Category Archive 'Value investing'

QLTI – a Graham value play experiment

Value investing

I purchased some shares of QLTI today in what is basically my first attempt at putting Benjamin Graham’s value investing approach for “” at work. Given the drop in stock prices the last few months, showing stocks trading at 2/3 net current asset value (or NCAV) have suddenly shown dramatic increases in listings versus in “normal” times.

I found QLTI through a 2/3 NCAV screen at , of which I’m a subscriber. Note that again, there are many different Graham stock screens available, each of which may show a different set of stocks based on definitions and criteria. I narrowed down the list from FPF’s screen against another one based on value, momentum, earnings quality, and predictibility and came up with a much smaller subset of candidates. Of the 8 remaining, I looked at specific financial ratios for each one and QLTI was the one that really stuck out as an anomaly. Keep in mind that Graham emphasizes having sufficient diversification among even stocks trading a 2/3 NCAV, so at least in theory, my just buying this stock should be just the first step among many others to follow.
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An automated version of my Portfolio vs. S&P 500 tracking spreadsheet

Excel spreadsheets (.xls), Personal finance, Value investing

Before my site went down last week, I received an email from Jae Jun at (a fellow value investing blogger) who took it upon himself to make an that I created when this site first launched (the original version’s here).

Using the SMF add-in from Randy at Yahoo! groups, the spreadsheet now automatically looks up SPY’s performance on a particular date rather than requiring you to manually enter in SPY prices, a real time saver.

Thanks for doing this Jae! You can go to the link above to find the spreadsheet as well as his instructions, and while you’re at it, check out his blog and “about” page.

Exited my position in ICF (REIT ETF)

ETFs, Value investing

Today, I sold off my position in ICF. I purchased my shares a more than a month ago at $96.35 and sold them at $102.40 for a gain after fees of 6.26%. Because I have some short-term capital-loss carryovers from way back when, I don’t expect to incur any capital gains taxes on this transaction.

What made me decide to sell now?

I had originally wanted to (as mentioned previosly, we don’t own any property at all) and thought that by investing in commercial real rather than residential estate and dollar-cost averaging into an index, I’d addressed the riskiest aspect of REIT investing. But shortly writing about my investment, I was advised in a comment in the same post by a reader and more experienced value investor that a REIT index might not be the best way to go at this time.

That prompted me to delve much deeper into understanding REITs (due diligence I should have done earlier), because, as I’ve said many times before, I set up this site in large part to learn more about investing.

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All this industry consolidation’s great, but what’s next?

ETFs, Value investing

I woke up yesterday to discover that , a real estate ETF, had shot up by 4% due to Blackstone Group’s purchase of Equity Office Properties Trust (EOP) for $36B, including $15B in debt in the largest private-equity deal, ever. Since EOP is a major component of the 31 REITs that comprises ICF, it, along with most other REIT ETFs, went up thanks to the announcement of the deal.

Being relatively new to making my own investment choices, I find it sort of astounding that two of my previous choices have also benefited from ongoing industry consolidation as well. Just a couple of months ago, Smithfield Foods (SFD) announced it was purchasing Premium Standard Farms (PORK), a purchase I’d made last year and had concluded I’d bought at too high a price.

The announcement allowed me to exit my position gracefully and with a profit. Nucor (NUE) has also indirectly benefited from all the M&A activity within the steel sector. I can’t point to a hard figure for how much its stock price increase has been driven by this activity, but certainly it seems anytime there’s speculation, NUE shoots up at least a few percentage points that day.

I don’t have any illusions of being a prescient stock picker. And the general consensus is that there are few if any value purchases to be made in the market these days.

So what gives?

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My recent mistakes at value investing

Value investing

I’ve caught myself violating one of main tenets by ignoring his “margin of safety” principle. Here are the gory details on the two transactions:

    Ergo Science Corp (ERGO or ERGO.OB)

    Summary: This stock appeared in the Special Situations Investing site as a going-private transaction via a reverse/forward stock split. At the time, ERGO was trading for 0.80 and under the terms of the agreement, shareholders with less than 200 shares would be paid $2.10 per share after the split or a straight 162.5% gain (e.g. not annualized) and before transactions costs.

    My moves: I purchased 199 shares at $0.80 too early, before the pre-14A filing was released saying that the transaction would apply to shareholders of record only, meaning the shares had to be in my name. Schwab charges a $50 fee to register stock shares in my name, and it was unclear to me how I would go about mailing or otherwise transferring these certificates to the company (potential additional transactions costs), so I decided the best course of action was to dispose of my shares. I sold 199 shares a day or two later at $0.70 for a net $39.80 loss.

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