5/7/03-Our equities, including REITs, have been doing swimmingly of late, on the strength of which we've actually been selling some of our mutual fund shares to raise reserves or reduce debt. At the portfolio's low last year, we were net buyers and the total current asset holdings were briefly below $500,000 in market value. Today they stand at only slightly under $600,000, a nearly 20% increase.
In a recent article in the April, 2003, issue of AAII Journal ("The AAII Beginner's Portfolio: An Annual Performance Review," by James B. Cloonan, pp. 33-36), it is pointed out that micro-cap value stocks tend to substantially outperform the major averages. At the time of publication, the ten-year annualized return of carefully selected, very small capitalization assets with price to book values less than 0.60 had been 13.3%, compared with 9% for the S&P 500 Index.
Currently, the following stocks fall into this small but high value category and look quite interesting to me. Their market caps are at least $17 million but not more than $125 million (the range suggested by AAII). Price to book is no greater than .59. Total debt to total equity for each is reasonably low. All three companies pay some dividend. And the dividend payout ratio of each is safely below 50%.
5/19/03-Despite the drop in U.S. equity markets over the last couple days, we've averaged $6000 a week in realized and unrealized portfolio gains since the first few days of March. There have also in this period been about ten sell signals in our system, triggered by a rise of over 5% in stock (or stock mutual fund) market value above the average investment level. Thus, through mandated sales or exchanges, we have the happy overall outcome that the risk level is down substantially even as the current value of net holdings is up 12%, close to our target level for annual portfolio increases of 15% (10% after yearly expenses). We're achieving our goal too of a 3% yield on liquid holdings. Of course, we're currently getting a lot of help from "Mr. Market" but, as a sustainable long-term business, our Balanced Value Portfolio is doing well. (Meanwhile, the holdings' book value is increasing by 12% or more a year, offering promise for the future.)
My first annual post-retirement tax-deferred account net distribution has been received. The administrators automatically took out 20% and sent it to IRS. Still, it's reassuring to receive the balance, which will be applied to good purpose.
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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.