAU) & Magna International (MGA)

Sector: Cyclical Consumer Goods & Services > Industry: Auto, Truck & Motorcycle Parts

All three of these companies’ stocks have performed quite bad over the past 12 months returning -21.80%, -9.87% and -9.77% respectively. It is no secret that the tariffs have had a large impact on purchasing and inventory management for these companies and this sector. Whether or not management is able to impactfully move the needle in operational effectiveness will likely dictate how well these companies perform in the coming months. Out of the three, I think FCAU is the most likely to prevail and will likely see some reversion in its market capitalization.

AU Optronics Corp. ADR (AUO)

Sector: Technology > Industry: Display

While horrible when compared with others in this section, but certainly not positive, AU Optronics has returned -8.15% over the previous 12 months. Similar to (LPL), AU Optronics has had a difficult time managing the extremely competitive low-end panel market and has low single-digit operating margins. It is unlikely that shifts in these categories will occur any time soon, however, management stated in the Q3 press release that aggressive restocking and shipment momentum remained robust heading in the fourth quarter.


Over the past year, I have used the Acquirer's Multiple large-cap screen as a tool to create a portfolio of between 15 and 25 companies that exhibit signs of value. While my results outperformed the index and the benchmark they were largely sourced from luck and market timing and should not be viewed as characteristic of under- or over-performance (nor skill as a stock picker or money manager). Furthermore, I think the best way to use the screen is as a filter for finding valuation trends in the market. By combining this screen with other valuation measurements and techniques a retail investor stands a better chance of picking stocks and beating the market.

In my next post, I will be taking a deep dive into the reallocation and rebalancing decisions that make this strategy so appealing to retail investors. The focus will be on analyzing the buy, sell and hold criteria necessary for success with this strategy. Lastly, I will disclose what the portfolio will look like moving forward, stay tuned!

For more information on the portfolio and to stay up to date with my posts, consider subscribing to my feed.

If you have any questions on the Acquirer’s Multiple screens, please refer to Tobias’ FAQ section. If you are interested in investing in this strategy I recommend looking up to learn more.



Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.