Thursday, May 31, 2007


I had to laugh. I sold my OVTI a couple weeks ago, bu I still follow it. They were to announce their earnings today after the closing bell. I think some one pushed the "send" button a few minutes early!

OmniVision Reports Financial Results for Fourth Quarter and Fiscal 2007
PR Newswire (Thu 3:55pm)

Note it went out at 3:55 pm! The stock quickly jumped as the news was good and then trading was suspended. Oops! I am a bit sad that I missed the17% bump today. But the stocks I bought in May are up an average of 11%, so I can't complain.

I did sell Ezenia! today. It only had 2+ weeks left and I had a sell order in that was triggered as it went up a bit today. No regrets.

It was another solid day for me. JTX announced earnings this morning (Jackson Hewitt Reports Fiscal 2007 Annual Results). I didn't think the earnings were jaw-dropping (remember, this is the quarter tax prepartion firms earn 95% of their revenues). But the market thought otherwise, JTX traded up over 10% early in the day and closed up 5%. True Religion was up 6%, on the heels of the 15% gain yesterday. There are some sad shorts out there. So I am now 0.05% behind the benchmark... call it even.

May 31st train wreck. Last year I bought a bunch of stocks right around May 31st. It was a train wreck, and I don't use the term just because RAIL was one of the stocks. Easily my worst stretch of stock picking. Here is a list of stocks I looked at that time and how they performed:

Pretty bleak in total and my picks were FDG, KG, ORCT, OVTI & RAIL. I guess I should have just bought "PU". Note I did buy ASEI, but not until September.

I did buy a replacement for KG After seeing how my 2006 May 31st stocks did, I have a little apprehension. I'll give you a hint, I went with a value stock... literally.

VALU - they have been knocked down a bit, down 10 to 15% recently despite the recent bull market. They pay a nice 2.7% dividend. I also think that with Fox looking to get into the financial reporting big time (recall bid on Dow Jones) that Value Line with its name and surely under-utilized assets may be a good match for a more progressive company. I am pleased with the stock and out look.

Funniest stock of the day: I am tracking Just Listed Stocks and AMEN hit the list today. Appropriately the company has just a single employee... though I don't think his name was God. I almost bought them to go along with True Religion!

Wednesday, May 30, 2007


Sorry I have been absent. Took a little 4 day weekend and just now getting back into the swing.

  • My portfolio has gained serious ground. I did drop 4% behind the benchmark 2 weeks ago. Now I trail by less than 1/2%. Never dull.
  • I sold KG today as it hit the 1 year anniversary. It was up a nice 24%
  • TRLG was on fire today, up about 15%. I suspect it was a classic short squeeze as 45% of the stock is shorted.
  • I do have an update on my study.
  • People are saying bullish things (FreightCar America Still on Track?) about RAIL. I hope that is good (Should You Buy It: Freightcar America).
  • I think to replace KG, I am going to try a new strategy.

Well, the tracking portfolio I set up a year ago is now closed. It stomped the Russell benchmarks. Including dividends the Tracking Portfolio was up 29.2%, my best result yet. The benchmark Russell 3000 was up 21.1% and Russell 2000 was up 18.7%.

Of the composite 6 portfolios that have now closed, the MFI annual result is 18.3% vs 14.8% for the average of the two Russells. Of the 50 stock portfolio, 4 finished up over 100%: DECK, PCU, PNCL and DLX. 5 were bought out, so you could have gotten further gains if $ had been reinvested.

