The post Huntington Ingalls Industries – Sold PUTs November 2024 first appeared on ValueInvestingNow.com.
]]>During the morning of November 1, 2024, Huntington Ingalls Industries – HII reported its third quarter results. HII had several financial setbacks causing the market price of this stock to drop dramatically. Within 30 minutes, the stock price dropped $60 from $250 to below $190.
When a stock price drops this much in a short period of time, it is an opportunity to sell PUTs and make some quick cash. The Value Investment Fund sold 500 PUTs @13.70 each. Each PUT costs $1 for the respective transaction fee. The Fund netted $6,350. The strike price is $185 with a June 20, 2025 expiration date. In effect, the Fund is projecting that the market price will be above the strike price of $185 and thus, the PUTs will simply expire at that time.
Here’s the market price for June 20, 2025 PUTs:
If the market price for HII is less than $185 per share, the Fund must spend upwards of $185 per share for 500 shares or up to $92,500 to comply with the terms of the PUTs.
Recall from a prior article, PUTs are an similar to an insurance arrangement. The buyer agrees to pay the seller a certain value to protect their investment if the price goes below a certain point – strike price. During the last five years, Huntington Ingalls Industries stock price has been below $185 for a total of twelve months due to the market setback driven by COVID in early 2020 thru the end of 2020. See this graph for evidence:
The Value Investment Fund has determined the intrinsic value to approximate $200 per share adjusted to 2024 from the intrinsic calculation performed in 2021. This is a highly stable and solid investment with very little downside risk. Simply stated, it is wonderful investment if the market price drops below $195 per share. Furthermore, selling PUTs with long windows of time to recover from current depressed market value is an opportunity to make some quick cash. Act on Knowledge.
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]]>The post Huntington Ingalls Industries – Bought 200 Shares first appeared on ValueInvestingNow.com.
]]>On Friday the 1st of November 2024, Huntington Ingalls Industries’ (HII) shares dropped $60 in the market due to their financial outlook as reported in their quarterly reporting. The current intrinsic value is approximately $210 per share. The Value Investment Fund purchased these shares at $190 each and paid a $1 per share transaction fee.
The Fund utilized its margin account to finance the purchase. This requires a 2% fee on the amount borrowed. Total amount borrowed was $38,000. The Fund utilized its cash to pay the 2% fee of $760 and the $200 fee to purchase the shares. Total basis in the shares stands at $38,960 per share.
The share price ended the day at $189.23.
Huntington Ingalls Industries (HII) is highly stable and relatively secure investment. Furthermore, it is one of the top 2,000 companies worldwide. The downside risk is low; during the last five years, the lowest market price for this investment was $140 per share back in 2020. The upside is a price above $290 per share. Act on Knowledge.
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]]>The post Warner Brothers Discovery – More Shares Please first appeared on ValueInvestingNow.com.
]]>On Friday the 25th, the Value Investment Fund proceeded to purchase another 3,000 shares of Warner Brothers Discovery. The market price at time of purchase was $7.75 per share and the transaction fee per share is 25 cents. Thus, the Fund invested $24,000 even to own 3,000 more shares bringing the total ownership position to 4,300 shares to date.
Total basis in the 4,300 shares is now $35,932.
This particular stock is currently trading at less than $8/Share. It peaked at $51/Share back in April of 2021. The key is that its current book value is $14/Share and the cash flow from operations per share over the last 18 months is $3.80 per share. What is driving the financial loss on the income statement over the last three years are the write-down of the goodwill and other amortizable intangibles. At some point, this company is going to start showing positive quarterly results. When it does, the stock price is going to soar and if it can do it four quarters in a row, it is possible the stock price will double in value and keep rising.
The Fund’s current sale price is $25/share and anticipates it will take 30 months to get there. But when it does, it will generate $71,000 of profit or an annualized return greater than 40% per year. Act on Knowledge.
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]]>The post Purchased Warner Bros. first appeared on ValueInvestingNow.com.
]]>Just before 10 AM this morning on the 7th of March, 2024, the Value Investment Fund purchased 300 shares of Warner Bros. Discovery, Inc. Series A stock from the Entertainment Pool of potential investments. Total investment is $2,622 including transaction fees of 25 cents per share. Purchase price was $8.49 per share.
Current book value of Warner Bros is approximately $18 per share; cash flow per share exceeds $3. Cash flow from operations is $7.5B with 2.5B shares outstanding.
