Tuesday, February 19, 2019

Despicable Stocks

Despicable Stocks

I just ran my MFI Formula Screen against top 50  over $200m.  This then filters that list so you only get stocks with a dividend yield > 2.4% and market cap greater than $800m.  Here is filtered list:


Ticker Market Cap Price Dividend Yield
MO              91,485         48.74              3.00 6.16%
BBY              16,369         60.18              0.80 2.99%
HRB                 4,953         24.10              0.99 4.11%
BKE                    866         17.66              1.00 5.66%
CJREF                    954           4.50              0.24 5.33%
GME                 1,168         11.43              1.52 13.30%
HPQ              36,323         23.28              0.58 2.48%
KLAC              16,376      108.19              3.00 2.77%
STX              12,878         45.71              2.52 5.51%
VGR                 1,676         11.88              1.56 13.15%
VIAB              11,750         29.15              0.80 2.74%


I gotta tell you.  When I look at these 11 names, I am very unexcited.  If I were bringing my biases to the table, there are not many names here I'd buy.

MO - just seems tobacco is out.  Vaping is growing.  Weed is growing.  These firms have a lot of debt.  I don't know.

BBY - retail just in continuously under fire.

HRB - one of better looking names to me.  I guess fear is that new tax laws are "simpler" so fewer will use HRB.  Also, definitely subject to disruption.

BKE - see BBY.

CJREF - TV broadcasting.  Looks ok but this is another area under direct attack with rise of you Tube, Netflix etc.

GME - probably worse retail than BKE and BBY.  Seems dividend cut is imminent.

HPQ - maybe one of better options.

KLAC - a lot of people think we're in down cycle for semi manufacturers. But again, looks like one of better options to me.

STX - ok with this, I guess Tech is my investment of choice.

VGR - see MO, but perhaps even more at risk.  I could see a dividend cut here.

VIAB - under attack like CJREF (do kids still watch Nickelodeon?).  But, still a top 5 on this list for me.

So 6 names here I'd be cautiously optimistic about.  One or two I just really would not want to buy for fear of dividend cut.

We will see how things change by 4/1.

Sunday, February 17, 2019

Always Avoid These Stocks!

Always Avoid These Stocks!

Earlier this week I posted how some of my MFI Formula stocks had fared recently.  A couple of the stinkers were TUP and BKE.  They both had yields over 5%.  So one of my readers commented to always avoid MFI stocks yielding over 5%.

Is this true?  In some sense, it could be a warning that a dividend cut is imminent.  Clearly we saw that with TUP.  In my non MFI portfolio, I saw that with CTL this past week as well and DLNG dove 25% recently on a cut as well.  Finally, I worry that GME is next. (as an aside, I do think it would be interesting to study what happens if you buy a stock that has cut it's dividend say 2 weeks post cut).

But these are anecdotal and we give no value to the names that yield over 5% that don't cut.  So let us go to the data.  First, here is a table that shows (by purchase year) MFI stocks by dividend yield:



Year None <1 td=""> 1% to 2.6% 2.6% to 5% Over 5%
2006 10% 12% 5% 35% 34%
2007 -21% -33% -27% -19% -7%
2008 -8% -11% -17% -11% 1%
2009 36% 29% 39% 53% 50%
2010 3% 44% 14% 18% 18%
2011 -5% -1% 3% 10% 8%
2012 19% 29% 29% 49% 29%
2013 24% 29% 19% 33% 18%
2014 -10% 64% 14% 6% 15%
2015 -11% 33% 0% 6% -8%
2016 14% -6% 22% 21% 15%
2017 9% -1% 4% 16% 25%
2018 -7% 0% -1% 1% 6%
Grand Total 4% 11% 7% 18% 16%


So if we look at the 2.6% to 5% (asserted sweet spot by reader) versus over 5%, we frankly don't see much difference.  18% versus 16%.  And is it a recent phenomenon?   No.  In past 5 years 2.6% to 5% is 10% and over 5% is 11%.

Perhaps its makes a difference by market cap?  Let is look just at over 2 billion.



Year None <1 td=""> 1% to 2.6% 2.6% to 5% Over 5%
2006 17% 16% 15% 38% 64%
2007 -23% -42% -23% -5% 26%
2008 -1% -18% -16% 6% -20%
2009 27% 36% 45% 23% 21%
2010 6% 50% 7% 20% 35%
2011 -9% -9% -5% 16% 43%
2012 4% 28% 55% 52% 58%
2013 51% 27% 18% 38% 48%
2014 -4% 6% 6% 6% 46%
2015 -10% -11% -6% 3% 0%
2016 -3% 8% 17% 18% -14%
2017 19% -1% 3% 15% -34%
2018 6% 2% -2% 2% -9%
Grand Total 5% 1% 7% 20% 25%

First, I should comment that since I take top 50 over 100m,  the data starts getting thin here.  But here you do see where Steve is making his point.  While for all years, being over 5% has not been a problem (a stellar 25% annual gain), it has been an issue recently.  Past 4 years -14%, which is pretty horrid.

I cannot tell you whether this is the start of a new trend of just an anomaly, but it does bear watching.

Is It Robust?

I mentioned that the data gets thin.  He is same table.  But instead of showing percent gain, it now shows counts.


