Value Investment Fund Status Week 22 – A Fair Return For The Week

A Fair Return

Anytime the value investment fund improves more than 1% during a calendar week, it is a fair return. This past week, the Value Investment Fund grew 2.2% far outpacing all the major indices in the market.

The fund is well ahead of schedule and will surpass 48% return for fiscal year 2021; it is conceivable that it may hit 55% depending on second quarter results for the investments in the REITs Pool. It is currently at 43.6% through the first 22 weeks. All of the respective investments on are on hold waiting for them to work their way to their target sales price. During this past week, the investment fund sold PUTs on Norfolk Southern netting $335.07. Total realized earnings to date are just slightly greater than 15.9%. Unrealized gains exist primarily in the REITs Pool. Compare the purchase price, current market price, market peak price for each of the respective REIT investments.

Name                                 Purchase Price           Current Market Price*       Historical Peak Price
Equity Residential                    $52.23                                 $71.68                               $88.37
Essex (Average)                     $216.77                               $283.33                             $331.30
UDR, Inc.                                 $32.95                                 $43.76                               $50.93

All three of the real estate investment trusts investments will report their first quarter results in about four weeks. Unless there is a significant setback with collection of rents by all three, the pool’s aggregated value will continue to march towards their historical respective historical peak market prices which in turn will drive the investfund fund’s unrealized gains and the overall return. 

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             $71.68                      $41,177.22

    – Essex Property Trust (Tranche #1)        48.9644             10,000              283.33                        13,873.08
    – Essex Property Trust (Tranche #2)        43.2994             10,000              283.33                        12,268.02

    – UDR                                               606.9803             20,000               43.76                         26,561.46      
       Sub-Totals                                                                $70,000                                               $93,879.78
Railways Pool
– No Stock Holdings
Banking Pool

     – Bank of New York                        232.9373             10,000                 46.49                       10,829.26
.    – Wells Fargo (Tranche #1)                   292.0560             10,000                 38.76                       11,320.09
.    – Wells Fargo  (Tranche #2)                   558.9715             20,000                 38.76                       21,665.73
.       Sub-Totals                                                                 40,000                                                 43,815.08
Dividend Receivables                                                                                                                        -0-
Cash on Hand (Gains, Dividends, PUTS)                                                                                    5,951.61
Totals (Starting Cost Basis = $100,000)                    $110,000                                              $143,646.47

*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                       $331 (updated from $301 due to switching to prior peak method)
  • 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%; this is better than a fair return. 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 alternative investments 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.

Value Investing Episode 1 – Introduction and Membership Program

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

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