11/5/03-Since the last entry the Essential Value Portfolio (EVP) results have been disappointing. Excluding the three most recent purchases (which, of course, immediately lowered the average performance), $31,100 had been invested, with a total return after commissions (since the 8/18/03 inception of the portfolio) of $1299, or 4.2%.
The new asset information is as follows:
Including all assets, the EVP's worth in the market today stands at $39,710, a 2.1% increase. The S. & P. 500 Index, since 8/18/03, is up 4.9%.
I'm not discouraged by this relatively low short-term result. The objective is simply, over the long run, to beat the major market averages and with lower risk. I believe we're on track to do that.
Indeed, our overall net assets are up over 22% this year, compared with a 19.0% increase in 2003 for the S & P 500 Index, despite 25% of our overall portfolio being in fairly low performing assets such as money market accounts or short-term bond funds, and though over half of our expenses (those not offset by income) must be paid out of the nest egg. Excluding such expenses, the net total, even with the poorly performing asset classes, would be up 27% in 2003.
Meanwhile, we are currently $26,000 away from our year-end target of a half-million dollars in equities, up from only $230,000 a little over a year ago (October, 2002). This has been accomplished without an increase in investment debt. (Margin currently stands at 4% of the total, the same level as a year ago.) Nor, by the way, have we robbed any banks, stolen from shareholders, or engaged in any other lucrative but illegal activity (smile).
11/12/03-Yesterday, the small prior downturn in the stock market having given us a portfolio buy signal, I purchased shares in Pfizer, a large-cap value asset that meets some of Warren Buffett's company screening criteria, and T-3 Energy Services, a strict Benjamin Graham low price to book (also low debt to equity, price to earnings, price to cash flow, and market capitalization) value stock.
The details follow in the table below.
These are our 16th and 17th purchases in the Essential Value Portfolio. The average EVP investment, including commissions, has been $2584. To date, the total portfolio investment has been $43,931. Its current value is $45,300, up 3.12%. Given the several purchase dates since the EVP inception date of 8/18/03, the portfolio's annualized gain of 35.08% may also be meaningful.
11/18/03-The markets' continuing slide having taken our assets' value down as well, today I bought additional shares for the Essential Value Portfolio, investments #18 and #19, as detailed below.
Following these purchases, the total invested in the EVP has been $48,638. The average investment per transaction, including commissions, has been $2560. The net return to date is 1.0%, with a current portfolio value of $49,115. The EVP annualized total return is 9.5%.
11/25/03-The Essential Value Portfolio (EVP) record has been so humbling lately that one night I had a panic attack, stayed awake till nearly 3 AM, and wondered if my entire approach to investing were wrong.
Eventually I realized the performance reflected too small a sample, skewed by significant losses in just a few holdings.
The situation could be corrected by: 1. eliminating assets for which recent surprise developments have undermined the buy rationale; 2. gradually molding the portfolio to better reflect the diversity and allocations of our entire equities nest egg (which remains substantially positive for the year, easily beating the S&P 500 record); 3. setting a performance standard for the EVP, purchasing additional assets only when its equities fall below that target, selling only when the standard is exceeded (thus favoring the basic rule of investing, to buy low and sell high); and, finally, 4. selecting for the portfolio only the very best assets.
The standard I'm setting for the stock (or stock fund) portion of the EVP is a 12% compound annual return, with a 5% plus or minus threshold and a $2500 minimum.
The equity holdings, after recent transactions and market action, now stand at $47,802. (The cash portion stands at $5989, and the total EVP has a market value of $53,791.) An advancing schedule of increases, at 12%/year, would improve the equity worth by approximately 1% a month to $53,582 by 11/25/04, or $54,216 by 12/31/04. When the EVP equities' value falls by at least $2500 below a 5% threshold under that advancing performance line, the difference below the threshold will be made up with one or more additional equity buys. When it is above that line by at least $2500 beyond 5% over the current target, I'll sell off the difference with at least $2500 in equity redemptions.
We use a performance standard such as this for our entire nest egg equities with quite good results when combined with careful stock and mutual fund selection.
I've now made a total of 21 purchases for the EVP (#s 20 and 21 detailed below).
And there have now been three sales, also detailed below.
The average purchase has been for $2570, including commissions. The closed positions have shown an average loss of 20.5%. Open positions have had an average gain of 3.0%. The combined EVP total return on investments since the 8/18/03 inception of the portfolio has been a .4% loss. (The S&P 500, meanwhile, at 1054, is up 5.4% in that period.)
Readers may appreciate the following link, Quicken's The Warren Buffett Way Screener, one element in my choice of ADP for recent purchase.
The value of our total nest egg stocks or stock mutual funds is now $483,000, closing in on the half-million dollar year-end goal. Our combined total assets are just under $650,000. We currently have $40,400 in margin debt. N.A.V. is thus about $610,000. Net holdings have gone up about $118,000 in the last twelve months, though we've needed to use some assets to cover ordinary expenses in excess of income.
I do not pretend to be a master investor and realize that such gains must be balanced against the huge losses we had suffered through the period from early 2000 through October of last year. But the performance in 2003 has been a lifesaver for our retirement security and prospects. We hope in future to simply hold our own above inflation, despite expenses. Anything more is a rich gravy.
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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.