Railroad Fund – Update 02/26/2020 Coronavirus Impact


The last two days have been expensive. Norfolk Southern’s value has dropped to $190.07. I currently have 49.060606 shares in the fund bought at two different prices two days ago. My total investment is $10,000. Thus, the current market value is $9,324.95 meaning the fund has decreased $675.05 in two days!

Many of you are wondering what I am going to do now, since this is a sudden drop in value. The answer is “Nothing“. Value investing means having faith in the buy/sell points. I’m going to wait now for the stock to come back up. I would imagine the market will recover once this coronavirus scare passes. Once the weather warms up, the flu bug generally goes away; thus, come May/June this virus will die a natural death and the market will recover. As always, patience is important here.

*As a side note, update on 12/31/2020; the virus information back in Feb. 2020 was limited in scope, i.e. there was more misinformation than actual facts; the end result is that the COVID-19 scare turned into a pandemic affecting the markets and how society conducted day to day activities. 

Still, overall the fund’s market value is the stock price at close of business today $9,324.95 plus cash in the bank of $1,304.65 for a total of $10,629.60.

I noticed that Union Pacific (I consider Union Pacific the highest quality stock within the six Class I railways) is now at $165.00 even. A 17% drop is the requirement for me to buy; see my article: Union Pacific – Buy/Sell Model. The prior high was on 01/24/2020 at 9:55 AM at $188.90. A 17% drop means the price would need to dip to $156.79 before I can purchase any stock. If this happens, I will use the excess cash of $1,304.65 to make a purchase. I will go one step further, if my Norfolk Southern increases in value back to my buy point of about $202 per share, I’ll sell half to buy Union Pacific at this extremely low price. As stated in several of my articles, the key is purchase quality stock at a good price. Union Pacific as of this month is the best quality stock of the existing six railroads to choose from. I am simply reducing my risk at no cost to the fund. It is unlikely Union will drop while Norfolk Southern increases; but at least I conveyed my thinking related to economic substitution and its value with reducing risk. ACT ON KNOWLEDGE.

Value Investing

Do you want to learn how to get returns like this?

Then learn about Value Investing. Value investing in the simplest of terms means to buy low and sell high. Value investing is defined as a systematic process of buying high quality stock at an undervalued market price quantified by intrinsic value and justified via financial analysis; then selling the stock in a timely manner upon market price recovery.

There are four key principles used with value investing. Each is required. They are:

  1. Risk Reduction – Buy only high quality stocks;
  2. Intrinsic Value – The underlying assets and operations are of good quality and performance;
  3. Financial Analysis – Use core financial information, business ratios and key performance indicators to create a high level of confidence that recovery is just a matter of time;
  4. Patience – Allow time to work for the investor.

If you are interested in learning more, go to the Membership Program page under Value Investing section in the header above. 

Join the value investing club and learn about value investing and how you can easily acquire similar results with your investment fund. Upon joining, you’ll receive the book Value Investing with Business Ratios, a reference guide used with all the decision models you build. Each member goes through three distinct phases:

  1. Education – Introduction to value investing along with terminology used are explained. Key principles of value investing are covered via a series of lessons and tutorials.
  2. Development – Members are taught how pools of investments are developed by first learning about financial metrics and how to read financial statements. The member then uses existing models to grasp the core understanding of developing buy/sell triggers for high quality stocks.
  3. Sophistication – Most members reach this phase of understanding after about six months. Many members create their own pools of investments and share with others their knowledge. Members are introduced to more sophisticated types of investments and how to use them to reduce risk and improve, via leverage, overall returns for their value investment pools.

Each week, you receive an e-mail with a full update on the pools. Follow along as the Investment Fund grows. Start investing with confidence from what you learn. Create your own fund and over time, accumulate wealth. Joining entitles you to the following:

  • Lessons about value investing and the principles involved;
  • Free webinars from the author following up the lessons;
  • Charts, graphs, tutorials, templates and resources to use when you create your own pool;
  • Access to existing pools and their respective data models along with buy/sell triggers;
  • Follow along with the investment fund and its weekly updates;
  • White papers addressing financial principles and proper interpretation methods; AND
  • Some simple good advice.

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