1/4/14-No assets among monitored portfolios have been sold since the last entry.
The following is my regular quarterly results summary (statistics through 12/31/13) of the asset approaches followed here:
Consistent with the last entry, we have exceeded our 2013 year-end total dividend and book value targets of at least $17,706 and $885,300, respectively.
As guiding principles, our portfolio's total equity book value is raised by a minimum of 13.5% a year, and the dividend yield on that book value is maintained at 2.0% or more. Increases in book value usually over time result in increases in market value.
Through the close of trading on 12/31/13, our total net asset value (all after-debt holdings, such as bond and stock assets, reserves, collectibles, and real estate equity) has risen to $1,324,444, an 18.7% increase over that figure at the end of 2012. Except for credit card bills (paid in full monthly) and federal taxes (due in April), we owe nobody anything. $203,000 of our liquid holdings are in money market accounts, insurance against a market downturn.
Clearly, we are not among the "one percenters." Yet we are staying ahead of inflation, and our conservative allocation of holdings has been more profitable than the major stock averages for the period since we retired (12/01 for me, 5/02 for my wife).
As of 12/31/13, the ratio of our total stocks plus stock mutual funds [$901,956] to total book value [$938,741] stands at 0.961.
On the whole, our monitored strategies/holdings are competitive with the major market averages as represented by the S&P 500 Index's historical return, about 9.8% a year since World War II. However, comparing our performance with that of the S&P 500 Index just since the earliest of our presently monitored portfolios began, 5/14/09, does not make us look so favorable. In contrast to the long-term record, the S&P 500's return in this recent period has been just over 17% a year. Assuming their inceptions were identical, the returns of an equal investment (33 1/3% each) in our BRK/B shares and those of our Dividend Value and Low Price to Book Value strategies would have averaged an annual performance of 14.68%.
With dividends added in, the combined total return would have been over 16% annually. And if returns (with dividends) for our newest portfolio, Low Book Dividend Plus, were added in (so each of the four portfolios contributes a fourth of the result), our strategies' average gain comes to a little over 26% annually, which in fact is how my wife's and my average stock did in 2013 (open plus closed positions). Though our own record benefits from a proportion of assets being greatest among the Low Price to Book Value or Low Book Dividend Plus approaches, I doubt we shall soon again see that kind of return!
As noted previously, I am not trying to hit the ball out of the park but to provide us with reliable, relatively low risk profits and income. Assuming our representatives do not do more serious harm to the economy in the interim, this approach should take us in 2014 to a book value total in excess of a million dollars, with dividends totaling at least $20,000.
For those interested, these are the present Low Price to Book Value or Low Book Dividend Plus portfolios' open positions: ABLT; ACAS; AEG; AOSL; AUQ; BBOX; BDR; BIF; CDE; CEP; CNA; COCO; CRV; CUO; DIT; ELP; EZPW; FVE; HMY; HNR; HWG; IAG; KCLI; KMPR; LUKOY; MANT; MSN; MT; NBR; NTT; NWLI; PBR; PFIN; PKX; PZE; QCCO; REGI; RFP; RGA; SCHN; SCX; SGMA; SNE; SSRI; STLY; STM; STRL; TATT; TDS; TX; UMC; VLCCF; and VOXX.
And here are our current Dividend Value Portfolio equity holdings: BGCP; BRKS; COP; CSPI; EC; ESV; IAG; INTC; PSEC; RDS/A; STO; T; TICC; UVV; VIV; and WSTG.
Accurate as it is, the above compilation does not tell the whole story of how our household achieved a successful investing year in 2013. As in the past, I continue to experiment with new ways to make money in equities. Some flop and are dropped; some do not. And some are more appropriate for a blog focused on long-term value investing, others not so much.
A strategy that has proven useful is one I call "Just Right." There are five buy criteria: 1. It must be considered by a major investment service to be of no more than average risk; 2. Its projected 3-5 year annual total return, per a major investment service, must be 20% or greater; 3. Its annual dividend yield must be 3.0% or more; 4. Its current price to earnings ratio must be at least one and no higher than twelve; 5. It must have had a one-year total return of at least 10.0%.
