Low IQ

I am kicking myself regarding IQNT. This is a stock that was initially in my August 15 2013 MFI portfolio.  The day after I bought it, I read a negative article about it and I was scared off and switched to AGX (selling the IQNT for essentially a wash).

While AGX has been a terrific stock (up 47% for me thus far), IQNT is also looking exceedingly strong. They announced very good earnings this morning along with excellent guidance. They are up 26% just on the day (and up 52% since my buy/sell). If I had had a bit of courage, I would have bought them first thing this morning. They did gap up about 6% at the open! but it could be sitting on a 20% gain for the day. Maybe when I retire, I will try that sort of fast fingered trading.

Speaking of AGX, I must have been asleep at the switch last month. I missed AGX announcing a special 75 cent dividend. I wonder if other people missed it as the day it went x dividend (oct 10th, the stock did not move much). But the 10th was an excellent day for the markets, so perhaps that explains it.

I just saw where FLR announced their earnings.  It all looks ok to me, though the stock traded down 2% today and is off another three percent this evening.  I think the issue is either their guidance for 2014 was a bit lower than consensus (but that is likely UPOD), and their backlog shrunk slightly (which surprised me a bit as my rationale for buying was I think we are on verge of a construction renaissance).

I will be happy to get this week over.  Not a disaster, but am drifting down a bit (about 1/2 a point today).

Scary Stocks

Happy Halloween everybody.  Just a couple of rapid fire notes.

First, ABC ("easy as 1,2,3") reported earnings this morning. So far as I can tell, they were solid.  Good news, hooray!  FLR reports tonight after the close, but before trick or treating starts.

I saw where GS downgraded RIG to a "sell". That is pretty strong.  They think macro demand for off shore drilling is weak and that RIG faces significant contract renewal risk.  They also comment that RIG has a relatively old fleet and will need to start reinvesting.  These all strike me as relevant comments. I am not going to run out and sell my RIG tomorrow, but will be watching with a closer eye and may sell some at the margins.

QCOR crashed over 10% yesterday when the mentioned the dreaded phrase "SEC Investigation". It is ironic, that was the reason I sold QCOR in the low 20s in October 2012.  Scary stuff.

WTW appears to not be worth the wait, they are down 17% this morning with their dividend slimmed down to zero.

I Know I Tend To Babble A Bit But...

News flash!  I just saw where WTW suspended their dividend and they are trading down 10% this evening. It seems to me that someone mentioned on his blog that WTW had about the worst balance sheet he had seen and when you looked at tangible book value, they were so far below 0 that it would take nine or ten years to get back to break even.

As long as you are growing revenues, you can overlook things like negative equity. But when the tide starts to go out, it all becomes crystal clear who is overweight in their bikini (ok, that is a stretch).

I Have Had Better Days

The day started poorly with WU having poor guidance. They ended up down about 12%. But it was a real "rainy Days and Mondays Always get Me Down" kind of day.

CYOU was down 3.8%
GA was down 4.4%
GTAT was down 2.6%
KLIC was down 4.1%
SBS was down 3.6%
TCPT was down 4%

S o while RPXC was the good news, up 5.5%, I was down overall by 1.4%.  That was my worst day since October 8th.

I expect the sun will come out tomorrow still. I did sell my ACAS today for 14.18. S it was a nice holding, up a bit more than 11% pour moi. I also did buy (on a whim) a small amount of SCAI IPO in the open market at 27.31. That will be a short term hold.

My plan is to increase cash position during next 2 weeks. I am 24% cash right now and I will likely bump that up towards 27%.  I have decided not to increase MFI stakes by 50% in Novemebr.  The markets just seem to toppy and I will wait for a better time to increase my investements.

And while it is a down day, it is always good to remind one self that it is just one day and not really that bad. I am still up over 34% on the year and beating the index by over eight points.

Get Your Earnings Here

Earnings continue to pour in.  I have to say that overall they do not seem that hot.

