Saturday, May 23, 2015

Weekend Update 5/23/15

Weekend Update 5/23/15

Up early this Saturday morning.  Coffee is on - so understandable if I make typing errrors. Cool morning, just 43 degrees, but sunny and beautiful.

I am up 12% on the year, that is very good.  Honestly a good chunk of that is NHTC, which is my largest holding as it is up 145%. But even witha more subdued NHTC, I'd be beating the indices.  So it has been a good first 5 months.

Paying Dividends

Usually I start off discussing MFI. But today I thought I'd give the unsung dividend paying stocks a salute.  Here are the stocks I consider part of my "dividend" portfolio, in that I reinvest all the dividends:

Row Labels Sum of Cost Sum of Value Sum of Dividends Sum of Gain Sum of Shares
CSQ 20,323 22,142 2,790 4,609 1,920
AOD 17,586 18,830 1,562 2,806 2,069
OIBAX 9,317 8,972 1,865 1,521 1,534
O 6,079 7,839 1,000 2,760 167
NTC 5,526 5,535 187 196 440
FSC 2,049 1,999 26 -23 288
Grand Total 60,879 65,318 7,429 11,868 6,418


Now what is interesting about this table (which has been multiplied by a factor to remain mysterious) is that it represents my reinvested dividends.  So on CSQ, I have received $20,323 in dividends.  Those have been reinvested and are now worth $22,142. And on top of that, the stock I bought with those dividends has paid another $2,790 in dividends.  This is classic compounding.

Here is a look at the dividend stocks in a different way.  Note this also includes TGONF, a holding I do not reinvest dividends:

Stock Avg Cost Current Price Dividends Gain per Share Pct Gain
AOD          8.08             9.10             1.33              2.35 29.1%
FSC          7.08             6.95             0.18              0.05 0.7%
CSQ          9.18           11.53             2.24              4.59 50.0%
NTC        12.04           12.59             0.88              1.43 11.9%
TGONF        10.24             9.88             0.71              0.35 3.4%
O        22.02           46.96           16.79            41.72 189.4%
OIBAX          5.03             5.85             2.07              2.89 57.4%

Finally, here is a graph of my dividend income by quarter by year (with multiplier).  Note how dividend income has increased steadily over time (the plan).




I note that 2015 is a bit lower than 2014.  That is because it is a projected number and I have not included the prospects of any special dividends.  I quite often get a few of those and the 4th quarter is a common stretch for them.

MFI Select

This portfolio continues to absolutely torch the Russell 3000.

8/15/2014 Start Current Dividend Pct Gain R3K Gain
CSCO $24.40 $29.26 $0.59 22.3% 10.4%
AGX $36.71 $35.65 $0.70 -1.0% 10.4%
ITRN $21.32 $24.39 $0.71 17.7% 10.4%
BRCD $9.34 $12.54 $0.11 35.5% 10.4%
CBI $58.25 $56.31 $0.14 -3.1% 10.4%
Totals 14.3% 10.4%
11/15/2014 Start Current Dividend Pct Gain R3K Gain
FLR $64.80 $57.97 $0.42 -9.9% 5.9%
IPCM $38.45 $49.26 $0.00 28.1% 5.9%
VIAB $72.29 $66.80 $0.66 -6.7% 5.9%
NHTC $12.19 $30.25 $0.06 148.6% 5.9%
AWRE $4.40 $3.97 $0.00 -9.8% 5.9%
Totals 30.1% 5.9%
2/1/2015 Start Current Dividend Pct Gain R3K Gain
VEC $28.00 $25.71 $0.00 -8.2% 7.4%
QCOM $62.73 $69.51 $0.42 11.5% 7.4%
VIAB $63.91 $66.80 $0.33 5.0% 7.4%
UIS $22.03 $21.00 $0.00 -4.7% 7.4%
NHTC $12.44 $30.25 $0.05 143.6% 7.4%
Totals 29.4% 7.4%
5/6/2015 Start Current Dividend Pct Gain R3K Gain
CBI $50.38 $56.31 $0.00 11.8% 2.1%
PSDV $4.12 $4.01 $0.00 -2.8% 2.1%
TSRA $38.94 $38.74 $0.00 -0.5% 2.1%
KORS $62.24 $61.63 $0.00 -1.0% 2.1%
DEPO $23.50 $20.76 $0.00 -11.7% 2.1%
Totals -0.8% 2.1%
Category/Tranche August November February May Total
Initial Investment      25,000       25,000     25,000      25,000    100,000
Current Tranche 14.3% 30.1% 29.4% -0.8% 18.5%
Previous Tranche 41.4% 14.2% 8.5% 18.3% 19.2%
Tranche -2 14.1% 43.7% 78.3% 33.0% 42.3%
MFI Overall Gain 84.4% 113.5% 150.2% 56.0% 101.0%
Current Balance      46,088       53,382     62,561      39,002    201,033
R3K Current Tranche 10.4% 5.9% 7.4% 2.1% 6.4%
R3K Overall Gain 61.0% 65.7% 46.8% 37.0% 52.6%
R3K Balance      40,248       41,413     36,712      34,243    152,616
Annualized IRR 24.7% 35.1% 48.9% 24.3% 28.4%

So just looking at some key numbers. Since I started this re-boot in August 2012, my annual IRR is 28.4%.  That is not far from the book which was around 31%.  You can see I am at a double: 201,033 if I had started with $100,000. In reality it is more complex as I have added money to each tranche over time.  I should note that the 28.4% considers those adds (I track all my actual cash flows).