AEO $21.60 $27.09 25.4%
AHCI $3.82 $3.02 -20.9%
ALDA $31.43 $15.37 -51.1%
ANIK $10.52 $13.50 28.3%
BVF $23.43 $24.21 3.3%
CECO $32.59 $35.01 7.4% $5.75 $5.84 1.6%
CHKE $36.05 $47.15 30.8%
CHKP $19.30 $23.51 21.8%
DEBS $28.72 $27.46 -4.4%
DECK $35.46 $86.87 145.0%
DLX $20.69 $43.54 110.4%
ELNK $8.33 $8.29 -.5%
FTD $13.0 $17.68 36.0%
FTO $27.88 $40.06 43.7%
HAS $18.28 $32.50 77.8%
HOC $41.46 $70.12 69.1%
HSII $35.32 $48.97 38.6%
IVII $10.21 $13.0 27.3%
JH $38.69 $52.45 35.6%
KFY $20.50 $25.33 23.6%
KG $17.78 $21.44 20.6%
KSWS $26.20 $28.82 10.0%
MEDQ.PK $14.01 $8.30 -40.8%
MTEX $13.67 $14.02 2.6%
MVL $19.10 $27.48 43.9%
NSS $49.92 $65.0 30.2%
ORCT $12.63 $10.39 -17.7%
PCU $38.91 $86.88 123.3%
PLAY $10.05 $13.47 34.0%
PNCL $6.84 $18.01 163.3%
ptsc.ob $.94 $.47 -49.9%
VALU $40.86 $43.11 5.5%
VPHM $9.73 $14.74 51.5%
WINS $5.82 $7.15 22.9%
WON $7.86 $8.16 3.8%

My new technique I am going to try is an offshoot of my "Just Listed" analysis. It does appear to me that buying a stock that just got listed on the list is a potential means of getting a little better results. I still think the Blue Light Special approach has some merit as well (buying MFI stocks down 15% or more), but those are few and far between right now with the current bull run we've had.

My Perl programming friend has created the code to pull reams of data from Fidelity's compustat financial database. Hopefully this weekend we can pull data for 2000 stocks or so and see if I can come close to matching the top 100 list. Even if I don't match the top 100 list, the 2nd phase will be interesting. I will pull data so I can backtest for the past 5 years. So even if I don't match the MFI list "exactly", if my backtest still shows my formula gives superior results then I think we have something. Stay tuned, it'll be a busy summer as I crank through all the data. Too bad I have a day job!

Tuesday, May 22, 2007

I Was Wrong

ASEI went up almost 10%. I was wrong. Nice. My portfolio has been making a little comeback over the past 5 days. AEO announced their earnings this morning (American Eagle Outfitters Reports Record EPS of $0.35 for First Quarter 2007, A 25% Increase).

The stock traded down 4% to $28.06. you can write this down: The stock is a steal at that price. TMF agrees with me (Loaded for Eagle). Think of it this way, when they were at $28.40 a week or two ago they were in the top 25 stocks. This quarter will hit the MFI calcs shortly.

  • sales up 17%
  • gross margin was 48.7%
  • authorized purchase of another 23m shares
  • Operating Income up 19% to 116m from 98m.
With the operating income up so much and the price depressed, they will certainly be a top 25 stock. And JG seems to have an affinity for retail. I think they traded lower due to guidance.

KSW did have a 5% stock dividend today. I had to think a bit about how to track a stock dividend in my system.

PONR Gets Buyout Offer

I saw where PONR (which I sold 2 weeks ago or so (Olin to Acquire Pioneer) got a buyout bid yesterday. While I was bummed that I no longer owned them, it shows the power of MFI stocks. OLN went from $19.00 to $19.51, showing that at $35 people considered PONR a good buy for them. They also said the purchase would be accretive to earnings.

Interestingly, Forbes published a list of 12 potential buyout stocks last week with PONR on the list (In Pictures: 12 Could-Be Buyout Stocks). The list also included PTEN, OVTI and RAIL. Hmmm.

Monday, May 21, 2007

I've Got to Admit it's Getting Better

"I've got to admit it's getting better (Better)
A little better all the time (It can't get more worse)
I have to admit it's getting better (Better)
It's getting better since you've been mine"

Another decent day today, up about a 1/2 percent. It was the last day for MTEX, which ended up about 15%. Not sure what I'll buy next, I will wait a week until KG hits its anniversary next week and then decide.

