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July, 2016: 4 17 31

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.

Observations:

For the first time in several years, the annualized performances of the S&P 500 Index and of our BRK/B shares are at least equal, whereas since early 2009 the former had consistently beaten the latter, an anomalous result. (That the two records here match on an annual basis has been double-checked and is not in error.)

As suggested in the prior entry, though I remain committed to value investing, my sub-portfolios and overall method have changed. The number of assets in our nest egg has been reduced. Additional net redemptions are likely to occur till tradable equities number 50 or less.

Nonetheless, thanks to nice returns in recent months for such low P/E securities as MN and TRN and for such Low P/Bk equities as ATW, SVT, and TA, plus relatively good BRK/B performance since buying its shares below P/Bk 1.2 (early in the year), as well as the introduction of our High Quality approach (purchasing shares of strong, profitable companies with excellent long-term prospects when they are temporarily out of favor) our nest egg in the first two quarters of 2016 had its most successful six months in a long while, up 6.20%, notwithstanding the brief "Brexit" slump last month.

It is not unreasonable to expect the new approach will continue to be moderately lucrative. It does, however, involve my adopting more flexibility in buy candidates, in hold periods, and in portfolio size than had been the case during most of this journal's history.

Some readers' styles and temperaments may be better suited to a more classic Ben Graham regimen than I am now following. Others could find they would be well served to look into alternative ways of managing assets. One option: holding just one or two low-fee, conservative mutual funds, perhaps dollar-cost-averaging most of their liquid assets into, for instance, Vanguard Utilities Index Fund Admiral Shares (VUIAX). This fund has below average volatility yet a ten-year annual performance through June, 2016, of 9.20%. With this type investment, little time, frictional cost, or emotion is involved, yet one receives a fairly reliable return that can double one's initial investment, on average, in 7-8 years or can provide a 2-3% annual dividend (better than a long-term Treasury bond), with no need to draw down the invested principal. (It would be my choice for my spouse as a convenient way of handling our nest egg if I should become incapacitated and no longer able to handle things in an active way.)

For those seeking a somewhat more energetic mutual fund alternative, how about Vanguard Health Care Index Fund Admiral Shares (VHCIX)? Its ten-year annual performance through 6/30/16 was 11.3%, but it is more risky, so in my view one would be advised to hold off committing the bulk of his or her reserves till the next bear market is well underway.

Our tradable assets portfolio (subject to further sales or purchases in the weeks ahead) include: AAAP, AGO, AIZ, AMZN, ANAT, AP, ASA, ASFI, ASGN, ATRO, ATW, AVX, BBBY, BDN, BEN, BGCP, BHE, BIIB, BRK/B, CAH, CALM, COP, CRM, CSCO, CYBR, CZZ, DHT, DWSN, DY, ETN, EXPD, FLR, FOSL, FRD, FRO, GBX, GIM, GME, HDNG, HII, HP, ICON, INFY, IOSP, IOT, IQNT, JEC, KELYA, KKR, LGIH, MCK, MEI, MGA, MLR, MN, NLY, PAYC, PETS, PFIN, PJT, PNTR, RCKY, RDS/B, RGLD, RHI, SANM, SBNY, SIR, SKX, SKYW, SLW, SPN, SSL, SVT, SWKS, SYNL, T, TA, TARO, TECD, TPC, TRN, TX, UVE, UVV, VER, VLO, VOYA, VXX, WDC, WSTG.

Here's to our all enjoying an enriching next three months in both in our financial non-financial endeavors!

7/17/16-At the end of last month I introduced two portfolios, Top Ten and Honorable Mentions, for a total of 25 stocks. It turns out, however, that since several different approaches are used to determine which are the best 25 assets, keeping them in just those two portfolios is proving to be way too cumbersome. Here, then, is my hopefully more sensible and simplified redo:

Rather than keeping track of the performance of each portfolio, I shall merely report on the gains or losses of our liquid assets as a whole. These will essentially be comprised of our money market reserves plus holdings in each of five strategies plus a misc. tradable stock category (another 25 holdings):

BLND - This is a portfolio blend, updated about every month, of 6 low P/E, low P/S, and/or high dividend stocks. Current holdings are: EXPR; FRAN; GLAD; KELYA; KORS; and NLY.

BRK/B - Class B shares in Berkshire Hathaway shall be bought when available at or below 1.2 times P/Bk. I intend to never sell BRK/B shares once acquired.

HQ - This portfolio is for high quality assets that have good prospects yet appear to be at the time of purchase at relatively bargain prices compared with their likely future performance. Current holdings are: BEN; CAJ; EXPD; INFY; RDS/B; and RHI.

