Value Investment Fund Status Week 16 – Another Good Week

Value Investing

“A good process produces good results.” – Nick Saban










Another good week, the REIT pool of investments improved another $4,094 driven by Equity Residential and UDR’s actual results from the 4th quarter of 2020. Although the market responded positively to the results, the facilitator believes that UDR didn’t perform as well as Equity or Essex during the last quarter. This requires an in-depth review of UDR once their full annual report is released later this month. It might be time to dispose of this investment as the author feels that its growth to a higher value will be too slow to justify a continued hold with this investment. That report will be posted to this website prior to month’s end. For now, all three holdings are doing well with an $18,266 unrealized gain in just over three months off a $70,000 investment. This is a 26% actual gain, an approximate annual return of around 82%. 

The Fund’s gain during the past week is 3.9% over the prior week, two weeks in a row with more than 3% gains. The banking pool of investments did improve at 2.2%; but nowhere near the overall gain posted by the REIT pool of investments. As stated in several articles and weekly reports, until Wells Fargo’s cap is lifted by the Federal Reserve, Wells Fargo’s market price will not accelerate at a fast pace. The author believes that this cap will be lifted by year’s end, most likely no later than the end of the 1st quarter of 2022. It is expected that as the company gets into the second half of 2021, the stock’s price will begin to slowly climb towards $40 per share and begin to accelerate towards the upper $40’s by year-end. 

REIT Pool                                          # of Shares     Cost Basis     Market Price*         Fair Market Value
    – Equity Residential                            574.459           $30,000             $66.48                      $38,190.03

    – Essex Property Trust (Tranche #1)        48.9644             10,000              268.35                        13,139.60
    – Essex Property Trust (Tranche #2)        43.2994             10,000              268.35                        11,619.39

    – UDR                                               606.9803             20,000               41.71                         25,317.15      
       Sub-Totals                                                                $70,000                                               $88,266.17
Railways Pool
– No Stock Holdings
Banking Pool

     – Bank of New York                        232.9373             10,000                 40.93                         9,534.12
.    – Wells Fargo (Tranche #1)                    292.0560             10,000                 32.53                         9,500.58
.    – Wells Fargo  (Tranche #2)                   558.9715             20,000                 32.53                       18,183.34
.       Sub-Totals                                                                 40,000                                                 37,218.04
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                                               $129,091.75

*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 (116 days). Thus, realized value is $13,608 and unrealized value equals $15,484.

During the upcoming week, the author is going to investigate the benefit of selling UDR and using this cash to invest in a third tranche of Wells Fargo. Wells Fargo has not released its annual report; thus, there is no current update on the expected release of the cap from the Federal Reserve. The earnings call from Wells Fargo did not provide any real update on the timing associated with the cap release.

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.

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

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