I think it is a fair question. I know JG told us to give it 3 to 5 years, but I am getting so far behind that I am not convinced that I'll be ahead in 3 to 5 years. I know the mantra, "buying good companies that are cheap." But I am here to tell you that some of these companies have not been good nor in hindsight, cheap.
CROX was the latest value trap. I did not buy them as I felt they were a fad. But they appeared on the list in early March by my reckoning. Today they dropped a mere 43%. NVTL, another recent top stock dropped 22% today. Last month there was JTX and TGIS. The month before IAR. It gets a little disheartening to continuously see MFI stocks in the worst 20 performers of the day. Picking from the list is starting to feel like running through a TNT factory with a match.
Of the monthly tracking portfolios I started keeping in January 2006, the MFI portfolios have been steady losers thus far. I think MFI won the first 9 of 10. But is losing or has lost the past 20. And not to twist the knife, but MFI has had the "advantage" of excluding financials which have most likely been the worst performer in any index over the past 9 months.
I am not "giving up" and I sincerely hope to be proven wrong. But I think the question has to be asked. What does the peanut gallery think?
Subscribe to:
Post Comments (Atom)
Posts
4 comments:
"still" implies it worked at one point. I think it probably worked at one point, and will continue to outperform over the long term. Ironically, one of the reasons I feel that this will be the case is the terrible performance the system has turned in thus far. I mean, for the last 18 months, how many MFIdiots do you think have really stuck around? There is really a huge pressure to stop throwing money away, and the vast majority of these folks are probably going to give it up. I think the fact that JG's system has folks buy a few stocks over the course of a longer time really reinforces the need to look at this over a long time period. This makes it especially hard for impatient investors, because we see the great performance in the book and wonder how on earth we could be trailing the market by so much.
If you really believe the most vital assumption of MFI (which, IMHO is that a high ROIC = a good company), then you just have to wait this all out...
I think my biggest question about mfi is that if it does work, is the method described in the book able to mimic it. When I started I picked a bunch of losers. Lately I've been doing great and had some big winners. But from some of the posts about the distribution of the possibility of successfully picking from MFI, I'm inclined to think that if MFI was as successful as in the book and got 30% going forward you'd still have a decent shot at getting a negative return if you didn't pick some of the big winners. Now JG might argue that statistically it will all work out and you'll pick some dogs but also pick some stars but I only have one chance at rolling the dice. Even if it's an 80% chance of beating the market, if I'm in the 20% that doesn't, it doesn't matter if the system works. I think the only way to mimic the results would be to pick 25 stocks every month, but if you don't start with alot your transaction costs would eat away your returns. Maybe if you could find a company that allowed unlimited trades for an acceptable amount each year it could work. You'd end up though owning 300 stocks at any given time. I think the thing that convinced me to try the system the most was the deciles and how the the deciles did progressively better than the next decile. That triggered to me that he's on to something. You mentioned that alot of the tracking portfolios haven't done so great, if only we could compare them to the other deciles to see if they did worse, and how everything did over time and if the decile story has continued. I'm going to stick with it for now because I like the systematic approach and I don't have anything else that has convinced me that its better. If it is actually working I guess if you use it it gives you better odds to beat the market than if you were picking on your own but of course its not a sure thing. I would just hate though to find and use a system that works but not benefit from it. If two people use the same system and one gets a 30% return and the other a -10% loss are they really using the same system or is it just a way to improve your odds? If I'm using a system I would like the results of the system not a chance at the average results of the system.
MG,
Remember the giddy days of early 2006 and 2007, that will help you stay the course. I have swung from $110k up to -$10k down; now around +$35k; tough to see some of those long tailed gains evaporate but I am giving it five years total and edging in additional $$ till then.
The hope is that once the economy/markets shore up that MFI will greatly outperform - remember early - mid 2006 and 2007!!
I am feeling the same pain as you. I am almost at my 2 year anniv and so far I'm down $5500 with a total of 60k put in. Right now, looking at my 28 stocks (I buy/sell 7 every quarter) only 9 are in the green, with 5 of those being bought in the last 4 months. I too have a portfolio that is crushed by 6 stocks losing >33%.
GLBL 33%
AEO 39%
CROX 47%
MTEX 47%
BVF 55%
TGIS 78%
Many of these stocks got trampled right after I bought them. When their year is up, I'm going to dread selling them for the sake of not having capital to reinvest.
I'm temped to pull out and put the money in SPY.
I really enjoy your blog. Keep writing....maybe we'll pull through this....
Post a Comment