Wednesday, February 15, 2017

The Streakiness of Margic Formula Investing

Streaking

One of the curses (although Greenblatt might call it a benefit) of Magic Formula Investing is the streakiness of the results.  It will work really well for a stretch, then really poorly for a stretch.  It is not random - not one month good, one month bad. It is two years bad, 18 months good.

If you knew when you were getting to the end of a cycle (either good or bad), that would be very beneficial to know.  I have tried to get there, but with no success.  Instead, I have taken steps to mitigate the amplitudes, through approaches like my MFI Formula tranches.

We have been in the midst of a good streak.  But I am starting to see signs that is turning.  Look at the table below of all my monthly tracking portfolios.  The column to focus on is the last one, with the 1s and 0s. A zero means MFI lost (or is losing) and a 1 is a win (or winning).  The streakiness is easy to see here.  Note that we have had a decent strecth of 1s. But most recent three tranches are 0s.


Date MFI R3K Lead
1/6/2006 16.0% 10.9% 1
2/17/2006 21.2% 14.6% 1
3/29/2006 13.0% 9.6% 1
4/7/2006 10.3% 12.1% 0
5/12/2006 20.4% 18.6% 1
5/31/2006 29.2% 23.3% 1
6/30/2006 22.4% 20.0% 1
7/31/2006 19.7% 17.3% 1
8/31/2006 13.0% 13.3% 0
9/28/2006 12.7% 14.6% 0
10/27/2006 10.3% 12.0% 0
11/29/2006 -0.3% 4.8% 0
12/28/2006 -6.9% 3.4% 0
1/26/2007 -10.2% -6.6% 0
2/27/2007 -3.7% -1.0% 0
3/26/2007 -9.8% -5.5% 0
4/27/2007 -10.9% -5.0% 0
5/29/2007 -11.5% -6.3% 0
7/3/2007 -30.0% -15.6% 0
7/30/2007 -19.9% -11.5% 0
8/30/2007 -12.5% -8.7% 0
9/27/2007 -19.0% -18.2% 0
11/2/2007 -40.4% -34.3% 0
11/28/2007 -40.1% -38.3% 0
12/28/2007 -36.3% -40.0% 1
1/25/2008 -36.4% -35.9% 0
2/26/2008 -51.7% -41.5% 0
3/24/2008 -40.9% -36.8% 0
4/25/2008 -25.6% -31.0% 1
5/28/2008 -22.2% -33.6% 1
7/2/2008 -11.7% -25.3% 1
7/29/2008 -10.5% -20.9% 1
8/29/2008 -13.8% -17.9% 1
9/26/2008 -4.3% -10.0% 1
10/31/2008 18.7% 13.9% 1
11/26/2008 50.9% 27.7% 1
12/26/2008 48.9% 32.3% 1
1/23/2009 59.3% 36.4% 1
2/27/2009 92.8% 55.6% 1
3/27/2009 85.8% 48.1% 1
4/24/2009 69.7% 45.8% 1
5/29/2009 31.8% 22.8% 1
6/29/2009 21.3% 24.0% 0
7/29/2009 19.5% 15.9% 1
8/28/2009 7.4% 8.8% 0
9/25/2009 12.6% 12.4% 1
10/30/2009 22.7% 18.3% 1
11/27/2009 24.3% 13.6% 1
12/31/2009 23.7% 18.1% 1
1/22/2010 19.0% 20.6% 0
2/26/2010 18.6% 23.6% 0
3/25/2010 10.0% 15.4% 0
4/23/2010 7.1% 11.4% 0
5/28/2010 19.3% 25.4% 0
6/29/2010 16.7% 25.7% 0
7/29/2010 5.4% 20.1% 0
9/2/2010 7.3% 10.1% 0
9/24/2010 -4.3% 0.3% 0
10/29/2010 -2.9% 10.4% 0
11/26/2010 -8.5% 1.4% 0
1/3/2011 -11.4% 0.1% 0
1/28/2011 -7.6% 4.9% 0
2/25/2011 -5.5% 5.0% 0
3/24/2011 -4.4% 7.4% 0
4/21/2011 -16.0% 3.2% 0
5/27/2011 -12.0% -0.4% 0
6/24/2011 -9.5% 5.0% 0
7/29/2011 -4.3% 8.1% 0
8/26/2011 12.0% 21.6% 0
9/30/2011 23.5% 29.6% 0
10/28/2011 0.4% 11.5% 0
11/25/2011 13.9% 24.0% 0
12/29/2011 9.9% 15.9% 0
1/27/2012 7.4% 16.6% 0
2/24/2012 7.8% 13.3% 0
3/23/2012 9.1% 15.2% 0
4/27/2012 10.5% 15.3% 0
5/25/2012 26.5% 27.5% 0
6/22/2012 26.1% 24.6% 1
7/27/2012 30.4% 25.7% 1
8/24/2012 26.0% 19.8% 1
9/28/2012 39.3% 22.1% 1
10/26/2012 48.3% 28.9% 1
11/23/2012 45.7% 32.1% 1
12/31/2012 52.3% 33.0% 1
1/25/2013 39.5% 22.0% 1
2/22/2013 46.5% 26.4% 1
3/28/2013 40.1% 21.2% 1
4/26/2013 35.0% 20.5% 1
5/24/2013 20.4% 19.2% 1
6/28/2013 26.9% 24.1% 1
7/29/2013 17.8% 19.0% 0
8/30/2013 17.5% 24.6% 0
9/27/2013 12.9% 17.7% 0
10/25/2013 11.8% 15.4% 0
11/29/2013 12.3% 15.6% 0
12/31/2013 12.7% 11.9% 1
1/31/2014 14.2% 13.0% 1
2/28/2014 15.4% 13.9% 1
3/28/2014 6.1% 12.3% 0
4/25/2014 8.6% 15.8% 0
5/30/2014 5.9% 11.7% 0
6/27/2014 2.5% 9.2% 0
7/25/2014 3.3% 8.7% 0
8/29/2014 -2.2% 1.0% 0
9/26/2014 -0.6% -0.9% 1
10/31/2014 4.3% 4.4% 0
11/28/2014 -2.9% 2.9% 0
12/31/2014 -9.3% 0.3% 0
1/30/2015 -12.4% -2.8% 0
2/27/2015 -19.0% -7.3% 0
3/27/2015 -17.1% -1.9% 0
4/24/2015 -15.4% -0.8% 0
5/29/2015 -14.1% 0.1% 0
6/26/2015 -8.7% 0.4% 0
7/30/2015 3.96% 4.02% 0
8/28/2015 5.6% 10.2% 0
9/25/2015 6.5% 13.8% 0
10/30/2015 2.0% 4.0% 0
11/27/2015 8.9% 8.4% 1
12/31/2015 13.7% 12.6% 1
1/29/2016 23.2% 22.4% 1
2/26/2016 30.1% 24.0% 1
3/24/2016 28.0% 18.4% 1
4/22/2016 15.2% 14.5% 1
5/27/2016 19.3% 14.0% 1
6/30/2016 18.6% 13.7% 1
7/29/2016 13.6% 9.4% 1
8/26/2016 13.6% 9.3% 1
9/30/2016 12.4% 9.0% 1
10/28/2016 13.6% 11.5% 1
11/25/2016 3.5% 5.9% 0
12/30/2016 2.7% 4.6% 0
1/27/2017 1.6% 2.1% 0


Still early days on these tranches - but not a pattern I am thrilled to see.