GNW - A bit disappointing as they actually lost a bit of money in the US Mortgage Segment (Genworth Financial Announces Third Quarter 2013 Results).  Their book value is around $29.50.  Using a quick back of the envelope, if interest rates go up over the next couple of years by 200 basis points, that will drop into the $23 range.  Theoretically, their earnings should improve as new money will be invested at higher rates.  So I still see GNW over time moving towards $20 a share over time.

RPXC - I think their earnings were actually pretty decent (RPX Announces Third Quarter 2013 Financial Results).  I think the key to their beat is they are forecasting revenues up 6 or 7% next quarter over this quarter.

WU - At first I thought this was good, but now not so good (Western Union Reports Third Quarter Results).  They dropped over 10% after hours as they commented on need for higher investment in 2014 for compliance issues.  I will tell you, this is a theme across many industries.  It is a shame for my MFI portfolio as WU is scheduled to roll off in 2+ weeks.

Report Card

So if I think about a report card for my stocks reporting earnings thus far:

1. AAPL: B
2. AWRE: C
3. BAC-WTA: C
4. CA: A
5. CYOU: F
6. GNW: D
7. HIG-WT: B
8. LPS: B
9. NUS: A
10. RDA: C
11. RPXC: A
12. WU: D

Full Swing On Earnings Season

At least three of my stocks reported this evening: AAPL, AWRE and HIG. I also had CYOU this morning and I know for sue GNW is tomorrow (I think after the bell).

AAPL looked solid to me.  Just 37.5 billion in revenues. But it looks like their forecast/guidance is underwhelming, so the stock is trading down 2% this afternoon. They have their work cut out for them in Cupertino. Expectations are so high and new product cycles are speeding up all the time. I will likely take some apple off the table in mid November.

AWRE is my newest stock. I bought it pre earnings as I didn't want it to run away from me. It appears that should not have been a real concern.  They had a one time 2.8 million charge for getting out of DSL business.  So the numbers do not look so hot on absolute basis.  But they are a 149 million company, with over $75 million in the bank and decent growth prospects. I also think they will be turning a profit with the exiting of DSL.

HIG seems to have had a solid quarter.  They are up 1.5% after hours. I always maintain that book value is a key metric with insurers. They grew book value to 38.87 from 38.59.  Not earth shattering, but for a company with a stock price under $34, they could look pretty good if they can get to 110% of book value.  Recall that I actually own the warrants, which have (as of right now) a strike price of $9.19.  I have until June 2019. Frankly I just need 10% appreciation a year and that will translate to about 15% a year for me.

Biblical Money Code - WWJD?i

A couple rapid fire thoughts this morning.

First, I heard on the radio this morning about a product claiming to have unlocked "the biblical money code", and if you send them your money, they will give you the code to help achieve your much deserved earthly riches. Really?  I am sure the prophets that put the bible together were encrypting a code to make money in the stock market.

Second, on CNBC this morning Joe and Becky were arguing over the corporate tax rate in the US and the best way to measure it. I agree that you really want to get a snapshot of just the US component as that is what can be changed by lawmakers. My idea would be to take small cap stocks (say $1 b and below) that are US based. I have to believe that the majority of their income would be from the US. Then look and see what their taxes have been. I could probably do this fairly easily using my MFI worksheet and just pull different data from the corporations.  It might also be interesting to see how the tax rate varies by size of company.

Third, CYOU reported earnings early this morning. While they looked good to me - they were expecting 1.36 and they earned 1.36, they are trading down sharply in pre market trading.  I eat through the report and the guidance for 4th quarter is between 34 and 41 cents. That is a sharp drop off. It looks to be caused from their plans to ramp up marketing expenses to promote new line up of games etc. the idea is that this will expand user base and be beneficial to shareholders value in long term.  So the million dollar question (or perhaps $30 question for CYOU and shareholders) is whether this strategy works and whether it is a short term increase spend (a one time type of thing) or whether it is ongoing. I am inclined to think this might be a buying opportunity, but will want to read the transcript when it comes out.