The current driving forces on the depressed stock price are the two years in a row of net losses ($10.4B combined). The stock price has dropped $17 per share in two years. The actual loss sustained per share is right around $6. Thus, the market price is well below justifiable depression and the intrinsic value easily exceeds $14 per share. Thus, a good opportunity for a value investor. Act on Knowledge.
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]]>The post Sold Wells Fargo – 34.59% Annualized Return first appeared on ValueInvestingNow.com.
]]>Wells Fargo crossed the $57 per share threshold this afternoon just after 2PM ET. The last time Wells Fargo hit $57 per share was back in February 2022. The only issue holding Wells Fargo from achieving more than $65 per share is the restriction imposed by the Federal Reserve which is now over five years old. It looks like at least another year to finally get released. The Value Investment Fund set a sell order at $57 per share. Transaction fees are $1 per share. Here are the results:
Gross Sale of 500 Shares of Wells Fargo at $57 Each $28,500.00
Transaction Fees at $1 Each (500.00)
Net Proceeds from Sale $28,000.00
Basis in Stock 20,071.50
Taxable Gain $7,928.50
There were two tranches of Wells Fargo:
- 100 Shares from 01/15/21 (1,145 Days) with a basis of $3,200.00; Net $5,600.00 for a return of $2,400 or $2.096 per day or a 23.9% return.
- 400 Shares from 04/17/23 (324 Days) with a basis of $16,871.50. Earned $5,528.50 or $17.06 per day or a 36.91% return on the investment.
During this time period, Wells Fargo paid out $724 in dividends. Therefore, the effective return from this investment equaled an annualized 34.59% including the return with dividends.
From the proceeds, the Fund paid off the remaining balance of the Margin Account plus the 2% fee of $508.35. Total amount paid out to the Margin Account $25,925.73. Therefore, the cash account for the Fund increases by $2,074.27.
Overall, Wells Fargo turned out to be a reasonable investment. It took longer than expected to recover from the market dip, but still it turned out well. Act on Knowledge.
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]]>The post Purchased Choice Hotels first appeared on ValueInvestingNow.com.
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This morning 03/05/24, the Value Investment Fund purchased 100 shares of Choice Hotels. The market price is $109.46 per share at opening. The Fund pays a $1 per share transaction fee into an accounting pool account that covers the costs of actual broker fees, website activity, professional fees and maintenance fees for the website. Total investment is $11,046.00.
The predesignated sale price is $141.00 per share to net $140 per share. Act on Knowledge.
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]]>The post Sold Norfolk Southern Railroad – 31.64% Annual Return first appeared on ValueInvestingNow.com.
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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.
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]]>The post Value Investment Fund – September 30, 2023 first appeared on ValueInvestingNow.com.
]]>Value Investment Fund – Status on September 30, 2023
. September 30, 2023 August 31, 2023 September 30, 2023
. # of Shares Cost Basis Net Market Price* Net Fair Market Value* Net Fair Market Value*
REITs
. – Essex Property Trust, Inc. (Tranche #1) 71.6846 $20,000.00 $211.09 $17,010.04 $15,131.91
. – Essex Property Trust, Inc. (Tranche #2) 77.7000 20,000.00 211.09 18,437.43 16,401.69
. – Essex Property Trust, Inc. (Tranche #3) 100.0000 22,221.00 211.09 23,729.00 21,109.00
. – Essex Property Trust, Inc. (Tranche #4) 180.0000 44,980.00 211.09 42,712.20 37,996.20
. Sub-Total 429.3846 107,201.00 $101,888.67 $90,638.80
. – AvalonBay Communities 100.0000 17,581.38 170.74 $18,770.00 $17,074.00
Railroads
. – Norfolk Southern Railroad (Tranche #1) 100.0000 21,624.01 195.93 $20,401.00 $19,593.00
. – Norfolk Southern Railroad (Tranche #2) 200.0000 40,895.12 195.93 -0- 39,186.00