TS - This portfolio, so long as he is kind enough to make his holdings known to the general public via a Motley Fool discussion board, endeavors to track the top 6 holdings of Saul (from the Motley Fool discussion board entitled: "Saul's Investing Discussions," which I heartily recommend and which I find to mainly be picks reflecting low P/E in relation to both historical growth and ongoing potential). Current holdings for TS are: AMZN; CBM; LGIH; SBNY; SKX; and SWKS.

VM - This portfolio is for smaller capitalization value plus momentum stocks. They usually will be $10 billion or less in market-cap and 1.5 or less in P/Bk, yet with some dividend and above average momentum. Current holdings are: BDN; CZZ; GPT; SIR; SKYW; and VER.

As mentioned above, there is also a Misc. Tradable 25 Stocks portfolio. These do not fit any single investment method but seem for the time being to still be good assets to have in the nest egg. Current holdings in this category are: ASA; AVX; ATW; DWSN; DY; GG; HP; IOSP; IQNT; JEC; MCK; MEI; MN; PAYC; RGLD; SANM; SLW; SVT; T; TA; TPC; UVV; UVE; WDC; WSTG.

Part of our nest egg, yet not generally followed here, are some assets that I just keep "forever" because it is too hard for tax purposes to sell them. For example, there may since the original purchase have been spin-offs, mergers, corporate name changes, stock splits, and so on, in some cases multiple times. I do not even have a record in certain instances of all the changes that have occurred in particular securities. The combined current value of these "strictly no sell 'ems" is a bit above $100,000, and overall they are up roughly 80% over the cost basis. That sounds pretty good, but on average they have been held for several years, so the annual performance has not been so hot, maybe around 8% compounded. Still, better up than down, especially since I am keeping them till I pass away (and my wife or other heirs get a chance to sell them at the new cost basis [set effective the day of my death or the last trading session before it]). In addition, on average they have a combined annual dividend yield of 2.00%. Their long-term total return is thus quite similar to that of the S&P 500 Index. The balance of liquid holdings, though, are in either reserves or one of the above indicated six portfolios.

Combined liquid assets for my spouse and myself at present (from reserves, the "strictly no sell 'ems," our Misc. Tradable 25 Stocks, plus holdings in our BLND, BRK/B, HQ, TS, and VM portfolios) come to $1,145,500. As noted earlier, am also keeping track of our equity dividend income, intending it to rise 13.5% or more annually. We remain on target to reach the 2016 stocks (or stock fund) dividend goal of $25,888.

7/31/16-The following are the current suggested securities in each of five strategies plus in a misc. tradable stock category:

BLND - This is a portfolio blend, updated about every month, of 6 low P/E, low P/S, and/or high dividend stocks. Current holdings are: EXPR; HIBB; KBR; NLY; SAFM; and TPRE.

BRK/B - Class B shares in Berkshire Hathaway shall be bought when available at or below 1.2 times P/Bk. I intend to never sell BRK/B shares once acquired.

HQ - This portfolio is for high quality assets that have good prospects yet appear to be at the time of purchase at relatively bargain prices compared with their likely future performance. Current holdings are: BEN; CAJ; EXPD; INFY; RDS/B; and RHI.

TS - This portfolio, so long as he is kind enough to make his holdings known to the general public via a Motley Fool discussion board, endeavors to track the top 6 holdings of Saul (from the Motley Fool discussion board entitled: "Saul's Investing Discussions," which I heartily recommend and which I find to mainly be picks reflecting low P/E in relation to both historical growth and ongoing potential). Current holdings for TS are: AMZN; CBM; LGIH; SBNY; SKX; and SWKS.

VM - This portfolio is for smaller capitalization value plus momentum stocks. They usually will be $10 billion or less in market-cap and 1.5 or less in P/Bk, yet with some dividend and above average momentum. Current holdings are: CYS; GPT; IRT; SIR; SKYW; and VER.

As mentioned above, there is also a Misc. Tradable 25 Stocks portfolio. These do not fit any single investment method but seem for the time being to still be good assets to have in the nest egg. Current holdings in this category are: ASA; ATW; AUY; BDN; CAH; CODI; CRM; DWSN; FRAN; GG; GLAD; GME; INN; KELYA; KKR; KORS; MEI; PAYC; QCOM; SANM; SLW; TOT; TX; VOYA; and WSTG.

Combined liquid assets for my spouse and myself at present (from reserves, the "strictly no sell 'ems," our Misc. Tradable 25 Stocks, plus holdings in our BLND, BRK/B, HQ, TS, and VM portfolios) come to $1,155,694, a gain of $10,194 or 0.89% since their level as of the last entry. We continue to maintain minimum equity dividend income at target levels as well, with the absolute amount increased by at least 13.5% a year. To attain our year-end target for equities, our liquid assets overall, and equity yield, we need to average an increase per trading day through the end of 2016 of $1450, or roughly 0.2%, while also assuring the dividend income stays at or above 2% of the principal.

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