Thanks to everyone regarding thoughts about my November 15th date. I think I will stick with it. I may buy some of the stocks as discretionary prior to November 15th, but will keep MFI pure.  I will also likely add CYOU to the watch list. There is actually an inherent advantage to waiting until right after earnings as sometimes the selling is way over done (WU was a tremendous example of that last year). I just need to stay patient and disciplined.

Bit of A Quandry

I think I know the stocks I want to buy for the next MFI tranche.

• ATVI    11/6
• AWRE   10/28
• CALL   11/12
• CSCO  11/13
• PFMT  11/7

The Quandry is that several of them report earnings between now and November 15th.  I am unsure whether I should buy them in advance of earnings, or whether I should just wait until November 15th and then perhaps change my picks.  I will definitely be kicking myself if I do not buy and several of them run up post earnings.  Of course I will kick myself (this is getting old) if I do buy and they flop due to earnings.  My gut is that I should move the date up to November 1st so I am not right in the midst of earnings season. But the more I think about it, the more I think I just need to play by the rules.

Hmmm, I will decide by Thursday. It may depend on what the broader market does.  I suppose a middle ground is that I buy them now, but only start tracking them for MFI as of November 15th.

Thoughts?

October 25th 2013 Tracking Portfolio - New Stocks and Dividend Stocks

Here are the new stocks in the October 25th Tracking portfolio. As a reminder, "new" means it has not been in tracking portfolios for past year.

Stock	Initial Price	52 week low	Mkt Cap	New
SYNA	44.82	22.58	1,456	1
PFMT	9.93	7.55	476	1
ORCL	33.15	29.52	165,419	1
BKE	47.35	41.50	2,288	1

Here are the dividend stocks. Recall this means a yield (per Yahoo finance) of 2.6% or greater. You can see some with large one time dividends (IQNT for instance).

Stock	Initial Price	52 week low	Mkt Cap	Yield
AGX	22.45	13.90	315	2.7%
BAH	19.53	11.85	2,719	35.2%
BKE	47.35	41.50	2,288	11.2%
CA	31.40	21.48	14,036	3.2%
CSCO	22.46	16.68	121,010	2.8%
GNI	70.60	61.50	106	19.1%
IDCC	35.31	32.78	1,454	5.4%
INTX	8.70	7.83	157	14.9%
IQNT	10.93	2.10	353	40.0%
LO	49.59	36.70	18,299	4.4%
MO	36.25	30.01	72,536	5.0%
MSB	20.99	17.07	275	10.3%
NATR	19.28	12.91	308	9.6%
PBI	19.45	10.34	3,925	5.8%
PDLI	8.41	6.50	1,426	7.1%
PETS	14.84	9.63	300	4.2%
RGR	62.86	40.00	1,216	3.1%
RTN	79.96	52.24	25,787	2.6%
USMO	15.17	10.34	328	3.3%
VCI	27.36	23.69	1,058	3.4%

I just noticed MSFT is not there as Yahoo Finance really shows the trailing 12 month dividend and had not reflected the annual bump to $1.04.  I have added them.

October 24th 2012 Monthly Tracking Portfolio

October 24th 2012 Monthly Tracking Portfolio

Another month has zipped by. As my faithful readers know, I have been tracking the Magic Formula Stocks as described by Joel Greenblatt in The Little Book That Beats the Stock Market since January 2006.  Every month I take the top 50 stocks over $100m market cap from his website and track how that portfolio of stocks fares versus the Russell 3000 for the next 12 months.  It has been an uphill struggle as the tracking portfolios have under-performed, driven in part by Chinese reverse merger fiascos, for-profit education stocks and home health care stocks all being proverbial albatrosses.

