Bringing Down the House

When we go to Las Vegas, everyone wants a system that gives them an edge. Sadly, we are not all MIT grads and do not all have such ability. That is why you see the lavish hotels there, built with the money left by gamblers.

It does not have to be that way with the stock market. Perhaps we can find a way to beat the house. MFI is my approach, but many want to see if there is a subset of MFI that will do even better.

Here is a hypothetical approach suggested in the Yahoo Groups board by vdicarmine. Start with a list of MFI stocks and then buy the ones a month later that are still on the list but have been beaten down the most. Interesting idea. I will try it with a hypothetical portfolio. I have 48 stock picks from June 1st. I will spilt in the 24 best and the 24 worst for the month so far. Then if the stock is still on the list, I will place it in a hypothetical portfolio and track for a year.

Not Very Smart Section
It is early still but when I went through my not so in-depth analysis to pick stocks near the end of May (5 stocks at the end: RAIL, OVTI, KG, ORCT & FDG) I have to say that I really sucked. It is still early, but here are some gut-wrenching stats:
(1) the entire universe of 50 MFI stocks since then: -3.2%
(2) the universe of 10 stocks I decided to pick from: -8.6%
(3) the 5 stocks I actually picked: -15.4%!!!!
(4) the benchmark: -2.4%

I am not sure that I could have done any worse. Humbling? You bet!

I think I have finally figured out how to get some graphics in my blog... while I am not proud of the graph below, I am proud of figuring out how to get it in... not bad for an old man. The horizontal axis represents time. The vertical axis is portfolio value. The green line represents my investment ($10,000 per stock, plus the few additions). The Blue line is the value of just investing in IWV. The magenta line is the value of my portfolio. In an ideal world, the magenta line would be above the green and the blue lines. Alas that it is not a perfect world. I will try and update this regularly along with my detailed tables.

Stock News

Crummy day in the market, though my MFI portfolio held up ok.

• TGIS continued its extraordinary run and has gone from $8.56 on the 14th to $12.70 today.
• MTEX paid a 8 cent dividend today!
• FDG announced a distribution at end of month of $1 Canadian. They did say some complicated stuff about taxes and withholdings. I hope I don't have to pay Canadian and US taxes on that dividend. Hmm, perhaps I need to consult my tax advisor.
• OVTI was bashed by Herb Greenberg today (Herb Greenberg OVTI Comments) . That offsets their praise from Markman a few weeks ago to some extent.
• HW - Motley Fool sounded like thy're tossing in the towel on HW (Headwaters in Need of a Bailout? - at Motley Fool). Man, this is one hated stock. Maybe that is a bullish sign!

Must Read! I just checked out what Cramer said on his show tonight. He interviewed the CEO of Trinity Industries. Check out what he said about railcars (good news for RAIL):

"Where are we in the capital equipment cycle for railcars? Cramer asked.

In the in railcar sector we see a replacement cycle that we're in the early stages of, said Wallace. We have more than 700,000 railcars that are 25 years old that are going to have to be replaced in the next 10 to 15 years."

Well, I believe I am done blogging for the day. I hope everyone has a great evening... all three of you who read this! (I keep waiting (and waiting) for the WSJ to pick this up).