The post Compliance with PUT Options Contract for Essex Property Trust first appeared on ValueInvestingNow.com.
]]>This site’s Value Investment Fund had to comply with with two separate PUT options contract for Essex Property Trust sold back in late May and mid June of 2022. The combined total of both contracts were for 180 shares with strike prices as follows:
- 80 Shares @ $260 each for a total cash investment requirement of $20,880 including transaction fees;
- 100 Shares @ $240 each for a total cash investment requirement of $24,100 including transaction fees.
Transaction occurred on October 21, 2022. Total cash requirement to comply equaled $44,980. The cash position in the bank on October 14th was $3,239. In order to have the cash available on Friday the 21st, the Fund had to sell an existing position in one of its investments in order to timely raise the cash needed. On October 19th in the morning, the Fund sold 985.3567 shares of Wells Fargo. Shares of Wells Fargo were sold at $45 each and netted $44 each after transaction fees. Total cash raised was $43,355.69.
With a cash balance on the 21st of $46,595, the Fund complied with the terms of both option contracts and fulfilled its legal obligation. This left a cash balance of $1,615.
As for the Wells Fargo transactions. Here are the results:
Sold 985.3567 Shares Wells Fargo at $45.00 – Gross Sales Proceeds $44,341.05
Transactions Fees at $1/Share (985.36)
Net Proceeds from the Sale of Wells Fargo $43,355.69
Basis in Stock 35,732.50
Gain from the Sale of Wells Fargo $7,623.19
Total Dividends Earned During the Holding Period 1,990.42
Total Realized Earnings $9,613.61
Holding Period 639 Days; Average Annual Return 13.83%
For a full recap of this transaction, read: Sold Wells Fargo.
Basis per share of the 100 remaining shares is $4,267.50, $42.68 per share.
In summary, one of the primary goals of value investing is to minimize risk. But, when repercussions of risk unfold, wise value investing makes associated cost negligible. Recall from prior articles, this site’s Value Investment Fund earned $1,714 from the sale of those PUT Option contracts on Essex property Trust. Furthermore, Essex Property Trust is a REIT and as such, it is required to pay out dividends every quarter. The current quarterly dividend is $2.20 per share. Thus, the average cost investment net of PUT Option proceeds is $240.37 per share. With annual dividends of $8.80, the dividend yield is 3.67%. This is after all transaction fees involved. This is a pretty respectable dividend yield. Once the price per share hits $300, the Fund will proceed to sell this investment and earn an outstanding return on the investment. Act on Knowledge.
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]]>The post Bought 100 Shares of Avalonbay Communities first appeared on ValueInvestingNow.com.
]]>This morning, the Value Investment Fund purchased 100 shares of Avalonbay Communities Inc. The Fund paid $160 per share plus a $1.00 fee. In addition, the Fund utilized the margin account and paid a 2% fee. Thus, the total basis in this transactions is as follows:
Market Price $16,000.00
Transaction Fee 100.00
Margin Fee 322.00
Total Basis $16,422.00
The post Bought 100 Shares of Avalonbay Communities first appeared on ValueInvestingNow.com.
]]>The post Sold PUT Contract for Essex Property Trust first appeared on ValueInvestingNow.com.
]]>This morning, the Value Investment Fund sold a PUT contract on Essex Property Trust for 100 shares. The contract is for $10 a share netting $9 per share after fees of $1 per share. The expiration date is set for October 20, 2023 with a strike price of $200.00 per share. See this table:
For those readers unfamiliar with the company. Its intrinsic value is estimated at $280 per share and it peaked at $353 in March of 2022. As a real estate investment trust it pays more than 90% of its earnings as dividends. In two weeks, this company will issue a dividend of $2.31 per share and it is expected to continue this dividend payout each quarter. This is a highly desirable investment because at $200 per share, the annual dividend yield exceeds 4.5%.