The May 2015 tranche is off to a slow start. But the other three are all winning nicely.  That is expected.  Greenblatt in his book commented at length how MFI will have some stinkers and that would make it difficult for mutual funds or hedge funds to use it.  Fingers crossed that May 2015 isn't a "stinker", since my reboot, I have not had an out and out disaster.  Here is my worst tranche:

8/15/12 Stocks Start Current Dividend Pct Gain R3K Gain
DLB $34.43 $33.04 $4.00 7.6% 22.1%
KFY $13.98 $18.95 $0.00 35.6% 22.1%
MSFT $30.19 $31.92 $0.92 8.8% 22.1%
NSU $3.62 $3.33 $0.12 -4.6% 22.1%
UIS $19.96 $24.52 $0.00 22.8% 22.1%
Totals 14.1% 22.1%

The first one after the reboot lost by eight points.

Here is my month by month progression:

Date Differential MFI Value R3K Value
12/1/2012 -2.20%       99,765         101,965
1/1/2013 -1.78%      102,798         104,575
2/1/2013 -2.26%      102,594         104,856
3/1/2013 -2.23%      102,881         105,114
4/1/2013 -0.43%      106,804         107,234
5/1/2013 2.00%      110,423         108,423
6/1/2013 4.75%      115,831         111,085
7/1/2013 4.29%      114,888         110,597
8/1/2013 6.91%      124,799         117,889
9/1/2013 10.46%      124,536         114,079
10/1/2013 19.67%      138,655         118,990
11/1/2013 19.75%      143,514         123,764
12/1/2013 23.70%      150,105         126,405
1/1/2014 26.63%      157,138         130,503
2/1/2014 24.70%      150,619         125,918
3/1/2014 25.66%      158,116         132,458
4/1/2014 30.38%      162,991         132,616
5/1/2014 29.65%      162,428         132,779
6/1/2014 31.44%      167,001         135,559
7/1/2014 39.23%      177,971         138,740
8/1/2014 31.13%      167,054         135,922
9/1/2014 35.90%      177,792         141,892
10/1/2014 29.38%      168,321         138,944
11/1/2014 26.14%      168,810         142,666
12/1/2014 30.22%      176,420         146,198
1/1/2015 28.17%      174,306         146,140
2/1/2015 20.63%      162,833         142,201
3/1/2015 25.15%      175,476         150,324
4/1/2015 29.95%      178,565         148,612
5/1/2015 37.31%      186,655         149,348
Current 48.42%      201,033         152,616

You can see that my absolute dollar gain in May (over $14k) is my highest. On a percentage basis, September 2013 (up about 11%) is the winner.

MFI Formula

Not such a good week for these three tranches.  It seemed like bad news most of the week.  BAH and BKE each missed on earnings.  That caused BAH to sell off 10%.  So now my seminal tranche for my formula approach is now trailing (gasp). Still plenty of time, but also possible I lose.  My studies have shown that over the long term this approach works very well, but it also shows that individual tranches may struggle.

Recall in my formula there is an element of chance.  I only get five stocks from the overall pool picked by a random number generator.  It is noteworthy that the stocks I did not pick are up about 14%.

10/1/2014 Stocks Start Current Dividend Pct Gain R3K Gain
BAH $23.52 $25.11 $0.24 7.8% 9.9%
BKE $45.55 $44.07 $3.45 4.3% 9.9%
CA $27.87 $31.33 $0.50 14.2% 9.9%
GME $41.70 $40.80 $0.69 -0.5% 9.9%
NUS $44.56 $52.44 $1.05 20.0% 9.9%
Totals 9.2% 9.9%
12/31/14 Stocks Start Current Dividend Pct Gain R3K Gain
CA $30.83 $31.33 $0.25 2.4% 3.3%
CSCO $28.36 $29.26 $0.40 4.6% 3.3%
RGR $34.81 $55.44 $0.49 60.7% 3.3%
GME $34.21 $40.80 $0.36 20.3% 3.3%
IQNT $19.87 $17.82 $0.15 -9.6% 3.3%
Totals 15.7% 3.3%
3/31/2015 Start Current Dividend Pct Gain R3K Gain
HRB $31.99 $32.09 $0.00 0.3% 2.0%
GME $37.69 $40.80 $0.00 8.3% 2.0%
KING $15.85 $15.25 $0.00 -3.8% 2.0%
NSU $3.43 $4.06 $0.00 18.4% 2.0%
PPC $22.65 $26.50 $0.00 17.0% 2.0%
Totals 8.0% 2.0%
Still in total a success, the first tranche is certainly not a disaster.  I will be picking my fourth and final tranche at the end of June.  If I were picking today, here is what would make the cut (over $600m market cap and over 2.4% yield):

Number Ticker Market Cap Price Dividend Yield
1 HRB                  8,833         32.09                0.80 2.5%
2 CA                13,644         31.33                1.00 3.2%
3 CPLA                      656         53.63                1.48 2.8%
4 CSCO              148,407         29.26                0.84 2.9%
5 GME                  4,394         40.80                1.44 3.5%
6 NSU                      811           4.06                0.16 3.9%
7 PDLI                  1,089           6.66                0.60 9.0%
8 PPC                  6,864         26.50                5.77 21.8%
9 PBI                  4,621         22.99                0.75 3.3%
10 QCOM              113,510         69.51                1.92 2.8%
11 RTN                32,640      106.70                2.68 2.5%
We shall see what the list looks like in a month.  Finally, here is month by month progression of the formula tranches (still not fully invested):

Date Differential Value R3K Value
10/1/2014 0.00%      100,000         100,000
11/1/2014 1.63%      102,288         100,658
12/1/2014 0.30%      101,375         101,075
1/1/2015 -0.33%      100,664         100,995
2/1/2015 1.67%      101,281           99,611
3/1/2015 3.62%      106,073         102,454
4/1/2015 5.09%      106,781         101,695
5/1/2015 5.78%      107,859         102,077
Current 4.43%      108,212         103,779

Have a great weekend everyone.