. Sub-Total 300.0000 62,519.13 $20,401.00 $58,779.00
Entertainment
. – The Walt Disney Company (Tranche #1) 180.1801 20,000.00 $80.05 $15,005.40 $14,423.42
. – The Walt Disney Company (Tranche #2) 200.0000 21,200.00 80.05 16,656.00 16,010.00
. – The Walt Disney Company (Tranche #3) 198.0198 20,000.00 80.05 16,491.09 15,851.48
. – The Walt Disney Company (Tranche #4) 100.0000 9,096.09 80.05 8,328.00 8,005.00
. Sub-Total 678.1999 70,296.09 $56,480.49 $54,289.90
Banking
. – Wells Fargo (Tranche #1) 100.0000 4,267.50 39.86 $4,029.00 $3,986.00
. – Wells Fargo (Tranche #2) 400.0000 15,804.00 39.86 16,116.00 15,944.00
. Sub-Total 500.0000 20,071.50 $20,145.00 $19,930.00
Dividend Receivables (Essex/AvalonBay) -0- 1,156.88
Cash on Hand (Basis, Gains, Dividends, PUTS) 3,243.57 1,752.98
Totals (Starting Cost Basis = $100,000) $277,669.10 $220,292.56 $243,621.56
Accrual adjustment for taxes 4,617.33 10,348.07
Totals Net of Taxes (Recapture) $224,909.89 $253,969.63
Margin Account (AvalonBay/Norfolk Southern/Disney Purchase) (45,817.38) (85,521.38)
This portfolio’s value is AFTER TAXES of 28% on all realized gains. Total taxes paid to date 35,508.50 36,921.63
Comparative Gross Return Since Inception $214,601.01 $205,369.88
Unrealized Earnings (Value of Respective Market Prices Less Cost Basis & Fees at Point of Sale) $(18,660.48) $(36,957.40)
*Net of transaction fees of $1.00 per share; thus, the amount in the schedule equals the actual market price per share at closing less $1.00 per share.
Value Investment Fund – Potential Obligations
The Value Investment Fund’s current exposure related to PUT options is as follows:
Norfolk Southern Corporation – sold in September (200 Shares) with a strike price of $145 and an expiration date of January 21, 2024 $29,200
L3 Harris Technologies – sold 12/30/22 (100 Shares) with a strike price of $150 and an expiration date of October 20, 2023 $15,100
Marriott Hotels – sold 12/30/22 (100 Shares) with a strike price of $90 and an expiration date of January 19, 2024 $9,100
Essex Property Trust – sold 03/17/23 (100 Shares) with a strike price of $200 and an expiration date of October 23, 2023 $20,100
Norfolk Southern Corporation – sold 09/29/23 (200 Shares) with a strike price of $185.00 and an expiration date of June 21, 2024 $37,200
The Walt Disney Company – sold 07/18/23 (300 Shares) with a strike price of $85 and an expiration date of June 21, 2024 $25,800
*Total financial commitment = $136,500
Market prices on September 30, 2023 are:
- L3 Harris Technologies (Expiration 10/20/23) $174.12 (Strike Price of $150.00) Current Deviation = 16.08%
- Essex Property Trust (Expiration 10/20/23) $212.09 (Strike Price of $200.00) Current Deviation = 6.04%
- Marriott Hotels (Expiration 01/19/2024) $196.56 (Strike Price of $90.00) Current Deviation = 118.40%
- Norfolk Southern Corp (Expiration on 01/21/24) $195.93 (Strike Price of $145.00) Current Deviation = 35.12%
- The Walt Disney Company (Expiration on 06/21/24) $81.05 (Strike Price of $85.00) Current Deviation = (4.65%)
- Norfolk Southern Corp (Expiration on 06/21/24) $195.93 (Strike Price of $185.00) Current Deviation = 5.91%
*Deviations > 25% are considered favorable.
1st Quarter Earnings Summary:
- Gains from Securities $20,412.00 *Comerica Bank
- Dividends 2,131.53
- Sale of PUT Option Contracts 1,840.00
Sub-Total 1st Quarter Earnings $24,383.53
2nd Quarter Earnings Summary:
- Dividends $1,441.88
3rd Quarter Earnings:
- Norfolk Southern Dividends $135.00
- Wells Fargo Dividends 175.00
- Essex Property Dividends 991.88
- AvalonBay Dividends 165.00
- Sale of PUT Option Contract (NSC) 1,720.00
- Sale of PUT Option Contracts (Disney) 1,860.00
Sub-Total 3rd Quarter Earnings $5,046.88
Total Earnings to Date 2023: $30,872.29
Realized Return Year-to-Date 2023: 21.378%
Taxes Paid Year-to-Date 2023: $8,644.24 ($30,872.291*.28)
The post Value Investment Fund – September 30, 2023 first appeared on ValueInvestingNow.com.
]]>The post Buy Norfolk Southern Corporation (Railroad) first appeared on ValueInvestingNow.com.
