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May, 2002: 1 2 20
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. |
5/1/02-Have become aware that, with available internet resources, it is possible to find out if more money managers are recent buyers than sellers, or vice versa, of a particular asset. Thus, yesterday, I discovered that, despite its precipitous price fall lately, the institutional folks have been buying vs. selling Adelphia Communications, in about a four to one ratio. So, for now at least, I'll keep holding it.
I also learned I can glean for free on the World Wide Web information about the main stocks the very best mutual fund managers have been buying or holding as their top positions. This bit of intelligence should come in handy in the years ahead.
Fran came home yesterday with some good news (depending on the specifics). The Austin Lyric Opera is now treating its orchestra members like employees (as opposed to self-employed contract workers, as they'd done previously), with fringe benefits. Among other things, this will mean she can set aside her entire opera earnings in a tax-deferred account, apparently besides our regular IRAs. (However, it may preclude her also deferring funds in an SEP IRA.)
While this will lower our tax liability, it will also reduce our available funds for regular expenses, so we'll need to depend more on debt to get by, at least until my Social Security income should start, in late 2005.
5/2/02-In comments to shareholders last month, Wallace Weitz (Weitz Partners Value Fund, et al) indicated the jury's still out on whether Qwest or Adelphia Communications will prove to have been good investments, but that telecom/cable company sector stocks as a whole are still very much in disfavor. He feels that, once the sector is again popular, many telecom-related stocks, including most of his picks, should do well, though this may take several years.
But he cautions that, after he knows more, he may either buy new shares of Adelphia or sell all his holdings in this company, noting that, since his recently increased interest in it, there have been allegations of unethical financial dealings (at shareholders' expense) by the corporation's management.
We analyzed our equity portfolio this morning and found it over 7½% below target. As we like to spread our risk over time, we divided the amount of deficit, below 95% (our low threshold of target), by eight, for the number of months remaining to achieve our year-end goal, and placed a market order for 46 shares of American Axle (AXL).
AXL appears to have the best combination of value, technical, growth, safety, and timeliness factors in its favor among "Value Line Investment Survey" stocks projected to have at least a 15% three-to-five year compound annual total return.
5/20/02-It seems the other shoe has dropped in news about Adelphia Communications. I heard this morning on the public radio news that two of its highest officials have resigned after admitting the company had used the publicly traded company credit to support private partnership loans of over two billion dollars and that, since the company is now liable, it appears it is facing bankruptcy. Clearly management has failed the integrity test Wallace Weitz had mentioned. Accordingly, this asset does not have the "margin of safety" needed to justify investment, regardless of the quoted (far higher than recent price) book value.
To assure that most assets are redeemed only when up in price, we are following a portfolio monitoring approach that calls for sales when overall equities exceed target by at least 5%. Once that level is again reached, Adelphia will be among our first sell candidates.
Over the years, since the latter 1980s, I have been following the articles in the popular press on investment guru Warren Buffett. Time and again, some financial journalist seeks to make a name for him- or herself by trashing Mr. Buffett and his running of Berkshire Hathaway (BRK/A; BRK/B), indicating that the company's prospects are now dim compared with the rest of the market. In almost every case, within a reasonably short time after such an article appears, BRK is way up compared with the Standard and Poors 500 Index or any other major average. Its book value, a rather gross measure of intrinsic value, during the last three and a half decades or so has increased at a compound annual rate of over 22%.
At some point, of course, one of these writers may be correct. I'm not smart enough to know just when that will be. But my hard earned dollars are still on Buffett. The latest major example is an article in the current issue (June, 2002, pp. 37-40) of "Money Magazine," entitled "What's Keeping Berkshire Up?"
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.