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January, 2015: 1 4 5 10 26 28

Disclaimer - IMPORTANT - Read this first!

Investor's Journal is a diary focused strictly on investments and personal finance issues, primarily from a contrarian and retiree point of view. Follow along with an average guy's failures and successes as he learns, by trial and error, the fine art of value investing.

The following is my regular summary of quarterly, and this time also annual, results (statistics through 12/31/14) for the asset approaches followed here:

Observations:

In some years, the small-caps that tend to dominate our portfolios do great compared to large-cap stocks. 2014 was definitely not one of those times. As you will note from the above table, the past 5-6 years would probably have been a good period in which to just own a low fee index fund. It has been an interval in which the S&P 500 has shown superior performance compared with even that large-cap value asset, Berkshire Hathaway.

For our holding periods, a one-third each blend of the basic value investments cited here, bargain dividend stocks, bargain low price to book stocks, and Berkshire Hathaway, would have provided an average gain of just 11.9% per year before dividends, about 14.3% with dividends included. Given that the usual return of the S&P 500 Index is only about 10% a year, that is not too shabby, but I am quibbling. The fact is there will be times when an index fund can handily beat value investing strategies, and we have just lived though one.

As mentioned in prior summaries, I take more seriously the closed position returns. Stocks that are still invested will have their ups and downs, yet in many cases may be simply held till the right time to sell comes along. Here are the closed position returns for our basic Ben Graham type strategies: a. Low Price to Book Value assets have had average annual gains of +26.2% (about 27.9% with dividends included); b. Dividend Value assets have had average annual gains of +16.9% (about 22.3% with dividends included).

Meanwhile, we continue an approach of increasing our equities' total book value by 13.5% or more a year and maintaining a total dividend yield of at least 2.0% of that target book value amount. Based on this standard, the objectives for our nest egg through the end of 2014 were $1,004,816 in total book value and $20,096 for total annual equity dividend yield. Actual results were $1,076,933 and $22,864, respectively.

Our total equities' market price to total book value stands now at 0.94. Reflecting 2014's lower small-cap performance, the overall nest egg (bonds, reserves, real estate, stocks, etc.) has climbed only modestly since a year ago: up just 1.9%.

These are the present Low Price to Book Value portfolio open positions: ABLT; ACAS; AEG; AEL; AEY; AGII; AHL; AIG; ANAT; AOSL; AUQ; BBOX; BDR; BIF; CDE; CLF; CNA; CSH; CUO; ELP; EZPW; FVE; GBLI; GENC; GGB; GURE; HDNG; HIG; HMY; HNR; HWG; IAG; IOT; ISH; KBAL; KCLI; KELYA; LUKOY; MANT; MT; NE; NTT; NWLI; PBR; PFIN; PGH; PKX; PRE; PT; PZE; QCCO; REGI; RFP; SCX; SGMA; SSRI; STLY; STRL; SYA; TA; TATT; TCK; TDS; TGA; TX; UMC; VOD; VOXX; and VOYA. I may add to some of these positions from time to time.

And here are our current Dividend Value portfolio holdings: AP; BGCP; BRKS; CATO; COP; CSPI; DCM; DEST; EC; ESV; FIG; GME; IAG, INTC; IQNT; PETS; PSEC; RDS/A; RGR; SSL; STO; SUP; T; TEO; TGA; TICC; TNH; TX; USMO; UVV; VIV; and WSTG. I may also add to some of these positions from time to time. (I realize IAG no longer provides a dividend, but it is off considerably from when it was purchased for this portfolio. Am holding it in hopes that it may later have a better performance. Meanwhile, it continues to have a good low price to book value ratio, at 0.37.)

Will this year be a super one for U.S. equities? Who can say? I think they are somewhat overvalued and likely to succumb to significant bad news, yet in the third year of presidential terms stocks often are up, especially so when the year ends in 0 or 5. We shall have to wait and see.

In any case, hope you and yours have a great and profitable 2015!

1/4/15-I seldom have this sort of entry, but here goes: Harvest Natural Resources, Inc. (HNR), recommended in November, 2013, and bought for the Low Price to Book Value portfolio on 11/4/13 at $4.79, was down to $0.93 as of the close of trading on Friday, 1/2/15, a loss of about 80%, 49% just on that last day of recent trading. Its news remains bad. While the asset might have a significant surge this week, it is also possible the stock could continue its precipitous drop and be worth only pennies, or nothing at all, by next Friday. I am selling our shares for what they will bring early Monday morning, 1/5/15. Other holders may wish to do likewise. Of course, if there is a nice dead cat bounce early this week, I may be kicking myself, but at this point I'm simply trying to salvage a few hundred dollars out of this investment.

Readers may also want to look at PZE, another Low Price to Book Value portfolio Argentina-related holding. For now, I am continuing to keep our shares in it, but believe that henceforth I'll avoid stocks based in Argentina or with principal holdings there. Evidently that nation's government is at least as unreliable from a business/investment standpoint as Russia or China, two other places that raise big investor red flags for me.

1/5/15-Please see the most recent prior entry. Although as of this posting no sales of assets followed here have occurred since that entry, one (HNR) is pending.

