Value Investment Fund – Status 11/07/2020
The DOW Jones Industrial Average increased 6.115% during this past week and the Investment Fund increased 8.585% during the same time period.
Value investing is a systematic process of purchasing high quality, intrinsic backed stocks at depressed market prices. Using financial analytics, allow time for market price recovery and then proceed to reap gains from an investor’s patience.
The DOW Jones Industrial Average increased 6.115% during this past week and the Investment Fund increased 8.585% during the same time period.
The definition of value investing is elusive, more so because it is more of a concept than an actual formula or derivative. It goes beyond just owning stock at a good price, i.e. trading less than intrinsic value; it also refers to selling stock when the market price exceeds a reasonable value for the stock.
During year one of the Value Investment Fund’s existence, it out performed the DOW by 353%. After evaluating results and using a lessons learned process, adjustments were made and now the investment fund starts year two of the fund’s existence.
This post covers the core tenets and principles of value investing and why they are applicable related to understanding value investing and any results during interim periods.
Join the value investing club and learn about value investing and how you can easily acquire similar results with your investment fund. Upon joining, you’ll receive the book Value Investing with Business Ratios, a reference guide used with all the decision models you build. Each week, you receive an e-mail with a full update on the pools. Follow along as the Investment Fund grows. Start investing with confidence from what you learn. Create your own fund and over time, accumulate wealth. Joining entitles you to the following:
1) Lessons about value investing and the principles involved;
2) Free webinars from the author following up the lessons;
3) Charts, graphs and resources to use when you create your own pool;
4) Access to the existing pools and their respective data models along with buy/sell triggers;
5) Follow along with the investment fund and its weekly updates;
6) White papers addressing financial principles and proper interpretation methods; AND
7) Some simple good advice.
Real Estate Investment Trusts (REITs) are considered excellent long-term investments. There are two underlying reasons. First, under the Internal Revenue Code, they are considered income tax free investments.
From the Lessons Learned article posted a few days ago, in order to gain higher returns, the investment model needs to have greater dispersion with my buy/sell trigger points in its model. Last year, the buy/sell triggers for Union Pacific were a 17% market price decrease from the prior peak and to sell at 100% of prior peak.
This purchase point is driven by the model update whereby market price decreases must hit 18% decrease and the sell point increases to 102% of the prior peak price. This post covers the model update and the associated dollar amounts tied to Union Pacific.
This morning at the market opening, the railways pool of the Value Investment Fund purchased 98.2849 shares of Norfolk Southern at $202.49. Altogether, including transaction fees of $1 per share, the fund invested $20,000.
At close of business today, 10/26/2020, the REIT pool of the value investment fund purchased 606.9803 shares of UDR, Inc., United Dominion Realty Trust, at $32.95/Each including transaction fees of $1 per share.
A primary tenet of good business management is to constantly and consistently evaluate outcomes of decisions made; make adjustments and reevaluate the new results.
When selling PUTs in the market, value investors cover their position by purchasing a similar position in an existing low price to book stock. In effect, the position acts as a bank account in case the PUTs are activated, thus the existing stock is sold and the proceeds are used to cover the PUTs financial obligation.
Today, I sold 59 PUT options for Union Pacific with a strike price of $170.00 with a final date of February 19, 2021. PUTs are simply selling insurance that if the stock price drops to $170 per share, the Value Investment Fund will have to buy them from the owner of the puts.