1/3/13-Since the last entry, our Low Price to Book Value (Low P/Bk) portfolio stock, PLFE, purchased on 2/29/12, was bought out in a cash merger effective 12/31/12 for $14 a share. Our cost basis was $11.35 a share (plus commission). Net profit for the slightly over ten months we held PLFE was 23% (not counting dividends). PLFE has been deleted from our open positions record for Low P/Bk assets, and the closed position info has been added to our spreadsheet record of that portfolio's redemptions and mergers.
My quarterly analysis and report covering the last three months of 2012, as well as the year-end review for portfolios followed here, are a little late since my wife and I have been out of state during the holidays, just returning late today. I did, despite being away, note the final, close of trading results for our holdings and portfolios through 12/31/12 and shall post them once completing necessary calculations.
It is apparent, however, that, even with all the ridiculousness still occurring in Washington, 2012 was a good year for equities. I believe the S&P 500 Index was up 16% on a total return basis. The equity portion of our nest egg had a total return for last year of just over 21%. Since for diversification and safety a significant portion of that overall nest egg is in much lower performing assets, such as cash reserves or illiquid real estate, our combined holdings advanced a much more modest 13+% for 2012, to $1,116,092.
I expect to post a more detailed 2012 summary in the next few days.
1/6/13-The following is my regular quarterly (and annual) summary (statistics this time through 12/31/12) of the asset approaches followed here:
Our 2012 end-of-year equity portfolio's total market price to total book value, at 0.91, remains consistent with reasonably good safety margins.
My hope for this just past year was to continue to increase total equity book value at an average rate of 13.5% or better annually (since this rate regimen began on 4/2/11) while keeping total equity dividends at 2.0% (or higher) of that book value amount. To achieve those minimum levels, by the end of 2012 I needed $780,000 in book value and $15,600 in equity dividends. Effective 12/31/12, the actual book value of our equity portfolio was $822,405, while the total dividends from stocks or stock mutual funds came to $18,691, 2.27% of the book value level.
The 2013 respective targets for book value and dividends are $885,300 and just $17,706, both expected to be easily attainable.
Concerning the monitored investment categories in the above table, the performance of a strictly buy-and-hold investment in the S&P 500 Index since 5/14/09 remains relatively good.
The likely lower risk Ben Graham Dividend with Value Portfolio has behaved much like high quality bonds used to do, providing decent though not spectacular performance. With dividends added in, the annual return of this portfolio would have been about 10%. I continue to believe this strategy may be used for both portfolio diversification and income in lieu of debt instruments.
Holding Berkshire Hathaway, Class B, shares is in my view another means of obtaining fairly low risk gains. Yes, something could happen to Warren Buffett, now in his eighties, but the value investing culture at that company remains so strong that after an initial stock price drop, the shares should even then rally and go on to deliver better than market averages for years to come.
Our Love 'Em and Leave 'Em portfolio especially does not yet have a sufficient history to draw significant conclusions about its results. They are, however, intriguing. With dividends added in, the approach's total return has averaged roughly 37%. Nonetheless, such performance may well be merely chance. Time will tell. I continue to think LE&LE has an excellent chance to perform better than the market averages but will be surprised if the long-term total return exceeds around 15-20%.
The results for our Low Price to Book Value and Selective Six Percent Plus (SSPP) portfolios are also fine. As mentioned last year, an equal blend of the two would demonstrate market beating performance and healthy dividends. Note that the annualized total return for Low Price to Book Value has been about 17.5%, while that for SSPP has been roughly 18.8%.
Since results of the strategies are only paper ones until stocks are actually redeemed, I continue to have the most faith in the closed position stats. The average annualized total return among Low Price to Book Value sold positions is over 29%. That for SSPP is so far over 20%.
Last year I speculated that 2012 might end unexpectedly higher than most investors were anticipating. I wish I had a crystal ball for 2013. Much of the news out of Washington, D.C., Europe, Mexico, China, Africa, and the Middle East appears dismal.
As was the case for 2012, though, sound value investing principles should in the long run serve us well.
Once again, may we all enjoy a successful and happy new year!
A new evaluation of the bargains out there reveals ongoing low price to book stocks of interest. Alphabetically, though in no particular order of merit, my current top-five low price to book value stocks are: AXS; HDNG; LM; RCKY; and RFP.
My new featured equity from among them is Resolute Forest Products, Inc. (RFP) (recent price $14.04). It meets Benjamin Graham's bargain stock safety and value criteria.
Resolute Forest Products, Inc. will be added to our nest egg at its market price in early trading on Monday, 1/7/13.
1/22/13-Since the last entry, our Low Price to Book Value (Low P/Bk) portfolio stock, RCL, purchased on 10/12/11, was sold on 1/16/13 for a net gain of 49.97% (taking into account commissions but not dividends). RCL has been deleted from our open positions record for Low P/Bk assets, and its closed position info for 10/12/11 through 1/16/13 has been added to our spreadsheet record of the portfolio's redemptions and mergers.
In addition, our Low P/Bk and Selective Six Percent Plus (SSPP) portfolio stock, STM, has risen significantly. It is almost at a sell point for Low P/Bk and has now a lowered yield, so that I believe it is best replaced in the SSPP portfolio as well. It will be sold from the Low P/Bk portfolio once it achieves a 50% or greater net price performance. I also intend to sell it this morning from the SSPP portfolio. If the limit sell orders go through, STM will be removed from the respective open positions spreadsheets and the net closed positions vs. net cost basis (taking account of commissions but not dividends) info will be added to our spreadsheet record of the portfolios' redemptions and mergers.
I have selected a new asset to replace STM in the SSPP portfolio: KKR (recent price $16.93), which has a forward estimated dividend of 5.7%, a debt to equity of only 3.3%, a return on equity of 18.7%, a P/E of 8.2, and a dividend payout ratio of 0.3.
I caution that KKR is a limited partnership and as such, to avoid complications, is better suited for tax-deferred accounts and small to moderate investment amounts. (So $100,000 might be too big a purchase, though $5000 would likely never result in difficulties, yet it is best to do one's own research on such matters).
There do not seem to be as many good low price to book bargains available now as a few months ago, which gives me a little concern about a short-term top in the market, but I am relatively comfortable with the assets cited this time. Alphabetically, though in no particular order of merit, my current top-five low price to book value stocks are: HDNG; LM; RFP; SCHN; and VOXX.
My new featured equity from among them is VOXX International Corp. (VOXX) (recent price $8.98). It meets Benjamin Graham's bargain stock safety and value criteria.
VOXX International Corp. will be added to our nest egg at its market price in early trading today, Tuesday, 1/22/13.
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Neither I nor Investor's Journal will be responsible for losses by anyone who obtained ideas from this site.
This diary is intended for personal interest and general information only. You are advised to do your own research (as well as to consult highly compensated professionals) before spending money on anything.
I know of no reason anyone should take my financial musings seriously. At best I am a dedicated amateur providing a bit of investment-related insight and entertainment, at worst an amusing diversion.
My wife, Fran, and I may at times own shares of some of the assets mentioned here. But neither of us receive any benefit from reference to them, unless you count the mutual misery when we get it wrong, or the opportunity to gloat when we get it right.