Canadian Pacific Railroad – Sold Stock at $241.47

Today is November 15, 2019, and Canadian Pacific Railroad recovered by my railroad fund investment model to $241.47 per share. The value investing model automatically sold at $241.47, and the price per share continued to climb to $241.86 when the market closed at 4 PM.

This railroad fund investment model is purely a concept with no actual dollars invested in railway stocks. The model was designed using the business ratios and the tools to evaluate business ratios to select proper buy and sell triggers for railroad stocks. Both the industry makeup and the controls allow the model to utilize the parameters set. This is approximately the seventh post about this model, which creates the model’s operational points and allocations. For further clarification, read:

The above articles introduce the reader to this value investing concept and provide an example of how to build the model. Please remember, this is purely a one-year test to prove the model’s validity and the final change in value. I do not have any actual cash invested in railroad stocks, and issue a caution to novice investors: please do not get involved unless you have a sophisticated understanding of stocks. This system is designed to illustrate how to build and work the model correctly.

If you have read the prior posts related to the Railroad Fund, you will note that I start with $10,000 as my initial investment. My model started on 10/21/19, and today is 11/15/19; it’s 26 days later, for the sake of argument, 27 days total. During this period, I would select certain railroad stocks and invest $2,500 in that particular stock. So far, I have bought 3 stocks. One of those stocks was Canadian Pacific, which the model sold today upon reaching the sell trigger point. Basically, the model looks for a peak price, which, back on September 2nd, 2019, was $241.47. The model I built uses various inputs, cycles, and relies on business ratios to trigger a buy once the stock decreases in value by at least 10% from a peak. Based on the historical pattern, Canadian Pacific would recover within three to four months. In this case, it recovered much faster than anticipated. Nonetheless, it did recover according to the model.

The key to my concept dealing with value investing is patience. Now the model tells me to wait patiently for the Canadian Pacific Railroad to decrease by 10% from a peak point. This could happen quickly, or it may take months, even up to a year, before this happens. It doesn’t matter; the key is to be patient. There are five other railroads in the market for me to work with. I’ve built a buy-sell model for each, and I continue to wait.

Here are the results for Canadian Pacific:

Bought 11.36415 shares for $218.99 each (this is 9.3096% less than the peak). My start date missed the 10% decrease point, which was a few days before the portfolio started, thus I bought them anyway to get the model started. I estimated the cost per share at $1 each.

Buy 11.36415 shares of Canadian Pacific $2,488.64
Cost of Purchase    11.36
Total Cost $2,500.00
Sold 11.36415 shares on 11/15/19 @$241.47/ea 2,744.10
Cost to Sell    (11.36)
Net Proceeds $2,732.74
Gain on Sale $232.74
Return on Investment 9.31%
Annualized => 100%, remember the above return was over 27 days.

Fund as a Whole: Market Value of Fund:
Beginning Balance $10,000.00 Stock Holdings at Current Trading Price 11/15/19 $5,028.34
Net Gains to Date 232.74 NS @$191.07, 13.52375 Shares = $2,583.98
Dividends Earned to Date 12.71 CSX @$71.61, 34.13435 Shares = $2,444.36
Fund Basis 11/15/19 $10,245.45 Cash Balance $5,232.74
. Dividends Receivable (NS) 12.71
. Total Market Value of Fund $10,273.79

The difference between the fund basis and the market value is the unrealized gains, i.e., the amounts I would earn if I sold the other two holdings in this portfolio.

The railroad fund is performing well, in excess of 40% annualized return on my investment for the first month; however, I do have some concerns. First off, right now I have $5,232.74 not working for the fund at all. Cash sitting in a bank account isn’t making the money. The other part is that none of the other railway investments have met any of my triggers to buy, and only one looks like a viable option, but it is still not close to the buy trigger point. Norfolk Southern is doing well, but it still has a long way to go. Thus, the problem with patience is that it sometimes isn’t making you money. What do I do in the interim? That’s for another post.

For now, the portfolio is performing well and is following the model constructed. Patience is the key. It was a good day today selling Canadian Pacific. Act on Knowledge.