The course set by the Value Investment Fund is achieving its initial goal. The Fund continues to grow, not as fast as it did during the first few months of the new fiscal year. This is because when the respective investments are purchased at low values, and driven by their inherent quality, recover quickly to intrinsic value and typically increase in market value faster than the market as a whole. As the market prices tend towards higher total market capitalization for the respective investment, the growth in the price per share begins to slow. This past week, the Value Investment Fund grew 1.004% reaching a new all time high of $153,477 off a $100,000 investment 28 weeks ago. The average weekly growth rate through the first 20 weeks approximated 1.77%. Thus, the growth rate is slowing down because the core recovery of the respective securities has been achieved.
Value investing is a style of investing which derives its fundamental basis in business ratios. It is a long-term investing method that takes advantage of short-term downturns whether industry or market wide. Upon recovery, the investor simply sells their investment and waits for another downturn.
The Club’s Value Investment Fund continued to grow during April 2021. The Fund grew 7.6% driven by increases across the board for all investments. Total actual gain during April was $10,703 as illustrated in the report below.
As stated multiple times throughout the lessons and tutorials, high quality stocks have less risk and thus, resist remarkably well when the market goes down and recover quickly upon market rebound. Furthermore, high quality stocks provide many opportunities to earn good rewards if properly purchased at less than intrinsic value and sold upon market price recovery.
Value Investment Fund Status Week 26 – Halfway Point Report Halfway into the fiscal year and already, the value investment fund has surpassed the desired annual return. When the markets closed on Friday, April 23, 2021; the fiscal year to date return for the fund stands at 51.4%. The annual goal is to earn at …
This past week, the Value Investment Fund grew 2.7% reaching a new all time high at $148,147 off a $100,000 investment 25 weeks ago.
This past week, the banking pool propelled the fund higher with its 5% growth during the week. Wells Fargo and Bank of New York released their financial results from the first quarter. Wells Fargo’s 1st quarter results surpassed even the most optimistic expectations with earnings of $4.7 Billion on $18.1 Billion of revenue (26%). This stock is poised to explode once the Federal Reserve releases its cap on the volume of assets Wells Fargo is allowed to have on its balance sheet. The fund facilitator is adjusting its expected recovery price by $2 to $55 and expects this market price during the first quarter of 2022.
This past week, the Value Investment Fund grew 2.1% matching many of the major indices in the market.
The fund is well ahead of schedule and is on track to surpass 52% return for fiscal year 2021. Driving the unrealized gains are the REITs. This table illustrates how much has accrued since the purchases in late October, early November. Unlike many other investments, there are no performance indicators to assist investors during interim accounting periods. With REITs, an investor has to wait for the quarterly report to determine performance. Given the sound value of the underlying real estate, there is no concern regarding each position taken by the value investment fund.
The Club’s Value Investment Fund grew dramatically during March 2021. The Fund grew 10.1% driven by increases across the board for all investments. Total actual gain during March was $13,143 as illustrated in the report below.
As stated multiple times throughout the lessons and tutorials, high quality stocks have less risk and thus react remarkably well when the market goes down and recover quickly upon market rebound. Furthermore, high quality stocks provide many opportunities to earn good rewards if properly purchased at less than intrinsic value and sold upon market price recovery. Here is the Value Investment Fund’s status report for the end of March 2021.
Anytime the value investment fund improves more than 1% during a calendar week, it is a fair return. This past week, the Value Investment Fund grew 2.2% far outpacing all the major indices in the market.
The fund is well ahead of schedule and will surpass 48% return for fiscal year 2021; it is conceivable that it may hit 55% depending on second quarter results for the investments in the REITs Pool. It is currently at 43.6% through the first 22 weeks. All of the respective investments on are on hold waiting for them to work their way to their target sales price. During this past week, the investment fund sold PUTs on Norfolk Southern netting $335.07. Total realized earnings to date are just slightly greater than 15.9%. Unrealized gains exist primarily in the REITs Pool. Compare the purchase price, current market price, market peak price for each of the respective REIT investments.
Within the railways pool of investments for the Club’s Value Investment Fund, Norfolk Southern Railroad is considered one of the better investments of the six existing railroads in the pool (soon to be five with the merger of Canadian Pacific and Kansas City Southern). It is a highly stable company and rarely performs poorly, either financially or via key performance indicators. Thus, the sale of PUTs on Norfolk Southern Corporation are a safe and relatively low risk options investment.
A PUT is the sale of an insurance policy to an existing holder of stock. The idea is that IF the market price for the stock should suddenly depress to a particular price, ‘Strike Price’, the current holder of the stock can force the seller of the PUT to buy the stock from the current owner of the PUT at that strike price. In effect, the PUT acts as a floor price for the stockholder.
Monitoring performance is the single best tool to ensure success with value investing. Comparing results against expectations provides the basis for good decisions. In business, this is known as the feedback loop. In effect, a variable input is changed, results are recorded, compiled and reported in a understandable format. Any unexpected results are analyzed and input changes are implemented. The pattern is repeated. The end goal is to generate continuous improvement. With business, improvement is stated in the form of profit; with investment funds, it is stated in the form of percentage of return on the overall invested capital. Thus, managing an investment fund is just like operating a business; the goal is to improve overall performance.
Throughout this series of lessons in Phase One of the program, it has been stated and reiterated several times. The goal of value investing is to generate returns that far exceed the returns of several indices. A value investor should expect at least a return on their investment in the mid-twenties as a percentage per year. The real goal is to generate 30% plus with returns. If the investor does their research properly and adheres to the four principles of value investing, achieving 30% plus per year on average is doable. But without monitoring performance of the fund, an investor cannot make the necessary timely adjustments to achieve the annual goal.
After five of the prior seven weeks with 3.5% or more of growth per week, this past week saw the Value Investment Fund with a disappointing reduction in value of 2.6%. One of the drawbacks of value investing is that, at times, the investor feels like their portfolio just isn’t exciting. But at the end of the day, value investing isn’t about excitement, it’s about generating good overall return over the long haul. There isn’t anything exciting about 30 to 40% returns per year. It pales when you hear stories of some investors that earned 200% or more on their investments. The reality is that the 30 to 40% returns per year come with minimal risk; whereas others have extreme risk and sometimes they are rewarded with outstanding returns. You hear about those outstanding returns, you never hear about the huge losses those risk takers absorb.
The fund is still well ahead of schedule and will surpass 48% return for fiscal year 2021. It is currently at 40.5% through the first 21 weeks. All of the respective investments on are on hold waiting for them to work their way to the target sales price. As they head towards those targets, there are going to be weeks like this past week whereby the entire market was down a half percent. In turn, this does impact value investment funds. Certain industries had greater setbacks and of course real estate investment trusts were one of those industries. During this past week, the REITs pool of investments experienced a 4% downturn. Still, REITs are leading the way for the fund with unrealized gains of $21,470 on a $70,000 investment basis over the 21 week period. An investor should be thrilled with results like that; but it just is disheartening when there is a minor setback. Adherence to the fourth principle of value investing, patience, will pay off.