Value Investment Fund Status Week 15 – Amazing Movement Forward

“It is impossible to produce superior performance unless you do something different from the majority.” – John Templeton

What a great week for the Value Investment Fund! Essex Property Trust reported their 4th quarter results and as expected, the stock’s market price jumped almost $20 higher per share. The interesting part is that it wasn’t as if Essex reported great results; actually, their financial profits were in line with the third quarter profit. The market was holding back on ramping up this stock because it doesn’t know how to evaluate pricing of equity based apartment complex real estate investment trusts. Per the article written several weeks ago, ‘Intrinsic Value of Essex Property Trust’, Essex’s intrinsic value is approximately $255 and a reasonable market value for this stock is around $285 to $290 per share. 

On Friday the 5th of February, 2021, the stock closed at $258.10. Thus, the market price is approximately the intrinsic value of the company on a per share basis. If the first quarter results mirror the 4th quarter performance, the stock price will surpass $270 and will be well on its way towards the target sell price. It may take two more quarters to achieve this reasonable market recovery price. In the interim, this single stock with several thousand dollars of unrealized value will keep the investment fund on target for the fiscal year goal of more than 30% return. The other two REITs report this week; if their results are similar to Essex’s, then the Fund’s balance will have a solid foundation for the next six months.

The historical high for Essex Property Trust is $331.30 back in October of 2019.

During this past week, the Value Investment Fund improved $7,469, a whopping 6.4% from the prior week. The DOW Jones Industrial Average improved 3.4% during the same time period. Here is the Fund’s current financial position.

REIT Pool                                          # of Shares     Cost Basis     Market Price*         Fair Market Value
    – Equity Residential                            574.459           $30,000             $63.95                      $36,736.65

    – Essex Property Trust (Tranche #1)        48.9644             10,000              257.10                        12,588.75
    – Essex Property Trust (Tranche #2)        43.2994             10,000              257.10                        11,132.28

    – UDR                                               606.9803             20,000               39.07                         23,714.72      
       Sub-Totals                                                                $70,000                                               $84,172.40
Railways Pool
   
– No Stock Holdings
Banking Pool

     – Bank of New York                        232.9373             10,000                 41.03                         9,557.42
.    – Wells Fargo (Tranche #1)                    292.0560             10,000                 31.56                         9,217.28
.    – Wells Fargo  (Tranche #2)                   558.9715             20,000                 31.56                       17,641.14
.       Sub-Totals                                                                 40,000                                                 36,415.84
Dividend Receivables (New York Mellon & Wells Fargo)                                                              157.31
Cash on Hand (Gains, Dividends, PUTS)                                                                                     3,450.23
Totals (Starting Cost Basis = $100,000)                    $110,000                                               $124,195.78

*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.

Total realized gains, dividends and sales of PUTS equals $13,608 fiscal year to date (109 days). Thus, realized value is $13,608 and unrealized value equals $10,588.

Also during the past week, the banking pool improved $2,793 over the prior week. The site facilitator completed an article this week determining the intrinsic value of Wells Fargo at $38 per share. The expected market recovery price is $55 per share expected in about a year. At $55 per share, total gain on Wells Fargo will be $16,806 on a $30,000 basis. It is estimated that this will take one year to hit this recovery price; it may take 18 months due to the current Federal Reserve cap on total assets. Even at 18 months, the annualized return on the investment will end up over 35%.

Overall, the entire portfolio is performing in accordance to plan. The investment fund follows the primary tenet of buying low and selling high. The management of the fund adheres to four principles of value investing:

  1. Only buy high quality top 2,000 companies;
  2. Reduce risk by establishing intrinsic value and purchasing the stock for less than intrinsic value;
  3. Conduct a financial analysis to determine a reasonable target for market price recovery;
  4. Be patient.

Act on Knowledge.

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