Value Investment Fund – Status on July 31, 2021

Value Investment Fund

“You simply have to put one foot in front of the other and keep going. Put blinders on and plow right ahead.” – George Lucas

The Club’s Value Investment Fund keeps moving forward. During July 2021, the Fund’s balance improved $6,308, a 4% gain over the prior month. During July, the Fund sold both its holdings in Equity Residential and UDR. Both stocks reached their preset expected sales price triggering the sale of the stock. 

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 or is stagnant 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 July 2021.

Value Investment Fund – End of Month Report

                                                                                                          July 31, 2021                 June 30, 2021              July 31, 2021
REIT Pool                                          # of Shares     Cost Basis     Market Price*         Fair Market Value*     Fair Market Value*
    – Equity Residential                            574.459               –                       –                            $43,658.88                         Sold

    – Essex Property Trust (Tranche #1)        48.9644                –                       –                                 Sold                               Sold
    – Essex Property Trust (Tranche #2)        43.2994                –                       –                                 Sold                               Sold

    – UDR                                               606.9803                –                       –                             29,122.91                          Sold
       Sub-Totals                                                                    –                                                    $72,781.79                           -0-
Railways Pool
– No Stock Holdings (All six railroads are at or near their all-time highs)
Banking Pool

     – Bank of New York                        232.9373             10,000                 50.33                        11,700.44                    11,723.73
.    – Wells Fargo (Tranche #1)                    292.0560           10,000                 44.94                         12,935.16                   13,125.00
.    – Wells Fargo  (Tranche #2)                   558.9715             20,000                 44.94                        24,756.85                    25,120.18
.    – Wells Fargo (Tranche #3)                           234.3292             10,000                 44.94                        10,378.44                    10,530.75
.       Sub-Totals                                                                 50,000                                                  59,770.89                    60,499.66
Dividend Receivables (Bank of New York)                                                                                     346.40                           79.20
Cash on Hand (Basis, Gains, Dividends, PUTS)                                                                         24,732.15                  103,360.22
Totals (Starting Cost Basis = $100,000)                      $50,000                                              $157,631.23                $163,939.08

*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 July 15th, the Fund sold 574.459 shares of Equity Residential netting $82 per share after transaction fees. Net gain earned was $17,106. This equates to an annual return of 78%. This particular transaction generated the greatest volume of realized earnings fiscal year to date. Original basis invested was $30,000 back in late October, 2020 and net proceeds equaled $47,106; overall, an excellent return on the investment. 

On July 12th, UDR was sold for realized earnings of $10,956; this equates to a 77% annual return. During these last nine months, the Fund invested $70,000 and realized $37,918 including dividends. This approximates a 72% aggregated annualized return. The risk associated with the investments were extremely low due to the underlying value (intrinsic value) of the assets (properties held by the trusts). This is what value investing is all about. Getting good returns with minimal risk.

Value Investment Fund – Activity

During the month of July, the following transactions occurred. 

  • Dividends were recorded for UDR for $220.03;
  • Dividends were recorded for Bank of New York for $79.20;
  • Sold Equity Residential for a realized gain of $17,105.64;
  • Sold UDR for a realized gain of $10,956.00.

To date, the fund has realized earnings as follows:

Gain on sale of Norfolk Southern                                                          $2,678.26
Gain on sale of Union Pacific Railroad                                                   4,620.06
Gain on sale of Comerica Bank                                                               3,677.40
Gain on sale of Essex Property Trust (06/18/21)                                     7,863.67
Gain on Sale of Equity Residential (07/15/21)                                      17,105.64
Gain on Sale of UDR (07/12/21)                                                           10,956.00
Sub-Total Gains                                                                                    $46,901.03
Norfolk Southern (Nov)                                                                                92.39
Union Pacific (Dec)                                                                                     111.50
Equity Residential (Dec/March/June)                                                      1,039.20
Essex Property Trust  (Dec/March)                                                             294.58
Comerica Bank (Dec)                                                                                  251.57
UDR (Jan/April/July)                                                                                  658.87
Bank of New York Mellon (Jan/May/July)                                                 223.62
Wells Fargo (Feb/May)                                                                                170.20
Sub-Total Dividends                                                                               $2,841.93
Sale of PUTs 
Expired PUTs (See Prior EOM Reports for List)                                     1,592.16
Union Pacific (Feb @$155/Sh) Expires January 20, 2023                       1,769.23 – Market price is currently at $218.76.
Norfolk Southern (March @$190/Sh) Expires January 21, 2022               335.07 – Market price is currently at $256.16.
Sub-Total PUTS                                                                                      $3,696.46
Total Realized Earnings                                                                      $53,439.42

Total dividends earned in Year Two year-to-date equals $2,841.93. Realized earnings and dividends receivable plus $50,000 of the original $100,000 of basis equals the total capital available for investment in other securities. In effect, the Fund now has a very strong cash position at $103,360. Almost all of the available options for investment are at or near their all-time highs. Thus, without more available selections, the Fund will have difficulty with good returns in 2022. The pressure is mounting to build two more pools of investments broadening the overall opportunities from 18 to more than 30. 

© 2021 – 2022, David J Hoare MSA. All rights reserved.

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