Tight Race

Tight Race

As this is the MFI Diary after all, I do track my so-called MFI Index against the Russell 3000 index to see if MFI works over the longer term. As you can see from the picture on the left, it is almost a dead heat.  I have a table that shows the annual and inception to date returns of each index going back to 2006.  Neither result strikes me as stellar, but we did have to go through the crash of 2008.

	Annual		Inception to Date
Year	Russell	MFI	Russell ITD	MFI ITD
2006	11.40%	15.03%	11.40%	15.03%
2007	4.09%	-6.69%	15.96%	7.34%
2008	-37.05%	-37.97%	-27.00%	-33.42%
2009	32.51%	45.18%	-3.27%	-3.34%
2010	18.38%	22.77%	14.50%	18.67%
2011	-0.56%	-10.47%	13.87%	6.25%
2012	16.38%	9.70%	32.52%	16.56%
2013	21.34%	36.25%	60.80%	58.81%

So the R3K is up by about 2 points, but was up by 16 points at year end 2012.

Warrant Investment

As my readers know, I have bought several "unique" investments this year.  The real weird ones are TC-PT, HIG-WT and BAC-WTA. Here is how they have fared so far:

Stock	Start price	Current	Dividend	% Gain	Status
TC-PT	16.02	18.25	0.81	19.0%	Open
TC-PT	15.90	18.25	0.81	19.9%	Open
TC-PT	15.80	18.25	0.81	20.6%	Open
TC-PT	15.15	18.25	0.81	25.8%	Open
BAC-WTA	5.10	6.39	-	25.4%	Open
TC-PT	13.99	18.25	0.81	36.3%	Open
HIG-WT	19.21	23.04	-	19.9%	Open
HIG-WT	22.01	23.04	-	4.7%	Open
HIG-WT	21.24	23.04	-	8.5%	Open
BAC-WTA	5.86	6.39	-	9.0%	Open

TC-PT, as I have mentioned before is kind of like investing in TC, but with an income stream which reduces both the upside and downside of investing directly in TC.

TC price           Ratio
4.64                  5.388
5.45                  4.586

As the table above shows, if TC is under 4.64 in May 2015 I would get 5.388 shares of TC for every share of TC-PT.  Then that drops to 4.586 when TC goes above 5.45, which would be fine with me!  TC-PT also pay a dividend slightly over 40 cents every quarter.

TARP Warrants

I first read about the Tarp warrants in Barron's this spring.  Essentially they are a leveraged way to invest in financial institutions that got money from Tarp.  I typically do not like using levered approaches or options as it is possible to lose 100% of your investment.  That is still the case here, but I have time on my side (as the Rolling Stones famously said).  These warrants run into 2019.

This table gives some color on how the warrants work.  The adjusted strike price considers dividends above a certain level.  By my calculation, the HIG strike price is down to $9.19.  If they keep their current 15 cent dividend, the strike price will be $6.88 at expiration.  For BAC, the strike price is still $13.30.  But if/when BAC increases their dividend from paltry 1 cent per quarter, the amount over that penny will erode the strike price.

I will undoubtedly be adding to my holdings in both these warrants on pullbacks.