ANF reported earnings after the bell (American Science and Engineering, Inc. Reports Revenue and Income for Fourth Quarter and Fiscal Year 2007 ). I guess they were good, the stock rocketed up about 6% in Happy Hour Trading. If I was day trading, I'd have probably sold on the spike this evening. I wasn't that excited by the numbers. Yes revenues were up and EPS was up. But when you dig down, you see that margins were way down and the increase in EPS is largely related to their stock price bing much lower ==> lower stock compensation costs. Like I said, I wasn't excited. We'll see what the pros think tomorrow.

Saturday, May 19, 2007

Market Cap/Correlation

Today I looked at the 270 stocks in my tracking portfolio that have either closed or been open more than 11 months. I then ran a correlation analysis between market cap and return. The correlation coefficient was about .07. That means they are uncorrelated, if you know the market cap you can not predict the return. I then tried the log of the market cap to scale things down a bit. The correlation coefficient bumped up to .13! That also implies no connection (for non-statisticians out there, as it approaches 1, the better the correlation).

I have been in touch with my programming friend , Dan F. He is going to run a test of 50 to 100 stocks to see how it works. If it works, I am also going to have him run the entire universe of stocks against quarterly financial statements. Then I'll calculate EY & ROIC and see how close my top 100 list is to the official list.

Stay tuned.

Friday, May 18, 2007

Bounce Back

The week ended on a positive note, led by my Jekyll & Hyde Stock TGB. Look at its range during the past 2 weeks:

DateOpenHighLowCloseVolumeAdj Close*

Then today it was up 11% to $3.37. So you could have sold it last week for $3.47, bought it yesterday for $2.77 and then sold it today for $3.37. The late action today was most curious.

FDG was my other strong Canadian performer today, up over 6%. A 3rd Canadian company (didn't realize I had so many!), PDS was down about 4% as their monthly distribution of 13 cents was clearly below expectation.

Here is my weekly chart. Again for new readers it shows how my portfolio (in Magenta) has performed vs breakeven inception to date and against the benchmark Russell 3000.

Finally here are my current holdings and their performance.

Current Portfolio
Stock Purchase Date Cost Current Gain
BBSI 09/06/06 $19.56 $25.45 30.8%
TGB 03/27/07 $2.64 $3.37 27.7%
VPHM 09/11/06 $11.79 $14.74 25.0%
KG 05/31/06 $17.31 $21.46 24.0%
ISNS 07/07/06 $13.17 $15.74 19.5%
PDS 03/01/07 $22.58 $26.35 18.2%
MTEX 05/22/06 $13.11 $14.75 15.0%
UNTD 05/01/07 $14.46 $16.09 12.7%
FDG 05/10/07 $25.45 $28.65 12.6%
LRCX 02/26/07 $46.66 $51.67 10.7%
ANF 03/05/07 $74.81 $80.55 7.7%
CREL 02/26/07 $12.50 $13.34 6.7%
FTO 05/09/07 $35.16 $37.44 6.5%
ASEI 10/05/06 $45.85 $48.37 5.5%
WSTG 05/15/07 $14.98 $15.59 4.8%
TGIS 05/10/07 $9.18 $9.56 4.1%
PNCL 05/02/07 $17.07 $17.68 3.6%
KSW 05/10/07 $6.80 $7.04 3.5%
GVHR 04/03/07 $19.17 $19.74 3.4%
RAIL 05/10/07 $45.14 $46.63 3.3%
NOOF 04/27/07 $8.59 $8.85 3.0%
AEO 05/04/07 $28.42 $29.05 2.2%
BLDR 09/18/06 $15.91 $16.04 0.8%
THO 03/26/07 $40.30 $40.50 0.5%
JTX 04/09/07 $28.70 $28.75 0.2%
TRLG 05/17/07 $15.54 $15.50 -0.3%
SHOO 01/17/07 $32.36 $31.69 -2.1%
DGX 02/26/07 $52.11 $48.53 -6.7%
PACR 02/26/07 $28.26 $26.20 -6.8%
IVAC 03/06/07 $23.52 $19.76 -16.0%
HW 02/27/07 $24.00 $20.09 -16.3%
EGY 02/05/07 $6.42 $5.15 -19.8%
EZEN.OB 06/19/06 $2.84 $1.30 -54.1%

