Value Investment Fund Status Week 17 – Three in a Row

Value Investment Fund

Three good weeks in a row, the Club’s Value Investment Fund increased another 3.6% during this past week. That’s three weeks in a row with at least 3% improvement over the prior week. This past week’s growth was driven by the banking pool of investments, specifically the gain from Wells Fargo. Wells Fargo’s total balance increased $3,659.42. As expected, Wells Fargo’s is currently being sold in the market for less than intrinsic value estimated at $38 per share. As time passes, with each week, Wells Fargo gets closer to having their Federal Reserve cap lifted. Once this cap is lifted, the company can expand their respective earnings assets portfolio and greatly improve their net interest revenue which then drives the bottom line. The cap is expected to be lifted sometime in the first half of 2022. Between now and then, Wells Fargo’s stock price should improve into the mid $40 range as buyers anticipate lifting of the cap. In the interim, the Fund will continue to maintain patience as it waits for time to pass.

During the past week, the Value Investment Fund sold PUTs on Union Pacific earning $2,009, improving realized gains to $15,616. Overall, the Fund is in a positive 33.7% improvement over its starting basis of $100,000. The Value Investment Fund is currently about 1/3 of the way into the fiscal year. All of the current holdings are long-term holdings and the Fund only expects them to improve marginally between now and the end of the fiscal year. The facilitator still believes the Fund’s total return will approximate 44% by fiscal year end. Here is the current balance and breakout:

REIT Pool                                          # of Shares     Cost Basis     Market Price*         Fair Market Value
    – Equity Residential                            574.459           $30,000             $65.97                      $37,897.06

    – Essex Property Trust (Tranche #1)        48.9644             10,000              262.89                        12,872.25
    – Essex Property Trust (Tranche #2)        43.2994             10,000              262.89                        11,382.98

    – UDR                                               606.9803             20,000               41.22                         25,019.73      
       Sub-Totals                                                                $70,000                                               $87,172.02
Railways Pool
– No Stock Holdings
Banking Pool

     – Bank of New York                        232.9373             10,000                 41.32                         9,624.97
.    – Wells Fargo (Tranche #1)                    292.0560             10,000                 36.83                       10,756.42
.    – Wells Fargo  (Tranche #2)                   558.9715             20,000                 36.83                       20,586.92
.       Sub-Totals                                                                 40,000                                                 40,968.31
Dividend Receivables (Wells Fargo)                                                                                                 85.10
Cash on Hand (Gains, Dividends, PUTS)                                                                                    5,531.44
Totals (Starting Cost Basis = $100,000)                    $110,000                                              $133,756.87

*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.

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.

Value Investing Episode 1 – Introduction and Membership Program

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

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