Value Investment Fund – Status on June 30, 2023
. June 30, 2023 May 31, 2023 June 30, 2023
. # of Shares Cost Basis Net Market Price* Net Fair Market Value* Net Fair Market Value*
REITs
. – Essex Property Trust, Inc. (Tranche #1) 71.6846 $20,000.00 $233.30 $15,416.49 $16,724.02
. – Essex Property Trust, Inc. (Tranche #2) 77.7000 20,000.00 233.30 16,710.16 18,127.41
. – Essex Property Trust, Inc. (Tranche #3) 100.0000 22,221.00 233.30 21,506.00 23,330.00
. – Essex Property Trust, Inc. (Tranche #4) 180.0000 44,980.00 233.30 38,710.80 41,994.00
. Sub-Total 429.3846 107,201.00 $92,343.45 $100,175.43
. – AvalonBay Communities 100.0000 17,083.80 189.27 $17,298.00 $18,927.00
Railroads
. – Norfolk Southern Railroad 100.0000 21,012.00 225.76 $20,718.00 $22,576.00
Entertainment
. – The Walt Disney Company (Tranche #1) 180.1801 20,000.00 $88.28 $15,668.46 $15,906.30
. – The Walt Disney Company (Tranche #2) 200.0000 21,200.00 88.28 17,392.00 17,656.00
. – The Walt Disney Company (Tranche #3) 198.0198 20,000.00 88.28 17,219.80 17,481.19
. Sub-Total 578.1999 61,200.00 $50,280.26 $51,043.49
Banking
. – Wells Fargo (Tranche #1) 100.0000 4,267.50 41.68 $3,881.00 $4,168.00
. – Wells Fargo (Tranche #2) 400.0000 15,804.00 41.68 15,524.00 16,672.00
. Sub-Total 500.0000 20,071.50 $19,405.00 $20,840.00
Dividend Receivables (Essex/AvalonBay) -0- 1,156.88
Cash on Hand (Basis, Gains, Dividends, PUTS) 1,458.44 684.86
Totals (Starting Cost Basis = $100,000) $226,568.30 $201,503.16 $215,403.65
Accrual adjustment for taxes 7,323.04 3,641.79
Totals Net of Taxes (Recapture) $208,826.20 $219,045.44
Margin Account (AvalonBay/Norfolk Southern Purchase) (36,986.22) (36,986.22)
This portfolio’s value is AFTER TAXES of 28% on all realized gains. Total taxes paid to date 35,150.98 35,508.50
Comparative Gross Return Since Inception $206,990.96 $217,567.72
Unrealized Earnings (Value of Respective Market Prices Less Cost Basis/Fees at Point of Sale) $(26,153.72) $(13,006.39)
*Net of transaction fees of $1.00 per share; thus the amount in the schedule equals the actual market price per share at closing less $1.00 per share.
Value Investment Fund – Potential Obligations
The Value Investment Fund’s current exposure related to PUT options is as follows:
- Norfolk Southern Corporation – sold in September (200 Shares) with a strike price of $145 and an expiration date of January 21, 2024 $29,000
- Essex Property Trust – sold 12/30/22 (100 Shares) with a strike price of $170 and an expiration date of July 21, 2023 $17,100
- Union Pacific – sold 12/30/22 (200 Shares) with a strike price of $145 and an expiration date of August 18, 2023 $29,200
- L3 Harris Technologies – sold 12/30/22 (100 Shares) with a strike price of $150 and an expiration date of October 20, 2023 $15,100
- Marriott Hotels – sold 12/30/22 (100 Shares) with a strike price of $90 and an expiration date of January 19, 2024 $9,100
- Essex Property Trust – sold 03/17/23 (100 Shares) with a strike price of $200 and an expiration date of October 23, 2023 $20,100
- Huntington Ingalls – sold 03/17/23 (200 Shares) with a strike price of $185 and an expiration date of September 15, 2023 $37,200
*Total financial commitment = $156,800
Market prices on June 30, 2023 are:
- Essex Property Trust (Expiration 07/21/23) $234.30 (Strike Price of $170.00) Current Deviation = 37.82%
- Union Pacific (Expiration 08/18/23) $204.62 (Strike Price of $145.00) Current Deviation = 41.11%
- Huntington Ingalls (Expiration 09/15/23) $227.60 (Strike Price of $185.00) Current Deviation = 23.03%
- L3 Harris Technologies (Expiration 10/20/23) $175.92 (Strike Price of $150.00) Current Deviation = 30.51%
- Essex Property Trust (Expiration 10/23/23) $234.30 (Strike Price of $200.00) Current Deviation = 17.15%
- Marriott Hotels (Expiration 01/19/2024) $183.69 (Strike Price of $90.00) Current Deviation = 104.10%
- Norfolk Southern Corp (Expiration on 01/21/24) $226.76 (Strike Price of $145.00) Current Deviation = 56.38%
*Deviations > 25% are considered favorable.
Earnings realized during April/May/June 2023:
- Norfolk Southern – $1.35/Share, 100 Shares = $135.00
- Wells Fargo Bank – $.30/Share, 500 Shares = $150.00
- Essex Property Trust – $2.31/Share, 429.3846 Shares = $991.88
- AvalonBay Communities – $1.65/Share, 100 Shares = $165.00
1st Quarter Earnings Summary:
- Gains from Securities $20,412.00 *Comerica Bank
- Dividends 2,131.53
- Sale of PUT Option Contracts 1,840.00
Sub-Total 1st Quarter Earnings $24,383.53
2nd Quarter Earnings Summary:
- Dividends $1,441.88
Total Earnings to Date 2023: $25,825.41
Realized Return Year-to-Date 2023: 17.88%
Taxes Paid Year-to-Date 2023: $7,231.11 ($25,825.41*.28)
Summary of First Half of 2023
One of the rare positive outcomes of having an in-depth knowledge of a particular industry is the ability to take advantage of an unusual and infrequent wild swing in market price for a particular member within the securities pool of investments. This occurred with Comerica Bank (Comerica Inc.). In Lesson 9 of this site’s Value Investment Program, the facilitator goes in-depth about Comerica Bank and how it frequently has dramatic swings with its market price. Comerica’s book value is nearly $50 per share. Thus, anytime the share price drops quickly and dramatically (more than 5%) it is an opportunity to buy. Well, this happened on March 13, 2023. The transactions were recorded in real time on that day.
Bought Comerica Bank / Value Investing – Business and Economic Principles (businessecon.org)
Look at that day’s swing with market price per share:
The Fund purchased 1200 shares when the price dipped below $30 per share early that morning. By midday, the price had recovered to just over $50 and the Fund sold the shares. This $20 per share differential on 1200 shares less transaction fees and associated borrowing fees generated a net gain of $20,412. This is a direct reflection of having in-depth knowledge about this particular company, the banking industry and intrinsic value. Act on Knowledge.
© 2023, David J Hoare MSA. All rights reserved.