Gain/Loss Open Positions ($):
Gain/Loss Open Positions (%):
Gain/Loss Closed Positions ($):
Gain/Loss Closed Positions (%):
Total Gain/Loss ($):
Benchmark Gain/Loss ($):
Annual IRR:
Total Gain/Loss (%):

Back Test Study

My friend who is the Perl expert has come through for me. He has written the code to pull the data needed to calculate the EY and ROIC for a list of stocks for each of the last 5 years. So my goal is to have him create a flat file with the data needed for the calcs along with a bunch of other data from the financials.

Then I can create the "list" at various points in time. It isn't going to be perfect, but I think it'll be the best back test out there by normal people. Once I have the list, I can see whether there are other variables that are correlated with good results. I will also have the capability to create my own real time list.

It is a lot of work. I doubt I'll be able to analyze thoroughly until this summer. But I am excited that the first key step is almost complete. Stay tuned.

Finally, I did finally have a reversal yesterday. I started the day down a bunch (again) and fell to 4.2% behind the benchmark midday. But then I actually came back and beat the benchmark and made $ on a down day. We'll see if momementum continues today.

Wednesday, May 16, 2007

Bad Dream?

Pinch me! Tell me it is a bad dream! My MFI portfolio was down $63 on a day the Dow was up 100 points. Sheesh. EZEN, TGIS & TGB were all down about 6%. Needless to say, we're due for an up day!

Not sure there is a need to say anything else.

Tuesday, May 15, 2007

Final Day for Cherokee

First thanks to a few of my readers for posting to try and raise my spirits. That was considerate. I'll start this blog on a positive note. CHKE celebrated its last day in my portfolio today. Overall up about 20% with another 5 to 6% in dividends. Not sexy, but I'd take an entire portfolio of stocks like that. Here is the birthday chart to celebrate ==>

While CHKE is still an MFI stock, I decided not to keep it in my portfolio. Rather I will be using the proceeds to increase my positions in a bunch of my May 31st stocks coming up on their one year anniverary (and possibly MTEX next week). Heck, I have lost so much with OVTI, that I'd need most of CHKE to make it whole!

Yesterday I was right about lamenting on Ezenia's earnings. This morning I compared the wording with the previous quarter release. They definitely expanded the gloom and doom from 1st half of 2007 to "all of 2007". That was a 14% haircut. Down to $1.50. It should not go much lower with 85 cents a share in cash. But clearly these quarters with no earnings will remove it shortly from MFI screens. I will hold it into June, but may sell a bit before anniversary date. At least I'll get some ST losses to offset that short-term gain from AVCI! Woo-hoo!

TGB OTOH did well today. I felt they had strong earnings and they went up 3.6%. This is still a cheap stock. As long as commodity prices stay strong, I can see TGB going from $3.16 to $4.00. The fact that they are in a much more stable country (Canada) has to make them more attractive.

I remember reading in Phil Town's book that people "feel" they influence the market. If they buy a stock and it goes down, they rationalize that it went down because they bought it. Of course, unless we have some closet billionaires out there, we make no difference as individuals. So I am going to sop thinking that I am snake bit and let the magic formula work its magic. And I do have some sizeable winners in my non MFI portfolio (actually they are all winners):

AIG: +8%
AXS: +48%
DVN: +27%
PTP: +15%
PVD: +21%
STP: +31%
TEVA: +20%
My Company: +38%

All of these are less than a year. There, I feel better!

Monday, May 14, 2007

Down in the Dumps

Another not so good day. Actually pretty much on par with the market. I continued mining my data and can report that I have found nothing. So far it seems JG was spot on when he said he could not develop good rules for selling.