 Fearless readers will recall we had a 29 month "losing streak"..  This month-end extended the winning streak to 5! It went up an excellent 48.3 %,stomping the R3K, which was up a less excellent 23.9%!  I had to go all the way back to April 2009 to find a portfolio that won by a greater amount. Here are the 50 stocks in descending performance order:

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
NUS	41.11	113.98	177.3%	32.36	2,525
QCOR	25.31	68.56	170.9%	17.25	1,530
SAVE	17.03	42.03	146.8%	15.64	1,235
GME	22.23	54.80	146.5%	18.90	2,864
TW	52.72	114.34	116.9%	49.74	3,811
EXPR	11.15	23.28	108.8%	10.47	967
WCRX	11.36	22.93	101.8%	10.85	2,946
JCOM	28.54	55.31	93.8%	28.08	1,324
CPLA	31.74	61.10	92.5%	26.38	406
ESI	21.49	39.18	82.3%	11.69	501
STX	26.74	48.56	81.6%	24.90	10,836
RPXC	9.78	17.42	78.1%	8.55	509
USNA	44.25	76.19	72.2%	30.51	626
SAI	9.80	16.87	72.1%	N/A	3,694
GTAT	5.12	8.65	68.9%	2.61	608
HRB	17.17	28.70	67.2%	16.44	4,812
VG	2.24	3.58	59.8%	2.05	507
BAH	12.25	19.51	59.3%	11.85	1,674
MRVL	7.59	11.87	56.4%	6.98	4,326
DELL	9.01	13.85	53.7%	8.69	15,994
RTN	53.88	78.08	44.9%	52.24	18,384
APOL	19.72	28.25	43.3%	15.98	2,213
CACI	49.45	70.32	42.2%	48.56	1,218
PETS	10.26	14.58	42.1%	9.63	215
CA	21.86	30.39	39.0%	21.48	10,410
USMO	10.73	14.75	37.5%	10.34	247
AGX	16.69	22.51	34.9%	13.90	238
MANT	21.61	28.96	34.0%	21.58	825
CSCO	16.78	22.37	33.3%	16.68	91,602
KLIC	9.89	13.16	33.1%	9.41	733
DLB	27.26	35.11	28.8%	28.66	3,235
MNTA	13.14	16.69	27.0%	10.05	679
NATR	15.33	19.18	25.1%	12.91	266
LPS	26.94	33.68	25.0%	21.23	2,312
MSFT	27.36	33.72	23.2%	26.26	237,585
TZOO	17.96	21.81	21.4%	16.56	285
HFC	36.87	43.76	18.7%	36.22	8,141
DMRC	19.14	22.09	15.4%	17.68	132
PDLI	7.46	8.36	12.1%	6.50	1,531
GNI	63.10	70.33	11.5%	61.50	112
VCI	25.10	27.51	9.6%	23.69	1,024
INTX	8.20	8.72	6.3%	7.83	169
CF	203.18	210.13	3.4%	169.33	12,831
POZN	6.31	6.44	2.1%	4.26	190
AFAM	18.90	19.23	1.7%	17.66	196
TNAV	7.15	7.15	0.0%	4.91	294
STRA	56.57	48.74	-13.8%	40.03	686
NSU	4.55	3.60	-20.9%	2.65	942
EGY	7.95	5.66	-28.8%	5.16	454
BODY	9.98	5.38	-46.1%	6.06	162

This is the first tracking portfolio in decades (ok maybe not that long) where the For profit Education Stocks were NOT a drag.  The 4 of them were up on average by a whopping 51%.  Read my

Anatomy of A MFI Stock

post. And there were seven stocks up 100% or more.  I can not remember more than that.  I do think things are continuing to change.  You can see that in the next table!

