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May, 2011: 10 19
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. |
5/10/11-Since the last entry, I have sold off a couple of the earlier classic value holdings, ones in which I had invested on my own for my wife's and my nest egg but without tracking them in one of the experimental portfolios. They did nicely, though, and their results are an encouragement, since of late it has seemed that the low price to value assets have not been performing so well relative to the markets. Both of these equities were sold yesterday: ACE had been purchased on 10/5/08 and saw a net gain, excluding any dividends, of 67.07% through 5/9/11; TYC took longer to see its gains, having been purchased on 9/9/02, but has had at least a better than market net performance, not counting its dividends, of 72.05% since then.
My current top-five low price to book value stocks are: ASI; ENH; FSR; HIG; and NWLI.
My favorite among them is Endurance Specialty Holdings, Ltd. (ENH) (recent price $43.75). It meets Benjamin Graham's bargain stock safety and value criteria.
Endurance Specialty Holdings, Ltd. will be added to our nest egg at its market price in early trading today, 5/10/11.
5/19/11-Since the last entry, I have sold off a Low Price to Book Value asset, PLAB. It had been purchased on 11/15/10. Not counting any dividends but subtracting commissions, PLAB was up 51.84% through its sale yesterday. It will be removed from the Low P/Bk open positions and its performance record for 11/15/10 through 5/18/11 will be added to the Low P/Bk closed positions spreadsheet.
My current top-five low price to book value stocks are: BDR; HAST; KTCC; LAKE; and MPAC.
My favorite among them is Blonder Tongue Laboratories, Inc. (BDR) (recent price $1.93). It meets Benjamin Graham's bargain stock safety and value criteria.
Blonder Tongue Laboratories, Inc. will be added to our nest egg at its market price in early trading tomorrow, 5/20/11.
Following the substantial downturns with very little warning in both AOB and HQS, I have been looking for a lower risk way of acquiring Ben Graham assets. I am still quite interested in both low P/Bk and low price to net asset value stocks (those selling for less than their current assets less their debts), but have been seeking a way to also obtain Ben Graham bargains at very low risk of loss.
The idea is not to replace the other two just mentioned Graham type investment approaches but to supplement them and so reduce the overall risk. I have settled on what I call a Ben Graham Dividend with Value Portfolio. Here are the buy criteria: 1. the dividend must be 0.66 or more the average AAA corporate bond yield (as that yield is reported in the most recently received "Value Line Investment Survey" or in the Moody's investment service); 2. the asset must be rated 1 (best) for safety by "Value Line;" 3. the dividend payout ratio must be 0.5 or below; 4. the debt to equity must be 0.99 or below; 5. the asset at time of purchase must have a 3-5 year projected total return, per "Value Line," of 100% or greater.
Assets bought under these guidelines shall be held until: 1. up 50% or more and they no longer meet the buy criteria; 2. until there is a new asset which will replace the one(s) being sold that do(es) meet all the buy criteria; and 3. the portfolio, after the sale/replacement, will still have at least 10 assets.
I wish to clarify that, whereas in previous announced portfolios here I was experimenting to find the best ones, here I am already convinced of this approach having very low risk and am simply using this method to balance out the higher risk of the other two Ben Graham techniques being followed here.
Moreover, I do not expect that the total return of this low risk approach will be substantial. I do expect it to beat that of the S & P 500 Index, yet not remarkably so.
To repeat, the main purpose here is simply to assure that the overall Ben Graham asset holdings in our nest egg have lower volatility and hence lower risk of loss of principal.
Initially I have placed orders to buy shares of JNJ and NVS for this new portfolio.
I have also placed a new order to buy shares early tomorrow in TBAC for the Net Nets portfolio.
This will be my last entry for a little while. I am going on vacation, starting tomorrow, intending to visit Taos, NM, as well as the Rocky Mountain National Park, CO. If all goes well, I shall have comments to add by the end of June or a bit before.
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.