5/12/04-As the markets have recently continued to tumble, our nest egg's net asset value is now slightly down (.4%) for the year vs. an S&P 500 Index year-to-date decline of 1.3%.
The performance of the Essential Value Portfolio (EVP) has been superior to both above records, up 6.4% for 2004. Since the EVP's 8/18/03 inception, it is ahead 11.1% vs. the S&P 500 Index's total return of 9.7% for the same period.
At this time, I note that, even with the recent sell-offs, there are fewer genuine bargains in the market as a whole than I have ever seen before. I have some interest in the following, each in my opinion representing a Benjamin Graham type low price to value asset (at least based on its high dividend) with debt to equity not as low as I'd prefer but less than 1.0: AEE; CHG; PGL; WGL; and WM.
But given the overvalued condition of equities generally, this would seem to be a good time to employ excess cash to pay off any debt having an interest rate above what one can reasonably obtain long-term through the average stock security and, once this is done, to accumulate fairly stable bond holdings, even at quite low yield, rather than investing in things that are but marginally acceptable as bargain purchases. Better opportunities surely will come. When assets are again at levels such as we saw with the lows of October, 2002, one can then quite easily and profitably pick up a number of golden nuggets. For now, in view of the adverse geopolitical, economic, and investment circumstances prevalent, caution would seem to be the watchword.
Accordingly, in our own total portfolio, we are substantially reducing debt and, with each market advance, redeeming assets that have gotten a little ahead of themselves, exchanging them for money market instruments and short-term bond funds.
5/20/04-BISYS Group (BSG) has had bad news recently. A few days ago it announced it would be restating its financial records from several years ago. Then we learned it was being investigated and apparently also sued. Given the very poor results for many companies' stocks after similar announcements, I sold our BSG shares yesterday. The per share sale price was $13.30.
The Essential Value Portfolio (EVP) had held 200 BSG shares at a cost of $2674 (including commission). Net proceeds of the 5/19 sale were $2630.
With this sale, there are now eight EVP closed positions (that is, sales from eight initial purchases, though some purchases were of shares in the same stock). With BSG included, the total closed position initial investment has been $20,778, and their total net proceeds have come to $24,256, for an overall gain of $3478, and an average closed position price appreciation of 16.7%.
After the sale, the EVP (redemptions plus dividends) total cash balance is $14,309, and the market value (5/19/04) of the remaining open positions (representing 17 purchases) was $44,913. The total initial investment in these open positions had been $43,278. There has thus been an overall gain of just $1635 in the open positions, or +3.8%.
For the EVP as a whole, the investment total has been $53,970, and its 5/19/04 market value (including cash reserves) was $59,222, for a gain of +9.7% since the portfolio's 8/18/03 inception. (The S&P 500 Index is up 8.9% for the same period.)
The EVP remains roughly 10% of our nest egg, and at present I don't find any compelling equity bargains. So no new EVP purchases are being made at this time.
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