A tracking portfolio of 50 stocks set up by blogger Marsh_Gerda went up 2.5% led by stocks such as
AXCA + 22%
DLX +20%
USMO +14%
LRW +13%
KG +9%
GIB, KFY +8%
FTO, IVAC, JAKK +7%
In Marsh_Gerda's personal portfolio UNTD went up 15% along with the nice gains from FTO & IVAC. But he was hurt by bad news from VPHM (ViroPharma Whacked by Data) which dropped 15%. He commented, "when VPHM dropped 20+% earlier this week, I toyed with doubling down on it. Thankfully I did not. This drop shows the perils of these smaller MFI stocks that are dependent on just a few sources of income and why diversification is important."
EGY released their earnings on Friday morning (VAALCO Energy Announces 2nd Quarter 2007 Results). Marsh_Gerda was unimpressed. "Their YoY income continues to drop sharply. Unless EGY announces a new source of oil in the next 6 months, this is a dead stock. However, I am unsure how it could go much lower."
Marsh_Gerda also shared his chart of current holdings along with individual performance:
| Current Portfolio | ||||
| Stock | Purchase Date | Cost | Current | Gain |
| TGB | 4/16/2007 | $2.64 | $4.79 | 81.4% |
| ASEI | 10/5/2006 | $45.85 | $66.09 | 44.1% |
| BBSI | 9/6/2006 | $19.56 | $25.94 | 33.7% |
| FDG | 3/8/2007 | $25.45 | $30.09 | 20.6% |
| VALU | 5/29/2007 | $44.01 | $51.45 | 17.6% |
| LRCX | 7/3/2007 | $47.51 | $55.04 | 15.9% |
| CHCG.OB | 6/5/2007 | $6.10 | $6.75 | 10.7% |
| THO | 3/26/2007 | $40.30 | $44.07 | 9.5% |
| DGX | 3/17/2007 | $52.11 | $55.96 | 7.8% |
| NXG | 12/20/2006 | $3.04 | $3.23 | 6.3% |
| WNR | 7/27/2007 | $53.64 | $55.67 | 3.8% |
| CHKE | 7/17/2007 | $36.70 | $37.65 | 2.6% |
| FTO | 1/10/2007 | $35.16 | $35.95 | 2.4% |
| VSNT | 7/27/2007 | $19.52 | $19.77 | 1.3% |
| KSWS | 7/27/2007 | $23.94 | $24.22 | 1.2% |
| KSW | 5/10/2007 | $6.48 | $6.55 | 1.1% |
| JTX | 4/9/2007 | $28.70 | $28.72 | 0.5% |
| WSTG | 5/15/2007 | $14.98 | $14.75 | 0.2% |
| HGG | 8/3/2007 | $13.48 | $13.41 | -0.5% |
| RAIL | 2/16/2007 | $45.54 | $45.17 | -0.7% |
| WPCS | 6/18/2007 | $11.89 | $10.96 | -7.8% |
| TGIS | 11/30/2006 | $9.18 | $8.31 | -8.4% |
| PNCL | 2/9/2007 | $17.07 | $15.51 | -9.1% |
| UNTD | 5/1/2007 | $14.51 | $12.67 | -11.7% |
| AEO | 7/10/2007 | $28.42 | $22.63 | -20.0% |
| SHOO | 1/17/2007 | $32.36 | $25.86 | -20.1% |
| UG | 6/13/2007 | $12.09 | $9.08 | -24.9% |
| PACR | 1/3/2007 | $28.26 | $20.28 | -27.2% |
| VPHM | 9/11/2006 | $12.11 | $8.70 | -28.1% |
| NOOF | 4/27/2007 | $8.59 | $6.01 | -28.6% |
| GVHR | 4/3/2007 | $19.17 | $12.85 | -32.0% |
| EGY | 12/13/2006 | $6.42 | $4.25 | -33.8% |
| USHS | 6/25/2007 | $11.22 | $7.14 | -36.3% |
| HW | 12/27/2006 | $24.00 | $15.18 | -36.8% |
| IVAC | 11/23/2006 | $23.52 | $14.17 | -39.8% |
| Grand Total | 1/0/1900 | $823.51 | $818.86 | -105.3% |
| Gain/Loss Open Positions ($): | ###### | |||
| Gain/Loss Open Positions (%): | -4.0% | |||
| Gain/Loss Closed Positions ($): | $45,723 | |||
| Gain/Loss Closed Positions (%): | 10.4% | |||
| Total Gain/Loss ($): | $21,577 | |||
| Benchmark Gain/Loss ($): | $44,399 | |||
| Annual IRR: | 4.6% | |||
| Total Gain/Loss (%): | 3.8% | |||
Posts
4 comments:
Marsh,
Interesting article in Saturday's WSJ about Quant funds (the huge computer model driven hedge funds). It says that they are doing a lot of illogical trading right now ... basically buying low quality stocks to cover large short positions and selling conversative, value stocks to raise cash.
The article talked about how this past week of trading was very strange ... stocks that should be going up going down and vice versa. So we're not crazy and the trading for the past week or so has been quite bizarre.
Friday was the first normal trading day in quite some time as far as MFI stocks are concerned. Could be a big turning point ...
One other point I forgot on my last post: a lot of the small cap MFI stocks are going to get hurt by the week dollar. They don't have a strong international presence and their COGS is going to increase due to an increase in import prices.
mg-
If you haven't seen it yet, the new issue of Smart Money has a stock screen article which references TLBTBTM. It's an interesting article b/c it suggests only owning a few stocks picked using the MFI method. The focus on the article is that diversification is not necessarily a good thing.
The problem with the article is that it doesn't remotely discuss how to pick the winners for those 6 or 7 stocks. It also doesn't discuss when to sell. But it's an interesting article. I think you mentioned in an earlier post about betting big on a fewer # of stocks. Thoughts?
Thanks for the heads up on both posts. I'll check the WSJ article online. Next week when I fly to CO I'll see about picking up SM. That being said, I have decided I don't have the stomach nor the talent to concentrate my "bets".
MG
If an investor is incredibly confident in his/her ability to pick stocks, the 6 to 7 stock method can be very successful. There are very small funds that use this approach (and cater to institutional investors). Some may only have 2 or 3 positions, and you can bet that the fund manager knows just about every minute detail of his/her portfolio companies.
For me, as a mere mortal, I don't have the ability to make such calls, so a diversified portfolio is a safer approach. Empirical studies show that the diversification benefits increase until you have 20-25 stocks, and then there's no real incremental benefit beyond that (essentially at 20-25 you've diversified away most of the firm-specific risk, and you're left with broad market risk).
My MFI portfolio has been hammered during the last few weeks (after almost reaching a 17% YTD return), but I'm sticking it out for 3 years .
The one thing about the MFI study that bothers me is that Greenblatt used the last 17 years of stock market data. My issue is that the last 17 years have been an incredibly great time for stocks relative to the entire history of the stock market. There are a number of studies based on 90+ years of market data that indicate the return on equities (specifically US equities) will not be as robust in the next 20 years. I would link to some articles, but they're all behind a firewall at the CFA Institute.
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