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July, 2012: 1 12
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. |
7/1/12-The following is my regular quarterly summary (statistics this time being through 6/30/12) of the asset approaches still followed here:
| Portfolio or Market Index | Date Began Monitoring | Average Asset Hold Period | Average Change | Annualized Performance |
|---|---|---|---|---|
| B. Graham Dividends w/Value Port. | 5/20/11 | 0.74 year | 5.74% | 7.88% |
| Berkshire Hathaway, Class B | 6/3/05 | 1.54 years | 20.51% | 12.86% |
| Jim's & Phil's 10 for 10 (combined) | 5/14/10 | 1.62 years | 4.89% | 2.99% |
| Low Price to Book Value | 5/14/09 | 0.96 year | 13.61% | 14.24% |
| Selective Six Percent Plus | 8/22/11 | 0.54 year | 1.13% | 2.10% |
| S&P 500 Index (SPX) | 5/14/09 | 3.13 years | 52.52% | 14.44% |
Observations:
Though 2012 started off with a bang for most U.S. investors, the second quarter has not been so kind to our market values. Of course, this is at least balanced by the appearance in the past several weeks of a goodly number of excellent bargains. Nonetheless, thanks to the downturn our monitored portfolios have not held up so well. The mean result for our five followed here, since the inception for each, has been an annualized increase of just 8.01%. With dividends added in, their average total return since inception would have been about 10.8%.
This does not compare favorably with the S&P 500 Index since 5/14/09 (when our low price to book value portfolio was begun), which has an annualized return of 14.44%. However, that period is atypical for the S&P. A longer perspective shows the index having risen about 9.9% a year (on average) since World War II and only about 3.5% per average year over the past decade.
At $738,641, we have retained a high book value level and so are on the way toward a continuation of our end of year target for total equity book value. The intention is for the combination of increased book value targets plus stock (or stock mutual fund) dividends to total at least 16% annually before taxes. Dividends on current equity holdings provide a little over $15,700, about 2.1% of our total equity book value. (For more info on my book value calculations, please see this journal's entry dated 4/2/11.)
A few comments on specific strategies or portfolios are in order. First, this will be the last report of the Jim's and Phil's combined ten stocks for a decade portfolios. By mutual agreement, Jim and I have decided to suspend them effective the end of this quarter. In some ways this experiment has proven a little disappointing, and the redemption proceeds from the sale of several of the initially selected assets can probably now be put to better use. Others of those picks, though, 5 each from Jim's and my selections, likely will do very well over the long-term, and so they are currently being retained in my overall nest egg. Those to be kept are: HI, LUK, MVC, PDS, XOM, CNI, EPI, HAO, HAS, and SBS.
The average dividend of the Selective Six Percent Plus (SSPP) portfolio assets is still high, at 7.7%. While this portfolio's market value may vary a lot, I believe it offers relatively safe income that is far superior to that provided by most bond assets these days. Any capital appreciation is icing on the cake. (For info on the criteria for the SSPP portfolio, see my entry dated 10/1/11.)
The results so far are still reasonably good for the lower risk portfolio, B. Graham Div. with Value. With dividends included, this one is up about an annualized 11.5% since its 5/20/11 inception.
Concerning the Low Price to Book Value record, as always I think the closed position outcome is a more reliable measure of a value investment strategy. The day to day or even quarter to quarter fluctuations in a group of open positions can be wide in either direction, but they only become relevant to investment results when equities are sold. Usually one need not accept negative returns but can instead wait for the price one wants before selling.
Through 6/30/12, the Low Price to Book Value closed positions' performances, since the portfolio's 5/14/09 inception, have averaged 31.27%. This works out to 27.62% on an annualized basis. With dividends included, these results would likely be about one percent higher in each case.
I wish everyone a great third quarter!
7/12/12-On 7/5/12, our Low Price to Book Value asset, CSS, purchased on 5/21/10, was sold for a net gain of 3.95% (not counting any dividends). Though this asset had not achieved a 50% or better gain, it had been held for over two years, and I felt the proceeds could be used for purchase of another asset with greater potential. Info on CSS's cost basis and performance from 5/21/10 through 7/5/12 has been added to the Low P/Bk closed positions spreadsheet, and CSS has been deleted from the record of Low P/Bk open positions.
On 7/5/12, our Low Price to Book Value asset, PRE, purchased on 6/30/10, was also sold for a net gain of 7.80% (not counting dividends). Though this asset too had not achieved a 50% or better gain, it had been held for over two years, and I felt its proceeds as well could be used for purchase of another asset with greater potential. Info on PRE's cost basis and performance from 6/30/10 through 7/5/12 has been added to the Low P/Bk closed positions spreadsheet, and PRE has been deleted from the record of Low P/Bk open positions.
My current top-five low price to book value stocks are: STRT; TC; LUK; LM; and IMN. Please note: in contrast to the previously alphabetical listing of my final 5 low price to book value candidates, now they are in order, highest to lowest, based on my assessment of their risk adjusted values relative to their current prices.
My new favorite from among them, then, is Strattec Security Corp. (STRT) (recent price $21.85). It meets Benjamin Graham's bargain stock safety and value criteria.
Strattec Security Corp. will be added to our nest egg at its market price in early trading tomorrow, 7/13/12.
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.