Sold Norfolk Southern Railroad – 31.64% Annual Return

Today, March 4, 2024 just after 2PM, Norfolk Southern Railway’s stock surpassed $260 per share. The Value Investment Fund proceeded to sell the stock and net $259 per share after paying a $1 per share transaction fee.

The fund is proceeding to sell several of its investments in order to clear the Margin Account per the terms of the special loan account. Terms require the Investment Fund to completely pay all monies borrowed at least once a year to protect the lender’s position. In effect, the Fund must carry a ZERO balance for 14 days in accordance with the terms. Renewal date is 03/10/24; thus the Fund must clear the margin account and then wait until almost month’s end to borrow again.

The Margin Account requires a 2% closure fee on the original borrowed amount. In this case, total capital borrowed was $60,104 over two tranche purchases. Therefore, the fee paid to close out this capital draw was $1,202.08. The financial outcome is as follows:

Gross Sale of 300 Shares at $260.00/Share               $78,000.00
Transaction Fees to Dispose                                           (300.00)
Net Proceeds from Sale                                             $77,700.00
Closure Fee from Margin Account                               (1,202.08)
Basis in Stock                                                             (65,524.33)
Gain on Sale of Norfolk Southern Railroad               $10,973.59
Dividends Earned During Holding Period                     1,080.00
Total Earnings                                                            $12,053.59
Average Cost Basis:
Tranche #1 Purchased on 04/27/2023 (313 Days)     $17,324.76
Tranche #2 Purchased on 09/29/2023 (158 Days)       17,530.40
Average Basis of Margin Account Interest Paid            3,237.35
Total Average Basis                                                    $38,092.51

Average Annualized Return on Investment                    31.64%

Cash Reconciliation:
     Net Proceeds                                                $77,700.00
     2% Closure Fee                                              (1,202.08)
     Loan Payback                                                60,104.00
     Net Cash From the Sale                               $16,393.92

     Gain on Sale of Stock                                  $10,973.59
     Interest Paid to Margin Account                      5,420.33 *Dollar Amount Recovered at Point of Sale
     Net Cash from the Sale                                $16,393.92

Overall, a decent return on the risk given that the Fund used borrowed capital to make the investment. Using a margin account is a sophisticated tool taught in Phase III of this site’s lessons about value investing. Act on Knowledge.