]]>Today, September 28, 2023, this site’s Value Investment Fund purchased another 200 shares of Norfolk Southern Corporation (Railroad) utilizing its margin account to fund the transaction. The price per share at closing was $197.38. The Fund paid $197.52 per share. Total costs to purchase the 200 shares are as follows:
Market Price/Share @ $197.52 at 3:56PM (200 Shares) $39,504.00
Transaction Fee/Share @ $1.00 each 200.00
Margin Fee @ 2% for Purchase ($39,704.00 X .02) 794.08
Total Capital Outlay (Fund’s Basis) $40,498.08 ($202.49/Share
The historical market price for Norfolk Southern Corporation has only dipped below $170.00 per share once in the last three and three quarter years. This occurred during the pandemic market chaos in March of 2020 (as indicated by red circled zone). The share price peaked at $271 as marked by the red line. Look at this basic presentation chart:
Take note of two key items. First, earnings per share are $11.11 during the last twelve months. In addition, dividends per quarter are $1.35 or currently tracking $5.40 per year for a 2.73% dividend yield. This is really good. One could hold this investment for several years while a value investor waits for the price to return to $250 plus per share to sell the security. Assuming it takes two years to get there, the investment will pay $10.80 in dividends and with a basis of $203.29 (includes the $1 per share transaction fee to sell the stock); total return at $250 sales price per share will equal $57.51 per share on an initial outlay of $202.29. This equates to a little over a 13% annualized return on the investment.
Imagine the return on the investment if this happens within one year? It will be over 26%.
This investment matches all the requirements a value investor seeks:
- A high quality company, a market capitalization of $44 Billion places this company in the top 1,200 U.S. operations;
- Low down side risk associated with the stock’s market price, see the chart above;
- Purchase price is below intrinsic value of $206 per share;
- Market price recapture capacity is high due to the high stable earnings of this company.
In addition, the Fund has sold a PUT Option contract for 200 shares with an expiration date of June 21, 2024. Gross earnings are $1,920.00 (200 shares at $9.60) with a net return after transaction fees of $1,720.00. The strike price is $185.00 per share.
The facilitator of this Fund has written multiple articles about Norfolk Southern Corporation and has made multiple trades as recorded on this website, all of them successful returns on the respective investment. Furthermore, the most recent financial filing with the Securities and Exchange Commission shows Norfolk Southern Corporation earning $576 Million net of reserving $416 Million to address the accident that happened in Ohio. Furthermore, key performance indicators show the company just slightly behind the volume of tonnage at this same point last year. Last year the price per share was $223 per share.
Thus, the low price per share is temporary and once the quarterly report posts in late October, early November for the third quarter, there is a high probability of market price recovery. Act on Knowledge.
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]]>The post Value Investment Fund – August 31, 2023 first appeared on ValueInvestingNow.com.
]]>Value Investment Fund – Status on August 31, 2023
. August 31, 2023 July 31, 2023 August 31, 2023
. # of Shares Cost Basis Net Market Price* Net Fair Market Value* Net Fair Market Value*
REITs
. – Essex Property Trust, Inc. (Tranche #1) 71.6846 $20,000.00 $237.29 $17386.38 $17,010.04
. – Essex Property Trust, Inc. (Tranche #2) 77.7000 20,000.00 237.29 18,845.36 18,437.43
. – Essex Property Trust, Inc. (Tranche #3) 100.0000 22,221.00 237.29 24,254.00 23,729.00
. – Essex Property Trust, Inc. (Tranche #4) 180.0000 44,980.00 237.29 43,657.20 42,712.20
. Sub-Total 429.3846 107,201.00 $104,142.94 $101,888.67
. – AvalonBay Communities 100.0000 17,415.52 182.82 $18,770.00 $18,282.00
Railroads
. – Norfolk Southern Railroad 100.0000 21,420.01 204.01 $23,255.00 $20,401.00
