Wednesday, October 23, 2013

Anatomy of A MFI Stock

I had a great night last night here in the big apple.  I went to the Lincoln Center and attended a Piano Quartet concert.  It blew me away.  I was able to get a 1/2 price ticket for $28 and then have 90 minutes of music by some of the best musicians in the world in a fabulous concert hall.

While I was listening to Brahms and Mozart being played, my mind wandered thinking about MFI.  I think one item that makes it difficult as investors is that a stock can stay on the screen for a long time and for a couple of years can be a real bow-wow dog.  That makes it less likely that you buy it as it approaches the bottom and you miss the spring back.  I am going to look at a couple of examples to illustrate my point:

ESI

Date  Initial Price   End Price  Percent Change
3/23/2012              65.52           13.78 -79.0%
1/27/2012              66.83           16.16 -75.8%
2/24/2012              74.21           18.63 -74.9%
4/27/2012              65.59           17.74 -73.0%
12/29/2011              57.56           17.31 -69.9%
10/28/2011              66.87           21.49 -67.9%
11/25/2011              51.52           17.00 -67.0%
5/25/2012              57.90           24.80 -57.2%
6/22/2012              55.53           24.40 -56.1%
8/26/2011              70.91           31.41 -55.7%
7/29/2011              85.67           43.43 -49.3%
9/30/2011              57.58           32.23 -44.0%
7/27/2012              43.43           27.25 -37.3%
11/27/2009              92.10           59.99 -34.9%
12/31/2009              95.96           64.86 -32.4%
10/30/2009              90.35           64.53 -28.6%
6/24/2011              76.62           57.45 -25.0%
5/27/2011              70.87           57.90 -18.3%
8/24/2012              31.41           28.81 -8.3%
9/28/2012              32.23           30.97 -3.9%
9/27/2013              30.97           32.01 3.4%
8/30/2013              28.81           32.01 11.1%
7/29/2013              27.25           32.01 17.5%
5/24/2013              24.80           32.01 29.1%
6/28/2013              24.40           32.01 31.2%
10/26/2012              21.49           32.01 49.0%
2/22/2013              18.63           32.01 71.8%
4/26/2013              17.74           32.01 80.4%
12/31/2012              17.31           32.01 84.9%
11/23/2012              17.00           32.01 88.3%
1/25/2013              16.16           32.01 98.1%
3/28/2013              13.78           32.01 132.3%

Now if you look at the top row.  Suppose you bought ESI in your MFI portfolio on March 23, 2012.  It proceeded to crash 79%. Yeow!  Then you are doing your next tranche in March of 2013 (bottom row).  How many people would have the stomach to re-balance and take on ESI for a second year?  It would be difficult.  But it would have been exactly the best thing to do.  If your re-balance had the same dollar amount, you would have actually been a net gainer with the 132% increase 9thus far).

GME

Date  Initial Price   End Price  Percent Change
6/29/2009              22.17           18.59 -16%
7/29/2009              21.87           20.05 -8%
12/31/2009              21.94           22.91 4%
1/22/2010              20.03           20.98 5%
2/26/2010              17.20           19.85 15%
3/25/2010              21.78           21.73 0%
4/23/2010              25.22           26.54 5%
5/28/2010              22.79           28.21 24%
6/29/2010              18.32           26.12 43%
7/29/2010              19.74           23.11 17%
11/26/2010              20.50           22.36 9%
1/28/2011              20.98           24.32 16%
2/25/2011              19.72           22.73 15%
3/24/2011              21.59           23.62 9%
4/21/2011              26.37           21.09 -20%
6/24/2011              25.74           17.32 -33%
7/29/2011              23.24           16.14 -31%
11/25/2011              20.92           27.07 29%
12/29/2011              23.46           25.09 7%
1/27/2012              23.43           23.71 1%
2/24/2012              22.05           24.82 13%
3/23/2012              22.66           27.97 23%
4/27/2012              21.76           34.62 59%
5/25/2012              18.87           32.11 70%
6/22/2012              16.96           42.03 148%
7/27/2012              15.48           45.39 193%
8/24/2012              17.90           50.21 181%
9/28/2012              20.30           49.65 145%
10/26/2012              22.23           51.66 132%
11/23/2012              26.16           51.66 97%
12/31/2012              24.48           51.66 111%
1/25/2013              23.13           51.66 123%
2/22/2013              24.21           51.66 113%
3/28/2013              27.59           51.66 87%
4/26/2013              34.15           51.66 51%
5/24/2013              31.67           51.66 63%
7/29/2013              45.14           51.66 14%

Maybe not as extreme.  But think if you bought in June 2009.  After one year, you are down 16%, which is pretty poor as the R3K was up 24% in that stretch.  But you belly up and buy it a second year, doing the whole re-balance thing (which is actually critical in my mind).  Guess what? It zooms up 43%!  You are now in the black (R3K was up 25%, so you are still trailing the benchmark).  You re-enlist for a third year.  Down 33%!  Everyone saying GME is going the way of the do-do bird.  The r3K is up 5% and you are trailing big time.  Do you have the conviction to buy again in June of 2012?  I doubt I would.  But then you miss the payoff.  Up 148%!

I expect I could replay this for many MFI stocks on the screens.  Yes, there are likely stocks that never rebound, but I'd wager most of them do eventually.  And psychologically it is difficult to buy after you see it bruised and battered for a year or two.

Maybe for November, I should buy the most down beaten stocks?  Ones that cross my mind are EGY, STRA, APOL and ENZN.  Hmmm. I don't think I could do that.

1 comment:

jb said...

Great post! I always thought of GME as much more of a dog, but your table shows that my general perception was not exactly correct.
j