Value is back!

Earlier this week CNBC posted a news article titled: There’s is a sudden transformation taking place in the stock market and it’s unnerving some investors.

The news article was highlighting the market performance for Monday, September 9th, and Tuesday, September 10th, when S&P 500 closed little changed for the session, where as value stocks– those defined by low valuation metrics– out performed their growth counterpart significantly.

It was a welcome news to  my ears. I am a value contrarian investor and its not been an easy ride for folks like myself over the last 5 years. To finally see the tide turning is heart warming.

The events of the past week are nicely reflected in my largest actively managed brokerage account.  The chart below shows the performance of my portfolio for this year. For better part of the year, my cumulative time weighted returns lagged those of broader S&P 500 index. However, the recent reversal has finally allowed my portfolio performance edge past the index.

Merill_Edge_Brokerare_YearToDate_Sept2019

I have begun taking advantage of this reversal to begin an exit from some of my long-term value holds. If the markets continue like this, I may very well exit several of my positions for which I am unable to initiate additional positions. For example, I recently exited out of my position in Comcast Corporation, CMCSA.

My purchase of CMCSA happened in the earlier half of 2018. At the time, the company was under severe pressure primarily due to the concerns surrounding cord cutting. By the end of 2018, the stock price had dropped to $34.16, a drop of 12 % for the year.  Since then the stock has recovered nicely and is trading around $46.88. As such, the PE ratio has grown from around 6.5 at the time of my purchase to 16. The returns on equity (ROE) has dropped from 33 % to around 16 % and with the recent acquisition of Sky, the long-term debt load for CMCSA has increased from approx. $61 B approx. $105 B.

These are a snapshot of some metrics that I consider while initiating a new position or adding to my existing position in my portfolio. Since, the current CMCSA fundamentals do not meet my investing criteria, coupled with the fact that the stock has risen to greater than 20 % over my cost of purchase,  I have decided to take some profits out in terms of long-term capital gains.

Below is the summary of my current holdings as of this writing.

Video/Book/Article/Audio for the Week

For this week, I want to highlight