Sunday, August 28, 2011

Spetember 2 2010 Tracking Portfolio

Another Monthly Portfolio Finishes Behind

Tropical Storm Irene is probably about 35 miles south of us right now. The power just went out. Thankfully, the house we just bought has a generator built into the house than runs on natural gas and it kicked in one minute after the lights went out. That is a real luxury.

I closed the September 2nd 2010 tracking portfolio today. It is a week early, but I had started it a week late last year and I had two September portfolios, so I am shifting by a week to get back on track. As a reminder, I create a tracking portfolio of 50 stocks > $100m every month and hypothetically hold them for a year. I have been doing this since January 2006.

The portfolio lost to the Russell 3000 going up 7.3% vs the benchmark gain of 10.1%. That makes it the eighth straight portfolio to close behind the benchmark. To make matters worse, all 11 open portfolios are also trailing. One can seriously question whether the MFI approach is working. Here is the listing of stocks followed by how all portfolios have fared:

Stock Initial Price End Price Percent Change
IDCC 25.49 69.06 171%
CNU 3.34 6.22 86%
TNAV 5.47 9.25 69%
CNXT 1.5 2.4 60%
CBST 22.45 32.28 44%
LO 76.64 110.11 44%
VPHM 13.09 18.66 43%
GXDX 17.95 25 39%
GMAN 10.65 14.82 39%
SNTS 2.25 3.11 38%
SNTA 2.89 3.97 37%
GTAT 8.5 11.39 34%
JCOM 22.19 29.35 32%
MD 48.22 62.81 30%
MRX 29.21 37.45 28%
PDLI 4.52 5.75 27%
AGX 8.09 10 24%
DLX 16.92 20.69 22%
IMMU 3 3.66 22%
ZLCS 1.31 1.52 16%
FRX 29.19 33.31 14%
USMO 13.17 15.02 14%
PPD 58.93 66.5 13%
IPXL 16.92 18.82 11%
VALU 10.88 11.94 10%
SUPG 2.03 2.1 3%
UNTD 5.06 5.1 1%
APOL 44.67 44.86 0%
TNDM 11.5 11.21 -3%
SNDK 36.01 34.8 -3%
RTN 44.16 41.59 -6%
LHCG 20.89 19.21 -8%
EME 24.24 22.17 -9%
CECO 18.25 16.48 -10%
TSRA 16.08 13.77 -14%
ELNK 8.35 7.09 -15%
CHKE 17.02 14.35 -16%
KIRK 12.29 9.39 -24%
AFAM 25.88 19.34 -25%
RST 17.24 12.56 -27%
OSK 25.57 18.28 -29%
PRSC 14.66 10.46 -29%
CSGS 19.04 12.82 -33%
UIS 24.92 16.75 -33%
AMED 24.43 16.08 -34%
DRWI 6.32 3.85 -39%
FSYS 34.46 19.84 -42%
ARO 21.81 11.07 -49%
GTIV 21.55 7.29 -66%
JGBO.PK 9.61 0.5 -95%

Some obvious stinkers in there, a bunch of home health providers that struggled along with the infamous JBGO.

