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.
A second purchased made at close of business yesterday is 48.9644 shares of Essex Property Trust, another REIT investment. The total cost per share including transaction fees is $204.23 per share (closing price is $203.23).
This post is to record the value investing fund’s purchase of 192.12296 shares of Equity Residential, a real estate investment trust (REIT) for the value investment portfolio.
On October 22, 2019 the Dow Jones Industrial Average was 26,823 (market opening). Today, October 18, 2020 the Dow Jones Industrial Average is 28,607. The DOW improved 6.65% in the course of one year (technically 361 days).
On October 22, 2019, I started out with $10,000 in a value investing based railroad fund. Today, the fund has a cash balance of $12,351.96 with no receivables nor stock position. This means, the fund had a return of $2,351.96 or a 23.52% return on the original basis of $10,000. This means, the fund performed 353% (a factor of 3.53) greater than the Dow Jones Industrial Average in the same time period.
How did this fund outperform the market? Two words explain the result – Value Investing.
Value investing is a style of investing whereby the investor uses business ratios to evaluate and set buy sell points for each of the respective stocks within a pool of stocks. The pool consists of similar companies within an industry. Each company within this pool has a buy/sell point and with this knowledge, the value investor simply waits for a trigger, a buy/sell point to occur, and automatically acts on the preset action. The results are undeniable, value investing generates significantly greater returns over the long run than the market does as a whole. It is simply a model that reduces risk and maximizes return on that investment pool.
On 09/14/2020, Norfolk Southern Railroad’s price hit $220.13 at opening. I set my sell point via an automatic sell at $219.88 and thus the shares automatically sold at $220.13.
Railroad stock offers good upside potential with very little risk involved. This particular railroad fund is outperforming the DOW Jones Industrial Average by a factor of three.
49.060606 Shares of Norfolk Southern Corporation – Closes at $175.82/Share FMV = $8,625.84 (Avg Buy Price/Share = $203.83 for Basis of $10,000.00)
Cash Position including recent dividend payment from NSC = $1,555.16
Total Fund Balance = $10,181.00
FMV Gain as a % Since Inception: = 1.81%
Value investing is a principle of investing whereby the investor uses ratios and comparative analysis of similar investments over an extended period of time. In this case, I compared the six publicly traded Class I railways in the United States. Then based on the results, I exercise buy and sell points for each stock within the fund. In this case, Union Pacific Railroad’s prior peak (high selling price) was $188.96.
If you think of the economy as a train pulling a load on the track, you would base its near future position on its current and historical trend. It is unlikely its current speed will change; thus, we can predict its future position with some degree of confidence.
There are six Class 1 Railways traded in the US market. If you look at each railway’s respective annual and quarterly filings, all of them report certain key performance indicators (KPIs).
In yesterday’s post, I indicated that if Union Pacific’s share price drops to $156.79 that the fund would use its excess cash to purchase shares.
