October 29th 2010 Tracking Portfolio

Another Tracking Portfolio Loses

I closed the October 29th 2010 tracking portfolio today. As a reminder, I create a tracking portfolio of 50 stocks greater than$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 down 2.9% vs the benchmark gain of 10.4%. That makes it the 10th straight portfolio to close behind the benchmark. To make matters worse, all but one of the 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	52 week low	Mkt Cap
AGX	8.47	13.84	63%	7.98	112
CNXT	1.50	2.40	60%	N/A	140
GXDX	17.02	25.00	47%	N/A	300
TNAV	6.29	9.03	44%	5.62	206
GMAN	10.03	14.27	42%	9.70	186
SNDK	37.63	53.38	42%	32.24	8,868
CNU	4.50	6.38	42%	N/A	272
LO	80.92	114.61	42%	72.40	13,036
HRB	11.28	15.44	37%	11.15	3,591
JCG	31.99	43.43	36%	N/A	2,003
TER	11.24	15.02	34%	10.51	1,984
MRX	29.48	39.32	33%	24.97	1,750
APOL	37.48	48.16	28%	33.75	5,555
PDLI	4.84	6.15	27%	4.66	619
VPHM	16.36	20.60	26%	14.62	1,289
UIS	23.05	27.28	18%	14.18	987
CMTL	29.75	33.41	12%	23.51	867
PPD	60.18	66.50	11%	N/A	598
GTAT	8.23	8.95	9%	6.65	1,216
SNTA	3.70	3.90	5%	3.15	147
UNTD	5.80	6.11	5%	4.80	518
MSFT	26.02	26.98	4%	23.65	225,009
SNTS	3.13	3.24	4%	2.40	186
IPXL	18.84	18.93	0%	14.46	1,355
EME	25.79	25.77	0%	18.25	1,711
RTN	44.46	43.54	-2%	38.35	16,613
CECO	17.54	17.15	-2%	12.32	1,414
ZLCS	1.30	1.27	-2%	0.83	114
IMMU	3.93	3.80	-3%	2.85	289
USMO	14.83	13.23	-11%	12.29	376
KIRK	13.45	11.32	-16%	7.69	268
PRSC	16.43	12.62	-23%	8.35	210
TNDM	14.62	11.10	-24%	9.02	478
CHKE	17.49	13.16	-25%	11.39	165
TSRA	19.71	14.68	-26%	11.16	975
OSK	29.51	21.89	-26%	14.42	2,679
ASTX	2.78	2.05	-26%	1.79	169
CRME	5.06	3.57	-29%	3.21	317
PETS	14.89	10.29	-31%	8.56	353
VECO	41.50	28.13	-32%	23.49	1,587
LPS	28.38	17.73	-38%	13.69	2,572
LHCG	26.90	16.00	-41%	15.39	488
ARO	24.40	14.30	-41%	9.16	2,324
FSYS	40.98	23.87	-42%	17.22	714
AFAM	34.53	19.64	-43%	14.71	316
AMED	25.46	13.95	-45%	12.64	744
NEP	6.72	2.70	-60%	1.87	204
COCO	5.23	1.87	-64%	1.40	474
GTIV	23.28	4.50	-81%	3.50	697
SCEI	7.11	1.20	-83%	0.65	119

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	-4.3%	0.3%
10/29/2010	-2.9%	10.4%
11/26/2010	1.6%	9.3%
1/3/2011	-7.2%	1.8%
1/28/2011	-9.0%	1.6%
2/25/2011	-8.5%	-2.2%
3/24/2011	-8.5%	-1.7%
4/21/2011	-12.1%	-4.1%
5/27/2011	-8.6%	-3.9%
6/24/2011	-5.6%	0.8%
7/29/2011	-7.1%	-0.6%
8/26/2011	8.6%	9.7%
9/30/2011	19.7%	14.1%
Grand Total	5.1%	4.5%
Closed	6.9%	4.9%
Open	-5.6%	1.1%

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 least a dividend of 2.6% (per Yahoo Finance). The dividend portfolio continues to way out perform (it was up 6.4% and is beating the Russell in 5 of the open 11 portfolios).

Stock	Initial Price	End Price	Percent Change
LO	80.92	114.61	42%
HRB	11.28	15.44	37%
PDLI	4.84	6.15	27%
CMTL	29.75	33.41	12%
UNTD	5.80	6.11	5%
RTN	44.46	43.54	-2%
USMO	14.83	13.23	-11%
CHKE	17.49	13.16	-25%
PETS	14.89	10.29	-31%

The "new" portfolio has been pretty poor. It was down 8% in the past year and the average open positions are down 7%.

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	111,611
Total New	101,687
Total Dividend	218,287
Total Russell 3K	111,847

So while the first table showed that MFI is "beating" the Russell 3000, this table shows we have been losing do to the greater volatility. The standard deviation (a measure of spread) between all the monthly tracking portfolios is about 33%, versus 25% for the Russell 3000.

For those of you playing along at home, here are the dividend stocks in the 10/28/2011 portfolio:

Stock	Initial Price	Mkt Cap	Yield
UNTD	6.11	532	6.5%
USMO	13.23	300	15.1%
STRA	87.84	1,070	4.6%
RTN	43.54	15,475	3.8%
PETS	10.29	216	4.9%
PDLI	6.15	854	7.3%
NOC	57.92	15,306	14.3%
GNI	105.00	157	12.4%
DLX	23.64	1,247	4.2%
CMTL	33.41	816	3.1%
CHKE	13.16	117	7.4%
HRB	15.44	4,672	3.9%

Then here are the new stocks:

Stock	Initial Price
MDF	6.70
HPQ	27.94
CPIX	5.82

Have a great weekend everyone!

Late Addendum: I saw that MSFT wasn't in the dividend list (again). That is because their trailing dividend was 64 cents which is a hair under my 2.6% screen. However, they just increased their dividend to 80 cents, so I have over-ridden and added them to list for October 28th 2011.