Covestor model manager Lance Langenhoven has an easy to remember goal for investing in his Rule Number 1 model: Don’t lose money. Langenhoven adopted this rule after reading the Phil Town book “Rule #1”. As you might have guessed already, that first rule is not to lose money. Predictably, the goal is to buy low and sell high—which is sometimes easier said than done.
One of the top holdings in the model is Life Partners Holdings Inc (NASDAQ:LPHI), a financial company that specializes in life settlements, an arrangement in which an issued life insurance policy is purchased from an insured/owner for more than the cash value but less than the death benefit. The company that purchases the life insurance policy is then added to the policy as owner and beneficiary and when the insured dies, the life settlement company receives the full death benefit. The life settlement market is considered the secondary life insurance market and LPHI is the only publicly traded company that specializes exclusively in life settlements. As the economy lags in recovery, life settlements could become an increasingly popular option for retirees who need additional capital after suffering unrecovered losses in their retirement accounts. Over the past 4 years, LPHI’s earnings per share have increased as has their shareholder equity and total assets. LPHI’s share price has been rocky over the past five years.
Another top position in the Rule Number 1 model is Apollo Group Inc (NASDAQ:APOL). Apollo Group provides higher education programs for adults through schools like the University of Phoenix. Their programs are accessible for adults who are already employed but who want to create an opportunity to segue into a higher paying career with more opportunities. Although these programs can be hard to afford, when unemployment rates increase adult learning courses can become very popular. APOL has a relatively low price to earnings ratio compared to its competitors and their net revenues, net income and earnings per share have been increasing steadily over the past three years.
