Value Investment Fund – April 30, 2022 (Monthly Report)

Value Investment Fund

Risk reduction is an incredible tool to protect one’s portfolio during market downturns. Over the first four months of 2022, the market as a whole has decreased more than 10% on average. Yet, this site’s Value Investment Fund improved slightly. When a value investor buys a security at less than intrinsic value, there is dramatic resilience against continued losses or sudden market downturns. In effect, there is less volatility. In exchange for this increased security, the value investor gives up instantaneous value growth due to the greater than normal stability of the respective investments. The secret to making a profit is to buy low and wait patiently for the market price recovery; the returns are still considered outstanding. Again, with value investing, expect returns above 30% on average per year. Do not expect returns greater than 40% as these are highly stable companies and well respected; thus, their market prices will rarely deviate dramatically in either direction.

Since inception, this Fund has demonstrated outstanding performance in comparison to all the major indices. Look at this graphical depiction of average annual yield.

Value Investment Fund

Value Investment Fund – End of April 2022 Report

                                                                                                            April 30, 2022            March 31, 2022              April 30, 2022
REIT Pool                                          # of Shares     Cost Basis       Market Price*         Fair Market Value*     Fair Market Value*
   – No Stock Holdings (All six REIT’s are beginning to settle around 10% higher than intrinsic value)
Railways Pool
– No Stock Holdings (All five railroads are well above intrinsic value)
Insurance Pool
.   – No Stock Holdings (All five insurance companies are approximately 30% higher than their respective intrinsic values)
Military Contractors Pool
.    – No Stock Holdings (All six military contractors are performing well)
Banking Pool
.    – Wells Fargo (Tranche #1)                   292.0560             10,000                 42.63                      $13,860.98                     $12,450.35
.    – Wells Fargo  (Tranche #2)                   558.9715             20,000                 42.63                        26,528.79                        23,828.96
.    – Wells Fargo (Tranche #3)                           234.3292             10,000                 42.63                        11,121.26                          9,989.45
.       Sub-Totals                                                                  40,000                                                 51,511.03                        46,268.76
Dividend Receivables                                                                                                                       -0-                                      -0-
Cash on Hand (Basis, Gains, Dividends, PUTS)                                                                       122,189.01                      122,189.01
Totals (Starting Cost Basis = $100,000)                      $60,000                                              $173,700.04                     $168,457.77
This portfolio’s value is AFTER TAXES of 28% on all realized gains. Total taxes paid to date equals                             24,185.62
Comparative Gross Return Since Inception                                                                                                                       $192,643.39
*Net of transaction fees of $1.00 per share; thus the amount in the schedule equals the actual market price per share at closing less $1.00 per share.

On 01/14/2022, the Fund’s end of week balance hit the highest point year-to-date 2022 at $182,329 reflecting the dramatic improvement tied to Wells Fargo; read Wells Fargo One Year Report for additional clarification. Wells Fargo stock price peaked at $57.08 net of fees to dispose. The facilitator admits to erring by not adhering to the original preset sale point of $58 per share in the market. In effect, I changed the sell point because I got greedy (stupid move on my part) and increased the sell point to $63 per share. I reread Lesson 18 about churning the portfolio. Again, once you have set your intrinsic, buy and sell points, a prudent value investor sticks to them. Lesson learned; I will not do that again. Had I adhered to the principle set forth, the fund would be $11,000 greater in value net of taxes. Sometimes in life, you just have to admit you screwed up. I screwed up.

The current exposure related to PUTs is as follows:

  • Union Pacific Railroad – purchased in Feb 2020 with a strike price of $155/share and an expiration date of January 21, 2023                 $20,000
  • Huntington Ingalls Industries – purchased in January 2022 with a strike price of $170/share and an expiration date of June 17, 2022      $20,000

Market prices on April 30, 2022 are:

  • Union Pacific Railroad (Expiration on 01/21/2023)                          $234.29  (Strike Price of $155.00)
  • Huntington Ingalls Industries (Expiration on 06/17/2022)                $212.74  (Strike Price of $170.00)

Overall, the Fund is still performing very well in relation to the balance of the market during the first four months of 2022. This is even with the error associated with the failure to sell Wells Fargo back in second week of January. 

This Fund’s facilitator recognizes that in order to achieve at least a 20% gross return by year end 2022, two actions are necessary. First, the site’s pool of potential investments must be expanded to no less than 60 members spread among at least eight pools. Secondly, the market must continue to slip in total worth which would bring some of the existing possible investments in line with their respective intrinsic value points and possible buy opportunities. For now, the facilitator has to continue to be patient; which is one of the four core principles of value investing. The Fund is currently sitting on a strong cash position at $122,189 (72.5% of the portfolio). This will allow the Fund to act when the conditions are beneficial. Act on Knowledge.

© 2022, David J Hoare MSA. All rights reserved.

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