Value Investment Fund – Status on September 30, 2021

Value Investment Fund

“I walk slowly, but I never walk backward.” – Abraham Lincoln

I took my vacation during September. Spent some time on the beach reflecting, relaxing and thinking. It was rejuvenating. During September, the Value Investment Fund decreased in value $315. What is really interesting is that almost every popular index had significant reduction in value. Take a look:
.                                                         August 31, 2021        September 30, 2021       Percentage Decrease
Dow Jones Industrial Average                35,361                            33,844                             4.3%
S&P 500                                                    4,523                              4,308                             4.7%
S&P Composite 1500                                1,033                                 985                             4.6%
Russell 2000                                              2,274                              2,204                             3.1%
NASDAQ Composite                              15,259                            14,449                             5.3%
NASDAQ 100                                         15,582                            14,689                             5.7%

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.

Yes, during September the Value Investment Fund only held one position which was Wells Fargo. It only decreased in value a mere .6%. To make this even more interesting, during September, Wells Fargo was hit with two more fines from the agencies of the federal government totaling more than $300 Million and yet, Wells Fargo only decreased in value a pittance .6%. This is another example of how high quality investments, when purchased at good prices, reduce risk dramatically. Yes, there is an offset to this risk elimination design. An investor will never get rich quickly, i.e. in less than one year. High quality investments purchased at less than intrinsic value have very little volatility and as such can only generate good returns. Good returns are defined as greater than 20% per year on average. In most cases, the average annual returns will exceed 30% per year with about one or two years per economic cycle with meager returns in the five to ten percent range. 

Again, Value Investing is about earning good returns, year after year. It is not a get rich quick scheme; it is a thoughtful well laid out plan to improve one’s wealth over time.

Here is the Value Investment Fund’s status report for the end of September 2021.

Value Investment Fund – End of Month Report

                                                                                                       September 30, 2021       August 31, 2021           September 30, 2021
REIT Pool                                          # of Shares     Cost Basis       Market Price*         Fair Market Value*     Fair Market Value*
   – No Stock Holdings (All six REIT’s are at or near their all-time highs)
Railways Pool
– No Stock Holdings (All six railroads are at or near their all-time highs)
Banking Pool

     – Bank of New York                              –                         –                         –                                 Sold
.    – Wells Fargo (Tranche #1)                   292.0560             10,000                 45.41                      $13,346.96                      $13,262.26
.    – Wells Fargo  (Tranche #2)                   558.9715             20,000                 45.41                        25,545.00                        25,382.90
.    – Wells Fargo (Tranche #3)                           234.3292             10,000                 45.41                        10,708.84                        10,640.89
.       Sub-Totals                                                                 40,000                                                  49,600.80                        49,286.05
Dividend Receivables                                                                                                                       217.07                             -0-
Cash on Hand (Basis, Gains, Dividends, PUTS)                                                                       116,018.03                      116,235.10
Totals (Starting Cost Basis = $100,000)                      $40,000                                              $165,835.90                    $165,521.15

*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.

Value Investment Fund – Activity

During the month of September, there were no transactions. 

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
Gain on Sale of Bank of New York Mellon (08/12/21)                           2,578.61
Sub-Total Gains                                                                                    $49,479.64
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/August)                                                                   387.27
Sub-Total Dividends                                                                               $3,059.00
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 $198.78.
Norfolk Southern (March @$190/Sh) Expires January 21, 2022                335.07 – Market price is currently at $242.12.
Sub-Total PUTS                                                                                       $3,696.46
Total Realized Earnings                                                                       $56,235.10

Total dividends earned in Year Two year-to-date equals $3,059.00. Realized earnings and dividends receivable plus $60,000 of the original $100,000 of basis equals the total capital available ($116,235.10) for investment in other securities. In effect, the Fund now has a very strong cash position at $116,235.10. 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. 

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

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