Overall, the Value Investment Fund is performing remarkably well in relation to the balance of the market during the first six months of 2022. This is even with the error associated with the failure to sell Wells Fargo back in second week of January. Overall, the market is down at least 15% as indicated by the DOW; this reflects the top 30 companies. The reality is that the market overall is down about 21% (S&P 500, S&P Composite 1500) since January 1, 2022. The S&P 500 and Composite 1500 are a more conservative comparative indices to this Fund’s selection pool of investments. As stated above, if using the NASDAQ 100, the Fund is simply crushing the market with Fund down 5% and the NASDAQ 100 down 29%.
On June 14, 2022, the Value Investment Fund purchased 77.7000 shares of Essex Property Trust at $256.40 per share. Adding the $1 per share transaction fee, a total of $20,000 was invested into this security.
In addition, the Fund sold a PUT option for 100 shares at $9.90 netting $8.80 per share. The strike price is $240 per share with an expiration date of October 21, 2022.
PUT options are an excellent tool to leverage the realized return for a value investment based portfolio of securities. In general, options are very risky financial derivatives and are not recommended for unsophisticated investors. In laymen terms, options are classed as mildly speculative instruments in the world of investing. The key to proper use is to eliminate the risk aspect by only utilizing PUTs in a very restrictive set of circumstances. When properly applying restrictions, PUT options can add between four and ten percent of a value investment fund’s annual realized earnings. This marginal improvement is how a value investment fund outperforms even the best performing index based funds.
During May, the Fund expanded the portfolio to include two new positions from among the existing 48 potential investments. The first included three separate tranche purchases of The Walt Disney Company and the second was an opportunity presented when Essex Property Trust, Inc. dropped below its intrinsic value. In addition, the Fund sold two separate option contracts in both positions. The Walt Disney Company position was exercised within a few days of that sale and the current option contract for Essex Property Trust, Inc. remains active. The sale of PUT options (three separate companies) generated $3,019 of realized income after associated transaction fees. Finally, Wells Fargo did issue a dividend worth $271 for the Fund. This dividend sits as a receivable on the books of record as Wells Fargo will pay the dividend during the first week of June.
The Fund uses options, specifically PUTs, to augment the income and boost the overall return of the Fund. The concept is simple. The Fund wants to own certain pre-qualified investments at certain prices; that is, market prices that are well below intrinsic value as calculated for the respective investments. These investments are basically top 2,000 companies trading in the United States, have a good history of performance and are highly stable. Currently, there are 49 researched potential investments spread among 8 different industry pools. Within the REITs Pool sits a well respected and well managed REIT, Essex Property Trust, Inc.
Recently, the Fund reevaluated Essex Property Trust Inc. and increased the company’s intrinsic value to $291 per share. In an article written in January of 2021, the Facilitator determined intrinsic value at $256 per share. In the course of one year, many market forces have elevated this intrinsic value higher. With real estate investment trusts (REITs), intrinsic value is strongly tied to fair market value of properties. At the end of 2020, the overall fair market value of the entire portfolio of apartments for Essex was estimated at net assets value (adjusted for closing costs, costs to sell, pay-off of associated debt and costs to eliminate book balance of financing outlays) of $19.14 Billion. This made each share worth approximately $283. During the last 16 months, the market value of real estate has jumped over 16%. Using a mere 12% adjustment to this portfolio, the modified net assets value now exceeds $21.8 Billion. This alone adds $36 per share in value. Utilizing net assets value by itself warrants an intrinsic value of $319 per share. And this assumes only a 12% increase in value over 16 months.
Disney is a DOW Jones Industrial Average member, which means it is one of the top 30 publicly traded companies. Anytime an investor can buy this company at a low price, it will reward patience. This site’s Value Investment Fund took advantage of the recent market decline along with the entertainment industry’s setbacks and now owns three separate tranches of The Walt Disney Company.
Today, May 9, 2022, the Value Investment Fund sold 200 PUTs of The Walt Disney Company. Market price at 11:06 AM was $107.34. The Fund has set the intrinsic value at $116 per share with a ‘Buy’ point of $110, a 5% discount from intrinsic value. On Friday the 6th, the Fund bought 180 shares at $110 each for a total investment of $20,000 including transactions fees. The current options trading matrix is below. For a buy price of $105, current PUTs are selling at $9.80 each. Thus, the Fund will net $8.80 per PUT contract. This totals $1,760 in realized earnings for a strike price of $105 through October 21, 2022 (5 1/2 months).
Bought The Walt Disney Company “Whatever you do, do it well” – Walt Disney On Friday, May 6th, 2022, the market price of The Walt Disney Company hit $110 per share at 9:35 AM. This site’s Value Investment Fund purchased 180.1801 shares for a total investment of $20,000 including a $1 transaction fee per share. …
Yesterday, May 3rd, 2022, the Value Investment Fund sold 246.9135 PUTs on JPMorgan Chase & Co. with a strike price of $80 per share. These PUTs expire on June 16, 2023 (13 months). The Fund sold the PUTs for $2.76 each and netted $1.76 each after fees. Total realized income was $434.57 (246.9135 * $1.76/ea).