Even my buying rules are starting to appear to be mirages. My two Blue Light Special seem to be regressing to the mean. My Just Listed Portfolio has had a couple stocks crash and burn.

Ezenia announced earnings after the bell. They basically made no money. Lots of excuses and promises for the future, but they ae clearly no longer an MFI stock. Here is what they said:

"The budgetary situation within DOD and uncertainty created by the on- going Defense Information System Agency (DISA) Network Centric Enterprise Services (NCES) bidding process clearly affected our results in Q1," noted Khoa Nguyen, Chairman and Chief Executive Officer of Ezenia. "As these difficult business conditions continue into 2007 and the Company moves forward with its investments in the development of advanced products and further hiring in the sales and marketing organizations, earnings for the year 2007 will be under pressure. However, the long-term outlook in the collaboration market and our own opportunity remains strong and promising. The Company continues to execute on its efforts to expand the existing DOD and IC customer base, pursue new opportunities with non-DOD agencies addressing the threat of terrorism and natural disasters, and be opportunistic on potential commercial applications. Furthermore, we believe that our investments in more robust marketing and sales organizations, coupled with current product enhancements and upgrades and development of next-generation products, will enable the Company to compete more effectively and grow more aggressively in the future."

Not sure if this was priced in. Guess I'll find out tomorrow. It has been a painful stock, down 40% so far.

PNCL announced they're buying back $30m of stock (Pinnacle Airlines Corp. Announces $30 Million Share Repurchase Program). That is 10% of the company, so is significant. They really are in strong financial shape.

TGB announced their earnings after the bell as well (Taseko Announces Second Quarter Results for Fiscal 2007). I always struggle reading Canadian reports. Hmm, they look ok. Basically the same (9 cents per share) as last quarter. Y o Y they were quite strong making $11m CAD vs about $3m CAD last year. No idea what people expected.

I was looking at my current stocks. I have to say that WSTG is the one I am most excited about. It'd be nice to have a stock start moving up sharply or be bought out!

Friday, May 11, 2007

Swimming Upstream

Close of May 12th 2006 Tracking Portfolio

The May 12th 2006 Portfolio was another decent performer. Overall it was up 20.4% vs. the benchmark Russell 3000, which was up 17%. It is funny, my tracking portfolios seem to typically be about 3 or 4 points better than the benchmark. There is no shame in that, I only wish I were at +3 right now, but I do find it odd that virtually everyone posting on the Yahoo! Board is doing much better. Are they great stock pickers or do they have selective record keeping? Only their hair-dresser knows for sure. Here are the stocks in alpha order (prices are actually at noon rather than close of day):

