Value Investment Fund Status Week 21 – Disappointment

Value Investment Fund

After five of the prior seven weeks with 3.5% or more of growth per week, this past week saw the Value Investment Fund with a disappointing reduction in value of 2.6%. One of the drawbacks of value investing is that, at times, the investor feels like their portfolio just isn’t exciting. But at the end of the day, value investing isn’t about excitement, it’s about generating good overall return over the long haul. There isn’t anything exciting about 30 to 40% returns per year. It pales when you hear stories of some investors that earned 200% or more on their investments. The reality is that the 30 to 40% returns per year come with minimal risk; whereas others have extreme risk and sometimes they are rewarded with outstanding returns. You hear about those outstanding returns, you never hear about the huge losses those risk takers absorb. 

The fund is still well ahead of schedule and will surpass 48% return for fiscal year 2021. It is currently at 40.5% through the first 21 weeks. All of the respective investments on are on hold waiting for them to work their way to the target sales price. As they head towards those targets, there are going to be weeks like this past week whereby the entire market was down a half percent. In turn, this does impact value investment funds. Certain industries had greater setbacks and of course real estate investment trusts were one of those industries. During this past week, the REITs pool of investments experienced a 4% downturn. Still, REITs are leading the way for the fund with unrealized gains of $21,470 on a $70,000 investment basis over the 21 week period. An investor should be thrilled with results like that; but it just is disheartening when there is a minor setback. Adherence to the fourth principle of value investing, patience, will pay off.

Here is the current status of the Value Investment Fund:

REIT Pool                                          # of Shares     Cost Basis     Market Price*         Fair Market Value
    – Equity Residential                            574.459           $30,000             $70.43                      $40,459.15

    – Essex Property Trust (Tranche #1)        48.9644             10,000              274.33                        13,432.40
    – Essex Property Trust (Tranche #2)        43.2994             10,000              274.33                        11,878.32

    – UDR                                               606.9803             20,000               42.34                         25,699.55      
       Sub-Totals                                                                $70,000                                               $91,469.42
Railways Pool
– No Stock Holdings
Banking Pool

     – Bank of New York                        232.9373             10,000                 45.35                       10,563.71
.    – Wells Fargo (Tranche #1)                   292.0560             10,000                 38.63                       11,282.12
.    – Wells Fargo  (Tranche #2)                   558.9715             20,000                 38.63                       21,593.07
.       Sub-Totals                                                                 40,000                                                 43,438.90
Dividend Receivables                                                                                                                        -0-
Cash on Hand (Gains, Dividends, PUTS)                                                                                    5,616.54
Totals (Starting Cost Basis = $100,000)                    $110,000                                              $140,524.86

*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.

The recovery for the REITs Pool continues to exceed the projected nine to twelve months rebound forecasted back in November 2020. The current price recovery sell points are:

  • Equity Residential                            $81
  • Essex Property Trust                       $301
  • UDR                                                  $51

It is possible that all three investments will hit their respective targets by July. If this holds, the annual return will exceed 64%; if it takes until October, the annual return drops to 48%. The results exceed the expected returns for value investing. Timing is explained in detail in Phase Two of the membership program with this site’s value investing program.

If the REITs do hit their respective target sales prices early, there are no available options to purchase at this time. The members of the railways pool are all at their respective all-time highs. Furthermore, there are no opportunities in the banking pool to use the proceeds. If so, then the investment fund will use a stop-loss tool to try and eek out marginal dollars while developing a fourth pool of investments. A stop-loss order is a sophisticated directive explained in Phase Three of the membership program. It will be covered if the fund excercises this tool.

Overall, the entire portfolio is performing in accordance to plan. The value investment fund follows the primary tenet of buying low and selling high. 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. Patience.

Act on Knowledge.

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

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