Alphabetically, my current top-five Low Price to Book Value equities are: KBAL; LQDT; REGI; TGA; and TX.

My new featured Low Price to Book Value security is Liquidity Services, Inc. (LQDT) (recent price $7.96). LQDT meets Benjamin Graham's bargain stock value and safety criteria.

Liquidity Services, Inc. will be added to our nest egg at its market price in early morning trading today, 1/5/15.

1/10/15-As previously indicated, on 1/5, HNR, purchased on 11/4/13 for our Low Price to Book Value portfolio, was sold at an 80.24% loss, to prevent an even larger loss if I had waited till later to redeem the shares.

Alphabetically, my current top-five Dividend Value equities are: GES; HP; PBF; UFS; and WNR.

My new featured Dividend Value security is Helmerich & Payne, Inc. (HP) (recent price $60.80). HP meets Benjamin Graham's bargain stock value and safety criteria.

Helmerich & Payne, Inc. will be added to our nest egg at its market price in early morning trading on Monday, 1/12/15.

1/26/15-For awhile now I have been holding for the long-term assets originally purchased as low price to book value or dividend value equities. In some cases they had been profitable, but I hoped they would eventually be more so. In others, they had disappointed, and I was thinking that perhaps in an extended bull market they would finally be priced higher than what I had paid for them. This approach has been effective in a few instances, not at all in others.

In any case, my impression is that I may as well now "take my licks" with respect to holdings that just have not panned out. By various measures, the market is overvalued. I figure I might as well dump securities that, if a bear market or significant correction were to definitely begin, I would wish I had redeemed earlier.

In addition, I can see good values in a few stocks out there and would rather they be in our portfolio, using funds available from selling the "losers," than do without them and just keep hoping for these laggards to perform.

All in all, then, have decided that, till our nest egg has been whittled of many of its older holdings that I do not intend to keep "forever," I shall follow a policy of selling at least two stocks for each one I add, at least till our reserves are back in the range of one-fourth to one-third of our liquid holdings, such as I prefer in the latter stages of a bull market. Chances are I won't get the timing just right, for the bull may obviously have come to an end before I am quite ready, but the intention is to unload most of them within the next month or two. Maybe a more frothy, volatile, downward trending market will hold off till I have done so, maybe not.

Related to the aim of reducing our holdings, here is an asset I neglected to mention previously, notwithstanding that it was bought out for cash in a merger last May: shares of HWG were purchased on 1/30/11 for the Low Price to Book Value portfolio and were bought out by HFL in a cash merger effective 5/16/14, the proceeds deposited in my account on 5/19/14, resulting in a 51.12% loss for my HWG investment. The buy and sell dates and result have been added to our spreadsheet for Low Price to Book Value closed positions and will be incorporated in the stats for the next and subsequent quarterly reports.

Further, since the prior entry the following assets have been sold from the Low Price to Book Value portfolio:

BDR, bought on 5/6/11, was sold on 1/20/15 for a net gain of 7.34%

RFP, bought on 12/31/12, was sold on 1/20/15 for a net gain of 13.78%.

RFP, bought again on 1/7/13, was sold on 1/20/15 for a net of 13.10%.

The buy and sell dates plus results for these three sets of round-trip trades have been added to our spreadsheet for Low Price to Book Value closed positions and will be incorporated in the stats for the next and subsequent quarterly reports.

Since the prior entry as well, I have sold these positions from our Dividend Value portfolio:

INTC, bought on 11/15/11, was sold on 1/22/15 for a net gain of 47.22%.

SPOK (and please note that the ticker symbol has changed from when the asset was purchased as USMO), bought on 5/22/14, was sold on 1/22/15 for a net gain of 21.63%.

CATO, bought on 7/28/14, was sold on 1/22/15 for a net gain of 44.03%.

In each of these three cases, the dividend had fallen below 3% and the stock had been profitable. The buy and sell dates plus results for these three sets of round-trip trades have been added to our spreadsheet for Dividend Value closed positions and will be incorporated in the stats for the next and subsequent quarterly reports.

I have no new low price to book value or dividend value picks to mention at this time.

1/28/15-Since the last entry, I have sold BBOX (on 1/27/15), bought for the Low Price to Book Value portfolio on 7/1/11, at a net loss of 33.31%. Info on BBOX has been removed from the open positions spreadsheet and its buy and sale dates plus performance info have been added to the closed positions record. BBOX had been held for over two years.

In early morning trading today I expect to be selling off shares of ABLT, also bought for the Low Price to Book Value portfolio, in this case on 8/8/11. ABLT had as well been held for over two years. To date, it is down 45.23% since purchase. Following the shares' redemption, info on ABLT will be removed from the open positions spreadsheet and its buy and sale dates plus performance info will be added to the closed positions record.

Alphabetically, my current top-five Low Price to Book Value equities are: CSH; FORTY; LQDT; REGI; and TX.

My new featured Low Price to Book Value security is Formula Systems, Ltd. (FORTY) (recent price $20.80). FORTY meets Benjamin Graham's bargain stock value and safety criteria.

Formula Systems, Ltd. will be added to our nest egg at its market price in early morning trading today, 1/28/15.

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