All stocks meeting the criteria are purchased. They are each then held until meeting both of the following sell standards: 1. The asset no longer meets all of the above buy criteria; and 2. It is up in price since purchase at least net 5% or at an annualized total return rate of 20%, whichever greater. (Note that on average if a stock has a 4% dividend and is sold after its price has risen just net 5% in the first four months since being bought, its annualized total return will be at least 20%.)
With so far assets having been bought and sold 37 times (often the same stock having had several such "round trips"), this "Just Right" investment method has provided an annualized total return of over 56% since last January and has significantly contributed to our overall nest egg performance. I think I shall keep it.
I realize, though, that for various reasons a short-term trading strategy is not for everyone, and so this method will not be one of those monitored in this journal. In case one is curious, however, currently AB and KKR appear to meet the minimum "Just Right" buy requirements. They each have 6 1/2% or greater yields. (Note: Both are limited partnerships, in case that makes a difference.)
An equally winning strategy has been to buy stocks when they have fallen substantially in price, such as AAPL, if they also have both a high financial ranking and a 3-5 year projected annual return sufficient to double one's investment in four years or less, then sell them when they are up nicely and these conditions are no longer met. Repeat indefinitely.
Finally, I have found it generously profitable to buy and sell an exchange traded fund, ProShares Ultra Russell2000 (UWM) (recent price $84.11), when it is respectively down or up net 5% or more from my just previous transaction price for this asset.
All of the strategies employed fall on a continuum of low price to value approaches, yet clearly some are more consistent than others with a strictly Ben Graham type methodology. I am mentioning them since they have been helpful for our net asset value and seem likely to continue to be so. Readers can decide whether any, none, or all such techniques, or fresh ones they may develop for themselves, are right for their own portfolios.
May we all have a happy and lucrative new year!
1/14/14-No assets among monitored portfolios have been sold since the last entry.
While I do not have time this morning for sorting through a number of low price to book value candidates, I have come across one likely good pick for our Low Price to Book Value portfolio: National Western Life Insurance Company (NWLI) (recent price $226.01). It meets Benjamin Graham bargain criteria based on its low price to book value and low debt to equity.
National Western Life Insurance Company will be added to our nest egg at its market price in early trading today, Tuesday, 1/14/14.
1/22/14-This entry is basically an "Oops!" Yesterday I mistakenly sold shares of MANT, purchased on 8/16/12 for our Low Price to Book Value portfolio. I had intended to sell the MANT shares bought this past fall under a different (Just Right) portfolio strategy. The closed position information is being recorded, and these shares of MANT have been removed from the open positions spreadsheet for Low Price to Book. At least the investment was profitable, up a net 36.12%, not counting any dividends. I retain in the Low Price to Book portfolio two groups of MANT shares that were purchased in the last few months.
1/23/14-Today I am buying a low price to book value stock for our perennial/global portfolio (not one I monitor for this journal). It is more risky than the kinds of assets I normally select and does not meet my usual buy criteria, which is why I am not suggesting it for any of the officially followed strategies here. Nonetheless, in my opinion it appears to have reasonably good prospects for the long-term, so thought I'd mention it: Golden Star Resources, Ltd. (GSS) (recent price $0.72). I am acquiring shares at its market price in early trading this afternoon. It has a price to book value of about 0.85 and a debt to equity of around 0.40. I intend to hold it indefinitely in the perennial/global portfolio or till price to book is 1.00 or above and per share price is up 50% or more or till held two years or more, whichever first.
1/26/14-There have been no sales or sell signals among assets followed here since the prior two or three entries.
The market's downward movements of late have provided a few more bargains than had been there in earlier weeks. Alphabetically, though in no particular order of merit, my latest top-five low price to book value stocks are: AEY; EZPW; GURE; NTWK; and PFIN.
My new featured Low Price to Book Value equity is Gulf Resources, Inc. (GURE) (recent price $2.17). GURE meets Benjamin Graham's bargain stock value and safety criteria.
Gulf Resources, Inc. will be added to our nest egg at its market price in early morning trading tomorrow, Monday, 1/27/14.
Disclaimer and Disclosure Statement
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.