The REIT’s pool on this website has this stock as a buy at $260 per share. Overall, the Fund desires to purchase this investment at $200 per share and will act on this if the price does drop to $200 per share in the interim period. Act on Knowledge.
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]]>The post Purchased 100 Shares of Essex Property Trust, Inc. first appeared on ValueInvestingNow.com.
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On Friday afternoon, just prior to market closing, this site’s Value Investment Fund purchased 100 shares of Essex Property Trust, Inc. at $221.21 per share. With the $1 per share transaction fee, total investment was $22,221.
This transaction acts as an insurance purchased against the existing PUTs due on October 19, 2022. More to come. Act on Knowledge.
The post Purchased 100 Shares of Essex Property Trust, Inc. first appeared on ValueInvestingNow.com.
]]>In addition, the Fund sold a PUT option for 100 shares at $9.90 netting $8.80 per share. The strike price is $240 per share with an expiration date of October 21, 2022.
The post Bought Essex Property Trust first appeared on ValueInvestingNow.com.
]]>On June 14, 2022, the Value Investment Fund purchased 77.7000 shares of Essex Property Trust at $256.40 per share. Adding the $1 per share transaction fee, a total of $20,000 was invested into this security.
In addition, the Fund sold a PUT option for 100 shares at $9.90 netting $8.90 per share. The strike price is $240 per share with an expiration date of October 21, 2022.
The underlying justification is as follows:
1) The intrinsic value for Essex Property Trust is greater than $280 per share;
2) This is a Real Estate Investment Trust (REIT) with significant tax advantages;
3) On June 30th, a $2.20 dividend per share will be issued;
4) REITs’ are solid operations.
Total netted from the sale of PUTs equals $890. With this sale, the Fund has two option contracts on Essex Property Trust, both expiring in October. One contract is for $260 per share and this contract at $240 per share. Act on Knowledge.
The post Bought Essex Property Trust first appeared on ValueInvestingNow.com.
]]>The post Essex Property Trust, Inc. – Sold PUTs first appeared on ValueInvestingNow.com.
]]>This morning at 11:14 AM (05/25/22), the Value Investment Fund sold 80 PUTs on Essex Property Trust, Inc. at $11.30 netting $10.30 each after transaction fees. These PUTs have a strike price of $260 each and expire on October 21, 2022.
The Fund uses options, specifically PUTs, to augment the income and boost the overall return of the Fund. The concept is simple. The Fund wants to own certain pre-qualified investments at certain prices; that is, market prices that are well below intrinsic value as calculated for the respective investments. These investments are basically top 2,000 companies trading in the United States, have a good history of performance and are highly stable. Currently, there are 49 researched potential investments spread among 8 different industry pools. Within the REITs Pool sits a well respected and well managed REIT, Essex Property Trust, Inc.
In January of 2021, the Fund evaluated Essex Property Trust and determined intrinsic value at about $256. It updated that intrinsic value calculation to $286 this past week. Yesterday, the Fund purchased 71.6846 shares at $278 a share and a $1 per share transaction fee. As the market price for a particular investment goes down, an option price for a PUT actually increases. Thus, a seller of a PUT, in this case, the Fund, can sell this insurance policy to a buyer at a better price. In this case, the strike price is $260 per share and a buyer is willing to pay $11.30 to the seller to force the Fund to buy this stock from the current owner at $260 per share. Naturally, the owner would only exercise this option if the price ever falls below $260 per share; typically it would need to fall at least $5 per share lower to make the owner (buyer) enforce the policy; that is, make the Fund buy the shares from the holder of the PUT. The current owner of the stock is concerned that the price will continue to fall and wants to get out of their position for $260 per share.