Average of Percent Change
Date Total IWV
1/6/2006 16.0% 10.9%
2/17/2006 21.2% 14.6%
3/29/2006 13.0% 9.6%
4/7/2006 10.3% 12.1%
5/12/2006 20.4% 18.6%
5/31/2006 29.2% 23.3%
6/30/2006 22.4% 20.0%
7/31/2006 19.7% 17.3%
8/31/2006 13.0% 13.3%
9/28/2006 12.7% 14.6%
10/27/2006 10.3% 12.0%
11/29/2006 -0.3% 4.8%
12/28/2006 -6.9% 3.4%
1/26/2007 -10.2% -6.6%
2/27/2007 -3.7% -1.0%
3/26/2007 -9.8% -5.5%
4/27/2007 -10.9% -5.0%
5/29/2007 -11.5% -6.3%
7/3/2007 -30.0% -15.6%
7/30/2007 -19.9% -11.5%
8/30/2007 -12.5% -8.7%
9/27/2007 -19.0% -18.2%
11/2/2007 -40.4% -34.3%
11/28/2007 -40.1% -38.3%
12/28/2007 -36.3% -40.0%
1/25/2008 -36.4% -35.9%
2/26/2008 -51.7% -41.5%
3/24/2008 -40.9% -36.8%
4/25/2008 -25.6% -31.0%
5/28/2008 -22.2% -33.6%
7/2/2008 -11.7% -25.3%
7/29/2008 -10.5% -20.9%
8/29/2008 -13.8% -17.9%
9/26/2008 -4.3% -10.0%
10/31/2008 18.7% 13.9%
11/26/2008 50.9% 27.7%
12/26/2008 48.9% 32.3%
1/23/2009 59.3% 36.4%
2/27/2009 92.8% 55.6%
3/27/2009 85.8% 48.1%
4/24/2009 69.7% 45.8%
5/29/2009 31.8% 22.8%
6/29/2009 21.3% 24.0%
7/29/2009 19.5% 15.9%
8/28/2009 7.4% 8.8%
9/25/2009 12.6% 12.4%
10/30/2009 22.7% 18.3%
11/27/2009 24.3% 13.6%
12/31/2009 23.7% 18.1%
1/22/2010 19.0% 20.6%
2/26/2010 18.6% 23.6%
3/25/2010 10.0% 15.4%
4/23/2010 7.1% 11.4%
5/28/2010 19.3% 25.4%
6/29/2010 16.7% 25.7%
7/29/2010 5.4% 20.1%
9/2/2010 7.3% 10.1%
9/24/2010 3.4% 4.4%
10/29/2010 -8.2% 0.7%
11/26/2010 -4.0% -0.4%
1/3/2011 -11.9% -7.2%
1/28/2011 -14.0% -7.4%
2/25/2011 -14.0% -10.9%
3/24/2011 -14.3% -10.3%
4/21/2011 -16.9% -12.5%
5/27/2011 -14.7% -12.3%
6/24/2011 -12.0% -8.1%
7/29/2011 -12.2% -9.4%
8/26/2011 0.0% 0.0%
Grand Total 4.1% 3.0%

Special Portfolios

As people may know, I also track two special sub-portfolios. One is called "new" and only has stocks that have not been in a tracking portfolio in the prior 12 months. The second is called "dividend" and only picks stocks with at leats a dividend of 2.6% (per Yahoo Finance). The dividend portfolio continues to way out perform (it was up 9% and is beating the Russell in 10 of the open 11 portfolios).

In addition, I do like to track performance solely using percentages. This is because a portfolio that goes up50% one year and down 50% the next leaves you at a worse absolute $ amount than one that goes up 5% and then down 5%. The chart below shows how much money you'd have if you spread $100,000 evenly over the first 12 months:

Category Value
Total 105,647
Total New 100,786
Total Dividend 205,731
Total Russell 3K 103,910

As you can see, MFI is just barely beating the Russell 3000 over 5+ years.

Finally, I have created a new August 26 2011 portfolio. Here are the stocks in the "new" portfolio and more importantly the "dividend" portfolio:

New

Stock Initial Price
MIPS 5.13
KFY 15.36
KLAC 35.47
DLB 33.50
AMAT 11.06

Dividend

Stock Initial Price
UNTD 5.10
USMO 15.02
STRA 92.67
PETS 10.00
PDLI 5.75
NOC 52.16
MDP 24.01
KLAC 35.47
DLX 20.69
CMTL 27.20
CHKE 14.35
HRB 13.96

4 comments:

AndrewsDad said...

Dividends... as I posted last week, my two real money portfolios, inspired by the MG MFI Dividend theory are both beating the market since April and my picks in the MFI contest are also leading the entire pack.

Do I think this is the investing silver bullet, no, but at least for now that theory seems to be working.

p0ppi said...

Marsh, you correctly question whether MFI does work or not. I do have the same question. Was astonished to see that JG, still got awesome returns in 2005-2009, as stated in the last edition of his book.
What's your opinion? Why JG seems to be the only person taking advantage of the MFI approach?

Marsh_Gerda said...

p0ppi - I need to read his new version of the book. The method has continued to work reasonably well if you set criteria of say +1b of market cap. It is really the mid/small/micro caps that have hurt the formula. Of course in his first book, he argued that was the beauty of MFI is that it identified stocks that were lightly followed.

MG

p0ppi said...

Marsh, actually JG said that small-micro caps boosts the total returns of his portfolio. The 1000 larest caps gave a repsecable return of 22%, still -10% of the largest 3500 caps, so I think that's not the case. Af far as the new edition of his book is concerned, I don't think it will be of any help reading as it is the same as 1st edition, plus a small appendix where the results of the last 4 years (2005-2009) are presented. He got more than 20% in those years....