Key insights
- A value investor's Q1 2026 portfolio update highlights significant outperformance driven by concentrated positions in small-cap energy and chemical companies. The investor focuses on companies trading below intrinsic value with a margin of safety, citing specific examples like Ring Energy (REI) and AdvanSix (ASIX). While not directly predictive, the update reflects a potential shift towards value-oriented strategies amid broader market uncertainty, which could offer some support to undervalued sectors.
I am a long term, value-oriented investor. I take positions in companies which trade at discounts to their intrinsic values and where downside risk is low compared to upside potential.
For the first quarter ended March 31st, 2026, my portfolio achieved a pre-tax return of 45%, comparing well with the S&P 500's & the Russell 2000 negative returns. The excellent quarter was partly due to a couple of stocks with standout returns.
- Ring Energy (REI) is a small-cap oil and natural gas company with a leveraged balance sheet, resulting in a high-risk / high-reward scenario. The company has taken a number of steps to reduce debt, with leverage expected to fall to 1.9x by year end. Enterprise value of $744 million, makes for a fairly attractive EV/FCF ratio. In my opinion, this is a situation where the odds are very good for the investor, considering the returns could be multiples of the current stock price. +75.86%.
- AdvanSix (ASIX) is a producer of nylon solutions, plant nutrients and chemical intermediaries. I invested when it traded at nearly less than half of its tangible book value. At this massive discount with a well covered dividend, there was a massive margin of safety here. In addition, there is significant potential upside from carbon capture tax credits. I believe that the stock will continue to rise, all the way up to book value. +41.04%.
- SunCoke Energy (SXC) operates as a producer of coke primarily in the U.S. On a market cap of $550 million, last year the company generated $110 million in operating cash flow. With no debt due until 2029, I would expect them to be able to weather any short-term bumps in the road. -9.58%
- Amplify Energy (AMPY) is an oil company. After recent asset sales, AMPY is completely debt free, leaving the company with 1/4 of its market cap in cash. The company has a book value of $460 million, but it trades for just $270 million, despite recent earnings of $65 million. Overall, I think this is a market mis-pricing. +36.54%.
Prices for many issues fell this quarter, but unlike previous market dips, I found it hard to find value with the Iran situation making it more difficult to evaluate margins of safety. Leveraged oil companies have been on my radar due to their inherent risk making them more volatile, correlating with the volatility in oil prices.