As noted in the year-end report for December 31, 2021; the Fund is allowed to sell PUTs obligating the Fund for a maximum of $62,603. The Fund currently has exposed positions as follows:
- Union Pacific Railroad – Sold in Feb 2020 with a strike price of $155/share and an expiration date of January 21, 2023 $20,000
- Huntington Ingalls Industries – Sold in January 2022 with a strike price of $170/share and an expiration date of June 17, 2022 $20,000
- JPMorgan Chase & Co. – Sold in May 2022 with a strike price of $80.00/share and an expiration date of June 16, 2023 $20,000
The Walt Disney Company – Sold in May 2022 with a strike price of $105.00/share and an expiration date of October 21, 2022 $21,200Exercised on May 12th- Essex Property Trust, Inc. – Sold in May 2022 with a strike price of $260.00/share and an expiration date of October 21, 2022 $20,880
Total obligation if all four positions in PUTs are exercised at once: $80,880. However, please note that the Huntington Ingalls Industries position expires in three weeks. The Fund’s Facilitator authorized a deviation from the limit due to the fact that two of the positions in PUTs are more than 28% less than current market prices. It is so unlikely the market will drop this much during the next five months when the Essex Property Trust, Inc. option expires. In addition, the Fund is currently sitting on $44,000 of cash to comply with any fulfillment requirements for the two options currently ‘near the money’, i.e within within 15% of the strike price. The closest being Essex Property Trust, Inc. at 8.5% of the strike price ($260 X 1.085 = $282). The Fund’s Facilitator agrees to hold back a minimum of $20,000 until Huntington Ingalls Industries option expires June 17, 2022. In effect, only $24,000 is currently available to take advantage of any possible opportunities to buy low. Given the resistive nature of high quality companies to mirror the market as it takes deep dives in valuation, it is highly unlikely any of these option positions will have to be exercised. However, it would be welcomed if any of them could come to fruition as value investing is structured around buying securities at extremely low prices.
Current market prices (05/25/22) for the respective possible commitments are:
- Union Pacific Railroad – $217.42 Strike Price $155.00
- Huntington Ingalls Industries – $206.07 Strike Price $170.00
- JPMorgan Chase & Co. – $127.25 Strike Price $80.00
- Essex Property Trust, Inc. – $284.17 Strike Price $260.00
Finally, REITs are excellent investments due to their legal requirement to distribute earnings to shareholders. Under the U.S. Tax Code, REITs must distribute as dividends at least 90% of earnings each year. Essex Property Trust’s next dividend is July 15th for holders of record on June 30th. The dividend is $2.20 making this particular stock’s dividend yield at $260 per share a smart 3.38% annually. Act on Knowledge.
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]]>The post Essex Property Trust – Value Investment Fund Buy first appeared on ValueInvestingNow.com.
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Today, May 24, 2022, at 10:50 AM the market price for Essex Property Trust, Inc. dropped below the ‘Buy’ point of $278 triggering the ‘Buy’ at $278 per share. Altogether, the Fund purchased 71.6846 shares. Total investment including a $1 per share transaction fee was $20,000.
Recently, the Fund reevaluated Essex Property Trust, Inc. and increased the company’s intrinsic value to $285 per share. In an article written in January of 2021, the Facilitator determined intrinsic value at $256 per share. In the course of one year, many market forces have elevated this intrinsic value higher. With real estate investment trusts (REITs), intrinsic value is strongly tied to fair market value of properties. At the end of 2020, the overall fair market value of the entire portfolio of apartments for Essex was estimated at net assets value (adjusted for closing costs, costs to sell, pay-off of associated debt and costs to eliminate book balance of financing outlays) of $19.14 Billion. This made each share worth approximately $283. During the last 16 months, the market value of real estate has jumped over 16%. Using a mere 12% adjustment to this portfolio, the modified net assets value now exceeds $21.8 Billion. This alone adds $36 per share in value. Utilizing net assets value by itself warrants an intrinsic value of $319 per share. And this assumes only a 12% increase in value over 16 months.
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]]>The post Sold Equity Residential for $83 per Share/Purchased at $52 per Share first appeared on ValueInvestingNow.com.