Here is a listing of every portfolio I have tracked:

Average of Percent Change
Date	Total
1/6/2006	16.0%
2/17/2006	21.2%
3/29/2006	13.0%
4/7/2006	10.3%
5/12/2006	20.4%
5/31/2006	29.2%
6/30/2006	22.4%
7/31/2006	19.7%
8/31/2006	13.0%
9/28/2006	12.7%
10/27/2006	10.3%
11/29/2006	-0.3%
12/28/2006	-6.9%
1/26/2007	-10.2%
2/27/2007	-3.7%
3/26/2007	-9.8%
4/27/2007	-10.9%
5/29/2007	-11.5%
7/3/2007	-30.0%
7/30/2007	-19.9%
8/30/2007	-12.5%
9/27/2007	-19.0%
11/2/2007	-40.4%
11/28/2007	-40.1%
12/28/2007	-36.3%
1/25/2008	-36.4%
2/26/2008	-51.7%
3/24/2008	-40.9%
4/25/2008	-25.6%
5/28/2008	-22.2%
7/2/2008	-11.7%
7/29/2008	-10.5%
8/29/2008	-13.8%
9/26/2008	-4.3%
10/31/2008	18.7%
11/26/2008	50.9%
12/26/2008	48.9%
1/23/2009	59.3%
2/27/2009	92.8%
3/27/2009	85.8%
4/24/2009	69.7%
5/29/2009	31.8%
6/29/2009	21.3%
7/29/2009	19.5%
8/28/2009	7.4%
9/25/2009	12.6%
10/30/2009	22.7%
11/27/2009	24.3%
12/31/2009	23.7%
1/22/2010	19.0%
2/26/2010	18.6%
3/25/2010	10.0%
4/23/2010	7.1%
5/28/2010	19.3%
6/29/2010	16.7%
7/29/2010	5.4%
9/2/2010	7.3%
9/24/2010	-4.3%
10/29/2010	-2.9%
11/26/2010	-8.5%
1/3/2011	-11.4%
1/28/2011	-7.6%
2/25/2011	-5.5%
3/24/2011	-4.4%
4/21/2011	-16.0%
5/27/2011	-12.0%
6/24/2011	-9.5%
7/29/2011	-4.3%
8/26/2011	12.0%
9/30/2011	23.5%
10/28/2011	0.4%
11/25/2011	13.9%
12/29/2011	9.9%
1/27/2012	7.4%
2/24/2012	7.8%
3/23/2012	9.1%
4/27/2012	10.5%
5/25/2012	26.5%
6/22/2012	26.1%
7/27/2012	30.4%
8/24/2012	26.0%
9/28/2012	39.3%
10/26/2012	48.3%
11/23/2012	43.4%
12/31/2012	46.0%
1/25/2013	38.5%
2/22/2013	35.8%
3/28/2013	33.8%
4/26/2013	27.4%
5/24/2013	16.7%
6/28/2013	18.1%
7/29/2013	9.7%
8/30/2013	9.4%
9/27/2013	4.5%
Grand Total	9.6%

As noted, this is the fifth straight portfolio to win after 29 straight losses! (that is hard to do... it ain't random).  However ALL 11 open portfolios are leading the Russell 3000 (by an average of almost 12 points.

Subsets

I also keep 2 subsets of the larger portfolios:  (1) dividend stocks (those with a yield per Yahoo of at least 2.6%) and (2) new stocks (those new to the tracking portfolios in past 12 months.  The dividend portfolio was most excellent, up about 37.5%.  The new portfolio was solid okay, up 35.9%.  Finally, I like to track cash as it is more "honest" than percentages as if you go up by 25% and then down by 25%, that is a different result than up by 5% then down by 5%.  So I track what you would have to day if you had spread $100,000 over the first twelve portfolios evenly.

Category	Value
Total	163,229
Total New	160,085
Total Dividend	367,845
Total Russell 3K	160,745

I am sure my eagle eyed readers have noted that the "Total" is now beating the Russell 3000 total.  It has been a long and arduous road, but MFI (by my measure) is officially  beating the benchmark!