Year None <1 td=""> 1% to 2.6% 2.6% to 5% Over 5%
2006            62            23                  40                  26              18
2007            48            32                  28                  11              24
2008            54            12                  27                    3                5
2009            63            10                  26                  20                9
2010            77              7                  11                  13              18
2011          101              8                  18                  34              13
2012            49            15                  22                  74              14
2013            25              6                  83                  85              44
2014            55            11                  83                  78              22
2015            41              3                  68                  77              25
2016            67              3                  55                  75              15
2017            81              2                  57                  66              20
2018            66              1                  92                  68              12
Grand Total          789          133                610                630            239


So 2015 through 2018 (the years of -14% for stocks over $2b in market cap and 5% yield or higher have 72 stock years.  That is 18 per year which means just 1.5 each month.  So my thesis is that is is the same stocks stock month by stock month that are driving this results (an one rhymes with Same Gop.


Let us now look at the individual stocks from 2015 and forward in that category just to see how robust it is:

Stock  Initial Price   End Price  Percent Change
BKE              39.73           26.82 -32.5%
BKE              44.69           31.32 -29.9%
BKE              47.32           31.75 -32.9%
BKE              47.78           28.42 -40.5%
CALM              51.98           37.95 -27.0%
CALM              50.03           41.40 -17.3%
CALM              45.23           44.18 -2.3%
CALM              54.63           40.35 -26.1%
CALM              52.18           38.16 -26.9%
CJREF                8.68             3.27 -62.3%
CJREF                9.05             2.85 -68.5%
CJREF                9.29             3.10 -66.6%
EAF              11.44           14.23 24.4%
GME              18.82           15.27 -18.9%
GME              19.65           14.83 -24.5%
GME              19.75           14.57 -26.2%
GME              20.50           12.67 -38.2%
GME              20.94           13.86 -33.8%
GME              20.81           12.62 -39.3%
GME              24.46           15.97 -34.7%
GME              22.63           17.06 -24.6%
GME              23.51           17.95 -23.7%
GME              24.15           17.42 -27.9%
GME              22.35           19.34 -13.5%
GME              25.80           20.66 -19.9%
GME              29.14           21.50 -26.2%
GME              23.51           21.61 -8.1%
GME              27.22           22.22 -18.4%
GME              29.06           22.55 -22.4%
GME              24.87           24.31 -2.3%
GME              26.61           25.26 -5.1%
HPQ                9.35           14.80 58.3%
KING              14.96           18.00 20.3%
KING              13.50           18.00 33.3%
KING              15.47           18.00 16.4%
KING              14.08           18.00 27.8%
KING              16.76           18.00 7.4%
KING              15.53           18.00 15.9%
MO              56.84           48.74 -14.3%
PBI              11.82             7.14 -39.7%
PBI              10.29             5.91 -42.6%
PBI              11.68             7.26 -37.8%
PBI              14.43             8.68 -39.8%
PBI              14.24             8.57 -39.8%
PBI              13.91             8.76 -37.0%
PBI              12.50           10.84 -13.2%
PBI              12.33           10.89 -11.6%
PBI              13.23           12.64 -4.4%
PBI              14.94           12.85 -14.0%
PBI              14.30           11.18 -21.8%
PBI              13.99             9.90 -29.2%
PPC              19.86           18.76 -5.5%
PPC              19.78           18.99 -4.0%
PPC              18.81           18.18 -3.4%
PPC              17.00           21.64 27.3%
PPC              18.83           21.12 12.2%
PPC              18.63           22.84 22.6%
PPC              19.63           23.24 18.4%
PPC              21.42           24.94 16.4%
PPC              22.91           24.84 8.4%
PPC              23.62           23.95 1.4%
PPC              23.71           24.09 1.6%
PPC              27.43           23.71 -13.6%
STX              38.59           45.71 18.5%
STX              42.36           45.71 7.9%
STX              38.15           45.71 19.8%
TUP              39.59           29.73 -24.9%
TUP              42.51           29.73 -30.1%
TUP              42.99           29.73 -30.8%
TUP              45.73           29.73 -35.0%
TUP              48.08           29.73 -38.2%
WDC              36.97           47.65 28.9%


Pretty dismal.  The only decent ones are KING and PPC and they were both in there via special dividends. PBI, TUP and GME are the regular offenders.  

Finally, let look at next layer down, those with market cap between 600m and 2b.


Year None <1 td=""> 1% to 2.6% 2.6% to 5% Over 5%
2006 8% 5% 12% 33% 47%
2007 -12% -14% -27% -29% 3%
2008 -11% 6% -15% -2% 7%
2009 37% 34% 59% 107% 42%
2010 5% 42% 72% 28% 13%
2011 -14% 10% 15% 9% 26%
2012 25% 37% 8% 45% 21%
2013 9% 48% 41% 20% 31%
2014 2% 62% 20% 7% -25%
2015 -20% 0% 2% 4% -38%
2016 7% 0% 43% 20% 14%
2017 9% 0% 6% 4% 35%
2018 -9% 0% 10% 23% 1%
Grand Total 2% 19% 13% 19% 17%

I don't see the same issue here. Past 4 years the over 5% band hasn't been materially worse.

My View

Interesting thoughts.  People have to make up their own mind.  I think data is too thin and I am encouraged that if you go all the way back, over 5% has been fine.  But there is no denying that it has been a rugged run.

Next I will try to find stocks that have cut dividend and what happened afterwards!