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Throughout the last five months, over several different articles, the Fund stated that the goal for this particular investment within the REITs pool was to sell once the stock price hit $83 per share. On July 15, 2021 at 10:23 AM, the stock price hit $83 per share triggering the automatic sale of all 574.459 shares.
Total net receipts after deducting $1 per share for the transaction costs were $47,105.64 (574.459 * $82 net per share). Basis in this investment was $30,000 including the $1 transaction fee per share at purchase. Net earnings totaled $17,105.64.
There were two tranches purchased. One tranche was purchased on October 23, 2020 and the second tranche purchased on October 25, 2020. Average holding period was 265 days. Effective yield for the gain was 57%. When annualized, it equals 78.54%.
This doesn’t include the value of dividends received during this holding period. Total dividends earned were $1,039.20 (three dividend payments). Thus, cumulative earnings for Equity Residential over this 9 month period totaled $18,145. This equates to an annualized return of 83.3%.
Not bad for a few hours of work doing the research on this particular investment.
Equity Residential was a holding in the REIT’s pool of investments in this Fund’s portfolio. The COVID pandemic drove many of the members’ share price downward in early 2020. Due to rent collection restrictions imposed by the government, these particular investments were very slow in recovering from that dramatic market price decline. The Fund simply took advantage of this opportunity once the respective intrinsic values were calculated. The current market price at that time was more than 20% less than intrinsic value making these stocks incredibly cheap in comparison to other industries. Now it is time to collect on the good decisions made.
On a per share basis, this is the report:
- Sold the Stock on 07/15/21 for $83/Share $83.00
- Transaction Fees of $1/Share for Broker Fees (1.00)
- Net Proceeds from the Sale 82.00
- Average Purchase Price for Two Tranches (10/23/20 & 10/25/21) for $51.22
- Held the Stock for 265 Days (Weighted Average)
- Transaction Fee of $1/Share 1.00
- Basis in the Stock $52.22
- Gain on the Sale $29.78
- Actual Return on Investment ($29.78/52.22) 57.03%
- Effective Annual Return 78.54%
- Dividends Earned $1.81
Real Estate Investment Trusts – Equity Residential as a Member
Real estate investment trust investments are excellent overall investments. This site’s six member pool of apartment based REITs performs extremely well. There are several underlying reasons:
First, REITs are income tax free companies. They exist under a special Internal Revenue Code Section and as such are not taxed by the IRS and by many states where they operate. Secondly, REITs provide reasonable dividend yields. With the above Equity Residential position, Equity pays $2.38 per share per year and have always increased their dividend payout year after year. The basis of the investment was $52.22. Thus, at $2.38 per year dividend payments on $52.22, the dividend yield was a respectable 4.55%/Year. Even at $83 per share, it is a reasonable 2.86% per year.
Thirdly, REITs have excellent cash flow. Just like any real estate rental, cash flow is the core value real estate investments provide. REITs are no different. Operational cash flow per share for Equity Residential during the last twelve months (3rd & 4th quarter 2020, and the first six months of 2021) was an impressive $2.70 per share. This alone with a 4 percent discount rate means the stock is worth north of $40 per share and this assumes no growth! Thus, a REIT’s underlying value is always significantly greater than that company’s book value per share.
Hands down, when a REIT is purchased at less than intrinsic value, an investor will always reap excellent returns. The intrinsic value for Equity Residential is estimated at or near $72 per share with a book value around $29 per share. Anytime you can purchase this stock with a 15% or more discount to the intrinsic value, you will reap significant returns on your investment. This is a definite buy if the price drops below $61 per share. Please refer to the REIT’s pool for the respective models, buy and sell points and the corresponding business ratio outcomes. You must be a member of the Value Investment Club to have access to this information. Act on Knowledge.
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]]>The post Sold Essex Property Trust – 74.07% Annual Return first appeared on ValueInvestingNow.com.