Entertainment
. – The Walt Disney Company (Tranche #1) 180.1801 20,000.00 $83.28 $15,834.23 $15,005.40
. – The Walt Disney Company (Tranche #2) 200.0000 21,200.00 83.28 17,576.00 16,656.00
. – The Walt Disney Company (Tranche #3) 198.0198 20,000.00 83.28 17,401.98 16,491.09
. – The Walt Disney Company (Tranche #4) 100.0000 9,007.78 83.28 8,788.00 8,328.00
. Sub-Total 678.1999 70,207.78 $59,600.21 $56,480.49
Banking
. – Wells Fargo (Tranche #1) 100.0000 4,267.50 40.29 $4,516.00 $4,029.00
. – Wells Fargo (Tranche #2) 400.0000 15,804.00 40.29 18,064.00 16,116.00
. Sub-Total 500.0000 20,071.50 $22,580.00 $20,145.00
Dividend Receivables (Essex/AvalonBay) -0- -0-
Cash on Hand (Basis, Gains, Dividends, PUTS) 3,243.57 3,095.40
Totals (Starting Cost Basis = $100,000) $236,315.81 $231,591.72 $220,292.56
Accrual adjustment for taxes 1,581.86 4,617.33
Totals Net of Taxes (Recapture) $233,173.58 $224,909.89
Margin Account (AvalonBay/Norfolk Southern/Disney Purchase) (45,817.38) (45,817.38)
This portfolio’s value is AFTER TAXES of 28% on all realized gains. Total taxes paid to date 35,508.50 35,508.50
Comparative Gross Return Since Inception $222,864.70 $214,601.01
Unrealized Earnings (Value of Respective Market Prices Less Cost Basis & Fees at Point of Sale) $(7,509.49) $(18,660.48)
*Net of transaction fees of $1.00 per share; thus, the amount in the schedule equals the actual market price per share at closing less $1.00 per share.
Value Investment Fund – Potential Obligations
The Value Investment Fund’s current exposure related to PUT options is as follows:
Norfolk Southern Corporation – sold in September (200 Shares) with a strike price of $145 and an expiration date of January 21, 2024 $29,200
L3 Harris Technologies – sold 12/30/22 (100 Shares) with a strike price of $150 and an expiration date of October 20, 2023 $15,100
Marriott Hotels – sold 12/30/22 (100 Shares) with a strike price of $90 and an expiration date of January 19, 2024 $9,100
Essex Property Trust – sold 03/17/23 (100 Shares) with a strike price of $200 and an expiration date of October 23, 2023 $20,100
Huntington Ingalls – sold 03/17/23 (200 Shares) with a strike price of $185 and an expiration date of September 15, 2023 $37,200
The Walt Disney Company – sold 07/18/23 (300 Shares) with a strike price of $85 and an expiration date of June 21, 2024 $25,800
*Total financial commitment = $113,200
Market prices on August 31, 2023 are:
- Huntington Ingalls (Expiration 09/15/23) $220.32 (Strike Price of $185.00) Current Deviation = 19.09%
- L3 Harris Technologies (Expiration 10/20/23) $178.09 (Strike Price of $150.00) Current Deviation = 18.73%
- Essex Property Trust (Expiration 10/23/23) $237.29 (Strike Price of $200.00) Current Deviation = 18.64%
- Marriott Hotels (Expiration 01/19/2024) $203.51 (Strike Price of $90.00) Current Deviation = 126.12%
- Norfolk Southern Corp (Expiration on 01/21/24) $204.01 (Strike Price of $145.00) Current Deviation = 40.69%
- The Walt Disney Company (Expiration on 06/21/24) $83.28 (Strike Price of $85.00) Current Deviation = (2.02%)
*Deviations > 25% are considered favorable.
Earnings realized during April/May/June 2023:
- Norfolk Southern – $1.35/Share, 100 Shares = $135.00
- Wells Fargo Bank – $.30/Share, 500 Shares = $150.00
- Essex Property Trust – $2.31/Share, 429.3846 Shares = $991.88
- AvalonBay Communities – $1.65/Share, 100 Shares = $165.00
1st Quarter Earnings Summary:
- Gains from Securities $20,412.00 *Comerica Bank
- Dividends 2,131.53
- Sale of PUT Option Contracts 1,840.00
Sub-Total 1st Quarter Earnings $24,383.53
2nd Quarter Earnings Summary:
- Dividends $1,441.88
3rd Quarter Earnings:
- Norfolk Southern Dividends $135.00
- Wells Fargo Dividends 175.00
- Sale of PUT Option Contracts (Disney) 1,860.00
Sub-Total 3rd Quarter Earnings $2,170.00
Total Earnings to Date 2023: $27,995.41
Realized Return Year-to-Date 2023: 19.386%
Taxes Paid Year-to-Date 2023: $7,231.11 ($25,825.41*.28)
Tax Deferral 3rd Quarter 2023 (Due 09/30/23) $607.60 ($2,170.00*.28)
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