Unsurprisingly our QVP strategy here at Kruse Asset Management takes most of the plaudits considering its long-term track record of outperformance. Having been created at the start of 2005, it has outperformed the market for eight of the past ten years. QVP has seen a cumulative return of 123.46% as of the end of October 2015 (net of fees); this is compared to cumulative returns of 71.75% by the S&P 500 and 50.28% by the Russell 1000 Value Index.
Outperforming the market for eight of the past ten years puts us above 99.6% of other money managers!
Our top-performing strategy for the month of October though ended up being our small-cap strategy, QSP. QSP was created with the same philosophy in mind as QVP, to identity characteristics of stocks that tend to lead to long-term outperformance; in this instance though the focus is on small-cap stocks rather than large-cap value companies.
The small-cap sector has been up-and-down throughout the year so far and despite a disappointing time in September, QSP was able to put up some good numbers in October just gone with a return of 7.06%; that compared to 5.56% by the Russell 2000.
Small-cap stocks are inherently volatile, and we hope to end 2015 in a strong fashion
Whilst trailing our benchmark somewhat for the year-to-date, we’re still confident of QSP producing positive results for the last two months of the year. Of course too, without deviating from the market it is impossible to outperform on a long-term basis and so the odd down period on occasion is to be expected, and followed with up periods.
With that in mind, we will now take a closer look at QSP’s top five performing companies for the month of October:
5. MBIA (MBI) +23.52%
Headquartered in the affluent Purchase, New York, this financial services company saw a large boost in their stock price at the beginning of the month after Puerto Rico announced an agreement with bondholders of the Puerto Rick Electric Power Authority. This was good news for MBIA, one of the larger insurers of Puerto Rican debt.
The company then announced a new $100M share buyback plan, good for about 9% of the float, having already bought 38.9M shares at a total cost of $297M so far in 2015.
4. RPC (RES) +24.63%
RPC provides oilfield services and equipment primarily to oil and gas companies engaged in the exploration, production and development of oil and gas properties throughout the United States, and it was surprising to see as large a return as they did considering their lack-luster Q3 results.
There was a loss of $35.2 million, after reporting a profit in the same period a year earlier, although their revenue of revenue of $291.9 million did beat analyst forecasts.
3. Kronos Worldwide (KRO) +27.21%
A major international producer of titanium dioxide products, Kronos Worldwide beat its 50-day moving average during the month and then recently announced a regular quarterly dividend of fifteen cents ($0.15) per share at the end of the month.
Titanium dioxide is predominantly used in paints and varnishes, as well as paper and plastics
2. Yandex (YNDX) +50.05%
Yandex is Russia’s most visited website and is their number one search engine as well. Having announced a deal with Microsoft to act as the default home page and search engine for the Edge and Internet Explorer browsers on Windows 10 devices in Russia, Turkey, and Ukraine, it's no surprise to see the value of the company shoot up in October.
Their reported third-quarter profit of $64.6 million later in the month also met Wall Street expectations.
Russia’s top search engine, but have you heard of Yandex before?
1. Weight Watchers (WTW) +141.07%
A colossal return of 141.07% in just one month for Weight Watchers. How do you explain that? One word: Oprah.
She bought a 10% stake in the company, and beyond that will join the Weight Watchers' board of directors as well as the Weight Watchers program, acting as an advisor to the company. She will also have the option to purchase an additional 3.5 million shares, or 5% of the company, through an options award. As part of the deal, Winfrey won't be able to sell any of her shares for at least two years, with 15% of the purchased shares able to be sold after three years and an additional 30% available after four years. After five years, Winfrey will be free to exit her position in the company.
Weight Watchers no doubt hopes that the Oprah influence—seen in her books recommendations on the The Oprah Winfrey Show leading to millions of copies being sold—will rub off on the company too.