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On June 18, 2021 at 2:56 PM, Essex’s share price dropped to $304 per share triggering a stop-loss order (explained in Phase Three of the Value Investment Membership Program) purchased a month earlier. This automatic sale of all 92.2638 shares netted $302 per share. The Value Investment Fund pays $1 per share for any transaction and also pays $1 per share for any option or market mechanism such as the stop-loss directive. Total adjusted sales revenue equals $27,863.67 ($302/Share X 92.2638 Shares). Basis in Essex Property Trust is $20,000 including the original purchase price plus the purchase transaction fee of $1 per share.
The Fund profited $7,863.67. The total holding period was 201 days. Thus, the actual return on the investment was 39.32%. The effective annual return equates to 71.4%.
Furthermore, during this time period, the Fund earned an additional $294.58 from dividends. Total cumulative earnings equal $8,158.25 on a $20,000 investment. Final effective annual return clears 74.07%.
On a per share basis, this is the report:
- Sold the Stock on 06/18/21 for $304/Share via Stop-Loss $304.00
- Transaction Fees: A) Sale of Stock $1, B) Stop-Loss Fee $1 (2.00)
- Net Proceeds from the Sale 302.00
- Average Purchase Price for Two Tranches (10/24/20 & 01/11/21) for $215.77
- Held the Stock for 201 Days (Weighted Average)
- Transaction Fee of $1/Share 1.00
- Basis in the Stock $216.77
- Gain on the Sale $85.23
- Actual Return on Investment ($85.23/$216.77) 39.93%
- Effective Annual Return 71.40%
- Dividends Earned $3.19
A stop-loss directive was implemented in May when the share price exceeded the targeted sale price set back in January 2021. The stock’s market price hit $316 per share and a stop-loss directive was issued to ensure a minimum $302 net proceeds from the sale. With $2 of fees, the stop-loss price was set to $304. The share price dropped to this value on June 18, 2021 triggering the stop-loss. Today, July 20, 2021, the market price per share is now over $330. The purpose of the stop-loss was to lock in the preset desired return on this investment calculated back in January of 2021.
There are several articles related to this particular stock and are as follows:
- First Tranche Purchase in October 2020 – 48.9644 Shares
- Second Tranche Purchase in January 2021 – 43.2994 Shares
- Intrinsic Value of Essex Property Trust January 2021
- Value Investing With Real Estate Investment Trusts – Analysis and Evaluation Techniques
In general, this stock was evaluated to have an intrinsic value of approximately $256 with a maximum value of around $283 for 2021. Shares were purchased at an average price of $217, basically a 15% discount against the low end of intrinsic value. For the next year, anytime the stock price drops below $255 per share, it is a ‘Buy’.
Overall, this was a solid and easy investment decision. It performed as predicted almost to the exact timing talked about in the articles written about Essex Property Trust. Act on Knowledge.
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]]>The post Purchased 43.2994 Shares Essex Property Trust first appeared on ValueInvestingNow.com.
]]>Today, the Value Investment Fund purchased a second tranche of Essex Property Trust. After calculating the intrinsic value of Essex Property Trust at $256, the REITs Pool allocated $10,000 for a second purchase of Essex Property Trust once the price dipped below $230 per share. Today, 01/11/21 at 12:38 PM, the stock price dropped to $229.95. Using a $1 per share transaction fee, the fund purchased 43.2994 Shares of Essex Property Trust; thus the total cumulative owned and invested is:
Essex Property Trust (Tranche #1) 48.9644 Shares on 10/24/2020; total basis of $10,000
Essex Property Trust (Tranche #2) 43.2994 Shares on 01/11/2021; total basis of $10,000
Thus, the fund’s cumulative investment for Essex Property Trust equals $20,000 owning 92.2638 shares with an average cost basis of $216.77 per share. The first tranche was purchased at $204.23 including the $1 per share transaction fee. Act on Knowledge.
Value Investing Episode 1 – Introduction and Membership Program
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