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October, 2014: 11
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. |
10/11/14-No monitored stocks have been sold since the last entry.
The following is my regular summary of quarterly results (statistics through 9/30/14) for the asset approaches followed here:
| Portfolio or Market Index | Date Began Monitoring | Average Asset Hold Period | Average Change | Annualized Performance |
|---|---|---|---|---|
| Berkshire Hathaway, Class B | 6/3/05 | 2.78 years | 46.73% | 14.78% |
| Dividend Value | 5/20/11 | 1.28 years | 13.34% | 10.25% |
| Low Price to Book Value | 5/14/09 | 1.12 years | 15.27% | 13.59% |
| S&P 500 Index (SPX) | 5/14/09 | 5.38 years | 120.83% | 15.86% |
Observations:
As was true at the end of the last quarter, once again the current targets for our nest egg's total equity dividends and book value have been exceeded. We are on track to achieve year-end goals for both.
To review, guiding principles here include that our portfolio's total equity book value increase an average of 13.5% or more a year, while maintaining a dividend yield on that book value of 2.0% or better. In the long run, increases in book value generally lead to correspondingly higher market prices. This is especially true for relatively small-capitalization assets, which ours tend to be. Most of my wife's and my holdings are in tax-deferred accounts. Given that, everything else being equal and assuming, for instance, that neither of us has an untimely death just as we enter a new bear market, even after taxes such levels of book value advancement plus dividends are likely to result in average annual total returns of 15% or more.
Meanwhile, however, through the most recently ended quarter the S&P 500 Index has continued to demonstrate bull market strength in the face of a variety of domestic and foreign headwinds. Although a correction appears under way as of this writing, effective the end of the third quarter the S&P 500 Index had seen little drop, whereas smaller capitalization assets were beginning to swoon. This is reflected in the above results, with Low Price to Book Value portfolio and Dividend Value portfolio combined closed plus open position averages showing less robust performance than the cited major average. Research has shown that smaller-cap stocks tend in the main to outperform over the long haul, but that about half the time they lag major indices.
With dividends added in, our Low Price to Book stocks would have averaged a total return of better than 14.6% a year. The Dividend Value securities did just a little better, providing total returns averaging 14.9% annually. The following calculations are inexact, for the portfolios have different onsets. However, if it could have been managed, an equal weighting of these two portfolios plus our BRK/B holdings would have given the investor about 14.8% overall annual returns, including a typical dividend of about 1.9% a year. While this would not have beaten the S&P 500 Index in the bull market that began in March, 2009, it is better than the roughly 9.8% average annual return of the S&P 500 Index since World War II.
These are the present Low Price to Book Value portfolio open positions: ABLT; ACAS; AEG; AEL; AEY; AGII; AHL; AIG; ANAT; AOSL; AUQ; BBOX; BDR; BIF; CDE; CLF; CNA; CUO; ELP; EZPW; FVE; BGLI; GENC; GGB; GURE; HDNG; HIG; HMY; HNR; HWG; IAG; IOT; ISH; KCLI; KELYA; LUKOY; MANT; MT; NTT; NWLI; PBR; PFIN; PGH; PKX; PRE; PT; PZE; QCCO; REGI; RFP; SGMA; SSRI; STLY; STRL; SYA; TA; TATT; TCK; TDS; UMC; VOD; VOXX; and VOYA. I may add to some of these positions from time to time.
And here are our current Dividend Value portfolio holdings: AP; BGCP; BRKS; CATO; COP; CSPI; DCM; DEST; EC; ESV; FIG; GME; IAG, INTC; PETS; PSEC; RDS/A; RGR; STO; SUP; T; TEO; TICC; USMO; UVV; VIV; and WSTG. I may also add to some of these positions from time to time.
Best wishes for good risk-adjusted investing results over the final quarter of the year!
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.