AEO $21.61 $28.99 34.2%

ANPI $14.88 $6.87 -53.8%

BVF $26.22 $24.67 -5.9%

CECO $31.62 $34.40 8.8%

CHKP $19.39 $23.92 23.4%

CLE $28.12 $32.67 16.2%

CMTL $27.57 $42.84 55.4%

COG $24.92 $37.06 48.7%

CONN $29.76 $25.50 -14.3%

DEBS $29.24 $27.46 -6.1%

DECK $37.76 $80.18 112.3%

DELL $24.02 $25.75 7.2%

DLX $21.75 $40.15 84.6%

EGY $7.06 $5.28 -25.2%

ELOS $22.97 $25.29 10.1%

FCX $62.11 $72.60 16.9%

FDG $29.96 $25.33 -15.5%

FTO $30.0 $35.48 18.3%

GIB $6.98 $9.86 41.3%

GMR $20.09 $31.15 55.1%

GNK $15.57 $39.25 152.1%

HAS $19.59 $32.91 68.0%

HNR $14.04 $9.91 -29.4%

HOC $39.72 $66.79 68.2%

HSII $32.99 $48.13 45.9%

JAKK $21.53 $24.89 15.6%

KFY $20.12 $24.86 23.6%

KG $18.15 $20.30 11.8%

KMG $50.0 $70.47 40.9%

KOSP $47.46 $78.0 64.3%

KSWS $27.68 $28.95 4.6%

LINC $16.45 $14.45 -12.2%

LNCR $38.18 $38.74 1.5%

MEDQ.PK $14.0 $9.25 -33.9%

MOT $21.43 $18.19 -15.1%

MTEX $15.60 $14.49 -7.1%

MVL $20.05 $27.33 36.3%

NUS $15.69 $17.98 14.6%

ODSY $16.64 $13.07 -21.5%

PPD $33.26 $63.55 91.1%

PTEN $31.39 $25.40 -19.1%

RAIL $71.60 $45.65 -36.2%

TBL $28.62 $26.53 -7.3%

USNA $38.01 $40.43 6.4%

UST $40.75 $55.50 36.2%

VALU $41.32 $51.13 23.7%

VPHM $9.54 $15.85 66.1%

VTRU $41.86 $48.0 14.7%

WON $8.72 $7.15 -18.0%

As you can see, the big winners included DLX, PPD, GNK(!) and DECK. Odd that PNCL wasn’t in the list that month. Wonder why? It is fitting that many of the worst performers were amongst my stocks, RAIL, PTEN, FDG and EGY. I obviously don’t know how to pick ‘em! After I have about a year of these tracking portfolios summarized, I’ll do an analysis on distributions, large cap vs. small cap along with the concept of buying only when a stock has dropped.

My Performance

Depressing as it is, I continue to trail the benchmark by about 3%. I know it can change quickly, one only has to look at my week-by-week graph to see that. I did make some major changes this week. In the interest of full disclosure, here they are:

  1. I decided to stop the Side Car Portfolios. Not that it wasn’t working, but it is too time-consuming and I don’t want to trade so often.
  2. So I have incorporated some of my Side Car picks as new MFI stocks. New stocks included KSW and TGIS.
  3. I marked FTO, RAIL and FDG as complete for their 1st year (all within a couple weeks of a year). At the same time I renewed all of them for a new year. So they enter the closed position of my tracking and show up with a new date in top part of chart. Concurrent with that, I added shares to all the positions to raise them to my new investment level.

So I now have more invested in MFI as the sidecar has been folded in. At the same time, I bought hypothetically more benchmark to match the new dollars in my MFI portfolio. I still have some $ from my sidecar, I will likely use that to round out positions of other stocks coming up such as MTEX, KG and TRLG. Not sure whether I’ll take another year from OVTI, but perhaps for the very reason that I think I should not take another year of OVTI, I should take another year of OVTI, if you follow my convoluted logic.

Here is my current list of holdings and under-performance vs. the benchmark. Note that my closed positions are up 16.2%. So it hasn’t been a disaster by any stretch, just a disappointment thus far.

Stocks of Note

BBSI had a nice day. At one point it spiked up over 10%. Not sure why. They did announce () yesterday that they were buying a firm in Salt Lake City and that it would dilute their earnings a bit in 2007. I can’t imagine they went up on that news. I think it must have been an analyst rating them Outperform.

KG was down another 2%. Been a bit of a drop since they announced earnings 2 days ago. Again, MS lowered their rating on KG. I was actually unaware that someone had a “Buy” on KG. Oh well.

AEO was upgraded as well. So I suppose I was 2 for 3 with the analysts today, but I don’t feel happy. Oh wait, one more!

GVHR was rated Market Perform by JMP Securities. They were the same ones who rated BBSI, must be a busy analyst! So make it two for four and I am still not happy.

Current Portfolio


Purchase Date



















































































































































































Gain/Loss Open Positions ($):


Gain/Loss Open Positions (%):


Gain/Loss Closed Positions ($):


Gain/Loss Closed Positions (%):


Total Gain/Loss ($):


Benchmark Gain/Loss ($):


Annual IRR:


Total Gain/Loss (%):