Sold Union Pacific – 23.66% Return in 72 Days

Union Pacific

Value investing is about buying low and selling high. The investor creates a model to set buy/sell triggers and exercises this program with investments. Back on October 29, 2020, the Railways Pool of the club’s Value Investment Fund purchased 114.9557 shares of Union Pacific at $173.98 each including a $1 per share transaction cost. In that post, the sell point was set at $215.17 which occurred this morning in the market. Union Pacific actually cleared $221 at one point this morning. 

The fund’s preset sell, automatically sold when the price hit $215.17. The fund netted $214.17 per share after paying a $1 per share transaction fee.

The return on the investment is $40.19 per share as follows:

Purchased on 10/29/2020 114.9557 shares at $173.98 each for a total cash outlay of    $20,000.00
Sold on 01/08/2021 114.9557 shares @ $215.17 netting $214.17; total net proceeds      24,620.06
Gain on sale                                                                                                                          4,620.06
Basis                                                                                                                                    20,000.00
Effective return on investment                                                                                               23.10%
Holding Period including day of sale and day of purchase                                                    72 Days
Annual Return (Extrapolated)                                                                                              117.10%   

Furthermore, during this period the Railways Pool earned another $111.50 from dividends issued by Union Pacific. Thus, the final total return is $4,731.56 with a total cumulative effective return of 23.66%.   

This was the only remaining investment in the Railways Pool for the Investment Fund. Currently, all of the potential investments in that pool are at their respective peak values. Thus, there are no current opportunities to buy any railroad stocks. Over the weekend, the Investment Fund will shift monies from the Railways Pool into another potential investment, most likely in the Banking Pool.

Still open are 59 PUTS on Union Pacific that expire on 02/19/2021 at $170.00 per share. This opportunity appears unrealistic as it is unlikely the market and this respective sector will see a downturn of this magnitude. However, if it does happen, the fund’s facilitator looks forward to an opportunity to own a high quality stock at a such a low price.

This is yet another example of how effective and productive value investing is as a method of stock investing. 

The current formula for a buy for Union Pacific is an 18% market price decrease from the current peak of $221.28; this sets the buy price for Union Pacific to $181.45 per share. The new sell point is 102% of peak, thus the new sell point is $225.71.

For those of you unaware of value investing principles; there are four. The first is to only buy high quality stocks reducing risk of loss. Secondly, buy the high quality stock at or near intrinsic value. Union Pacific’s intrinsic value is approximately $175 per share. Third, use financial analytics to support reasonable market recovery points as the sell point and finally, adhere to patience. Market fluctuations will cause Union Pacific’s price to change, maybe not in the near-term, but over the long-term; it will happen.

If you want to learn how to get returns like this, join as a member of the club. Complete the program and begin to make good returns on your investment with little risk. Act on Knowledge. 

Value Investing Episode 1 – Introduction and Membership Program

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