10/7/02-I certainly cannot tell when the U.S. equity market will turn around and clearly begin a bullish phase, and I would doubt many others, except by chance, can accurately pick a new bottom either. Yet, after two and a half years of a voracious bear, the longest, I believe, since early in World War II, there are just a lot of companies out there whose shares are at bargain levels. It seems likely the currently reduced prices may in later years be seen to have represented a superb buying opportunity.
An investor could do far worse at this point, I believe, than to add, on a dollar-cost-average basis, to one's holdings in attractively priced company shares and those of like-minded quality value mutual funds, which, over the long-term, are now probably priced so as to return much better than bonds or cash equivalent assets.
Accordingly, I plan to sacrifice our non-equities, to gradually increase carefully selected equities, by the end of 2003, to half a million dollars in then current value.
In keeping with this intention, today I purchased $5000 in Longleaf Partners Fund.
10/10/02-Last month Prudential, which held the largest of my employer-sponsored tax deferred accounts, down about 45% from its high, informed us it was closing out the relationship with the State of Texas and that I had the choice of getting a check directly or rolling the assets over into another tax-deferred plan. I had hoped to wait till, eventually, the assets were up again, but that was not an option. I asked for the rollover, to another tax-deferred account, through Schwab. Prudential had the nerve to then try to get my business for a regular account. I think not, ever. The majority of our losses, by far, came under their stewardship.
Today I used $5000 of the (now rolled over) reserves with Schwab for equal amount purchases of IBA and TSFT, both assets with excellent price to value and low debt.
After the transfer, necessarily into money market funds from redeemed Prudential equity shares, and today's purchases, the common stock portion of our total portfolio is down to only 22%. To gradually get equities up to my $500,000 target by the end of 2003, from their current levels, will require, through new investments, exchanges from reserves or bonds, and/or a rise in the markets, an average increase of $3750 a week.
10/11/02-The stock market added several thousand to our equity portfolio yesterday, but not quite enough to achieve the minimum target. So, I have placed an order for an additional $4000 in Weitz Partners Value Fund (WPVLX). Though down recently, this fund, ably managed by Wally Weitz, the second money guru of Omaha, NE, has returned an approximately 16% compound annual return for the last decade, compared with about a 10% total return for the S & P 500 and an 11% compound annual return for mid-cap funds generally. His return since inception, in 1983, is also excellent, at over 15%. While he's having a bad year currently, I'm confident he'll pull out of the slump. This is a no load fund, ranked as one of the "Forbes" top ten diversified stock mutual funds.
10/15/02-The markets were up again today in a big way, the Dow rising about 4%. Our equity portfolio's target was $230,000, aiming for $500,000 by the end of next year. But, after the close, our actual stocks portfolio value was over $14,000 higher, at $244,400. So, to reduce debt further, I placed orders to sell off the excess amount. Total current assets now stand at $518,500. Price to book value for our individual stock and REIT assets is now about 1.2, far below that for the Wilshire 5000.
10/21/02-The market has recently been friendly, raising our net asset value over $24,000 in the past couple weeks. In this period, as well, we have reduced debt about $17,000, but still maintained our equity targets. While the net value of the portfolio is going up ahead of our hopes and expectations, it is hard to maintain motivation for eventually returning to work. There is a far stronger desire, for now, to simply consider myself retired, resuming paid vocational duties again only if something really appealing comes along. Of course, the proof of the pudding will be in how our assets perform over the long haul, not just with these short-term spikes or dips.
10/25/02-Fran and I got a bit of a shock late this afternoon when we checked our total portfolio's current value on Motley Fool (where we have the assets listed and calculated for us) after today's market close.
The figure today was $10,508,561. That was roughly ten million dollars more than last week. It turned out that Telesoft (TSFT), a Benjamin Graham type value asset, of which I'd purchased 4000 shares a few weeks ago for $.62 per share, was now showing as having closed at $2500!
Well, life surely would have been kind to us if that were the correct quote. I was prepared to sell at the market right away, even if I had to take a few million loss on the bid to ask spread. But unfortunately the correct share cost was $0.25. The Motley Fool brothers should be a little more careful. That's enough to give someone a heart attack.
We are pleased at least to still see our holdings generally going up, if much more modestly. Maybe in time, no doubt a long, long time, we might actually have a nest egg that large, if we keep buying Benjamin Graham type bargains and selling them once they achieve fair value.
In Telesoft's case, the stock still looks good to me, with no significant debt and an extremely low price to book value (0.18). So, I've placed a new order, for 10,000 more shares at $.25. While this particular issue may or may not pan out, on average the investor who acquires a basket of such good value nuggets has been able to do well, with compound annual total returns in the 15-20% range. Even in today's lowered equity premium period, 12-17% yearly results would not be unreasonable.
10/28/02-For whatever reasons, the vocational marketplace holds me in little regard, as was all too apparent in my job hunting foray during the summer. The only position I could obtain, one for which I was no longer physically suited, paid only slightly more than $7 an hour, and that for just 10-15 hrs. on the clock a week.
All the other work for which I applied resulted in no calls for interviews. I did get in once, but simply by pestering the manager. He would not even see me himself, sending a third stringer, the assistant to his assistant, for the task and not bothering to tell him about it until I'd already shown up and been waiting for awhile. Then it was evident in our talk that he'd made up his mind ahead of time.
It is fortuitous that my wife and I do not have to work. However, one likes to feel productive. (In addition, there is a resolve to prove all these much younger prospective employers wrong.)
I shall therefore consider the management of our assets as my employment and, in subsequent applications or resumes, show it as such. The intention, as a minimum, is to see the equity holdings recover and to oversee the assets less with a view to traditional risk control and more to assure superior price to value and higher total returns than for the Standard and Poors 500.
We have been successful in this so far, our own portfolio, since March, 2000, down significantly less than the major market indexes, and looking far more valuable for its total cost than the S.& P.
But, we are also shooting for another milestone by the end of 2003, that our equities' current value be caught up to their levels planned for then three years ago.
One tool we'll use to accomplish this is the purchase of low book value stocks that also have low debt, to be sold when they reach fair price levels. While we cannot necessarily assure the current value goals, as the market price is ultimately out of our control, we can make certain the book value of the portfolio rises steadily. If we do, I'm confident the market prices will eventually follow.
Another tool is to build up a sizeable basket of core assets, for the long-term.
Today I placed orders to raise our Vanguard money market holdings, expecting to exchange them into that company's premier Health Care Fund soon. The health care and pharmaceutical industries appear now to be undervalued.
I also placed an order for $5000 in new Tyco International shares.
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.