Kruse Asset Management’s signature Quantitative Value Portfolio (QVP) is the firm’s foremost quantitative value strategy. Initially created in 2005, it is designed for long-term outperformance of the market through comprehensive analysis of wide-ranging historical data.
2014 was another successful year for QVP and clients, offering an annual return of 15.39% and outpacing the S&P 500, which had growth of just 11.39%. The year ended on a strong note, seeing QVP excel while the S&P stuttered, producing negative growth in the final month of December.
Whilst those figures aren’t as heady as some previous years (in contrast to the 7.45% outperformance of the S&P 500 in 2012, for example), QVP since inception in 2005 had seen a cumulative return of 135.84%. The difference between QVP and the S&P 500 (70.06% return) over the same time is now 65.78% heading in to 2015.
Over sixty different companies contributed to the QVP portfolio at some point in the past year but what were the top performing securities through 2014?
5. Applied Materials (AMAT)
Applied Materials had a fantastic 2014. The manufacturer of semiconductors, flat panel displays and solar panel technologies saw an annual return of over 40% this past year, fuelled in particular by revenue growth in their semiconductor business by 25%.
With the demand from customers and businesses for technologically superior and more affordable smartphones, flat screen TVs and solar panels not looking likely to abate any time soon, Applied Materials should be set to further kick on in 2015.
4. Hewlett-Packard (HPQ)
The technology giant gained most headlines this past year with their announcement in October of an impending split of the company's enterprise hardware and services business from its PC and printer operations. Both companies will be Fortune 50-sized, each with close to $60 billion in revenue.
Hewlett-Packard CEO, Meg Whitman
CEO Meg Whitman hopes the move will make both companies more able to adapt with the ever-evolving technology market heading into the future. It will be interesting come the end of 2015 to see whether that is the case or not.
3. Science Applications International Corporation (SAIC)
Having split off from Leidos in 2013, defense contractor Science Applications was a whisker away from seeing 50% growth in 2014. The computer security company received 90% of its 2014 revenue from the U.S. government, including 70% from the Department of Defense.
With 2014 finally bringing the issue of cyber-security to mainstream attention through cyber-attacks on big-name companies, most notably Sony Pictures, the company should hope to increase sales growth in 2015.
2. Kroger (KR)
The Ohio-headquartered supermarket giant grew over 60%, posting its biggest quarterly earnings gain in more than a year in the third quarter of 2014. While there was a considerable increase in momentum for organic and non-GMO products in the past year, it certainly didn’t hinder the growth of the nation’s largest supermarket chain.
Numerous analysts would say that the company is currently overvalued however, with the price rising from 39.53 to 64.21 this past year, and it will be interesting to how successful further solid quarterly results may be in staving off a drop in value.
How long before the share price begins to stumble?
1. Avago Technologies (AVGO)
The big winner in the 2014 QVP portfolio was Avago Technologies, which experienced a terrific 90.23% rate of growth. The semiconductor manufacturer saw a large sales surge in the fourth quarter of 2014 in particular to cap off a highly successful year.
It was a great year in general for many semiconductor suppliers. The Semiconductor Industry Association said at the beginning of December that it was the 18th straight month of year-over-year increases.
The Apple supplier, whose chips are in the new iPhone 6, had seen growth accelerate throughout the year, and revenue looks set to rise heading into the first quarter of 2015 as well.
The five aforementioned companies had excellent years in 2014 but it remains to be seen which of them may still comprise part of the QVP portfolio at the end of this brand new year.