Just moved clocks forward by an hour. Also, hoping that Spring is around the bend. This winter has made me think that when I retire I may have to try the snowbird thing. It was nice yesterday, about 50 degrees. Today will be upper 30s. This time of year 45 to 50 should be normal (typically).
We are now past the year end earnings season. It was actually all-in-all pretty good for me. I do not recall any out-and-out disasters, and I had some pretty good ones (AVG, ATVI, GTAT and NVDA for examples). The first quarter reports could be a bit of a mess with all the winter issues. Looking at my portfolio - hard to say who would be adversely impacted by bad weather. Maybe Activision, BBEP (could have production issues), TC-PT (mining may be difficult) and WNR (people driving less?). I suppose even my two construction firms: AGX and FLR could have had a slowdown.
Distribution By Portfolio
| Portfolio | Proportion |
| Dividend | 25.0% |
| Mfi | 26.3% |
| Discretionary | 28.6% |
| Cash | 20.1% |
You can see that with my purchases last week of TPVG, RIOM and LMNS that I am towards the lower end of my typical cash. I do not think this means I need to run off and sell something. But I need to be thoughtful about buying anything new - it would really have to be a deal. I do view my position currently in LMNS (which has become pretty large) as short-term in nature. So a sale there would right-size things a bit.
Also, the way I do things - cash is an ever-moving figure. It is actually representing my cash balance in my brokerage accounts. So if I owe money for taxes in April, it will drop. If I get some dividend checks or paycheck, it will increase. Finally, some of my recent purchases (I am thinking of NTC) are "cash-like", meaning they do not move quickly and if I saw an unbelievable opportunity in a stock, I could liquidate. That being said, at 20% cash I am a long way from that.
May MFI Tranche
My May tranche has less than two months to go now. Here are the holdings within it:
| Start | Current | Dividend | Pct Gain | R3K Gain | |
| $11.40 | $11.84 | $0.00 | 3.9% | 19.6% | |
| CYOU | $29.24 | $31.24 | $0.00 | 6.8% | 19.6% |
| $9.74 | $18.05 | $0.10 | 86.4% | 19.6% | |
| $13.85 | $18.36 | $0.32 | 34.9% | 19.6% | |
| CF | $183.97 | $261.09 | $2.80 | 43.4% | 19.6% |
| Totals | 35.1% | 19.6% |
As you can see, it has been rock-solid. Even CYOU has made a pretty good comeback. As I have mentioned before, I think I will focus on larger cap stocks for the replacement tranche. Looking at the list, here are some names I would consider today:
- AAPL (2.3%)
- BWC (1.2%)
- BR (2.2%)
- MSFT (3.0%)
- CSCO (3.5%)
- HPQ (1.9%)
- K (3.0%)
- NSR
- PM (4.7%)
- SNDK (1.2%)
- WSTC (3.7%)
Obviously some super big companies on the list. WSTC is a new one that actually looks interesting. Also BWC is new and certainly worthy of consideration. HPQ is a name that has been out-of-favor, but Meg Whitman seems to be turning around. Some decent yielders in the group as well.
MFI Index
Here is an update of the MFI since the start of the year. It has been a bit of a struggle due to some flame outs (GNI, GTIV, WTW and PFMT). Also, some of them have stopped trading due to buyouts (VCI, LPS and CRTX):
| Index | Stock | Start | Last Month | Current | YTD Change | Monthly Change | Shares |
| 1 | ATVI | 17.83 | 19.35 | 20.11 | 12.8% | 3.9% | 13.07 |
| 2 | MO | 38.39 | 36.26 | 36.81 | -4.1% | 1.5% | 6.07 |
| 3 | APOL | 27.32 | 33.33 | 32.99 | 20.8% | -1.0% | 8.53 |
| 4 | AAPL | 561.02 | 529.29 | 533.49 | -4.9% | 0.8% | 0.42 |
| 5 | AGX | 27.56 | 28.59 | 28.94 | 5.0% | 1.2% | 8.46 |
| 6 | BAH | 19.15 | 21.13 | 21.98 | 14.8% | 4.0% | 12.17 |
| 7 | BKE | 52.56 | 45.59 | 48.05 | -8.6% | 5.4% | 4.44 |
| 8 | CA | 33.65 | 33.50 | 33.18 | -1.4% | -1.0% | 6.93 |
| 9 | CACI | 73.22 | 78.83 | 78.78 | 7.6% | -0.1% | 3.18 |
| 10 | CHE | 76.62 | 84.60 | 86.20 | 12.5% | 1.9% | 3.04 |
| 11 | CRUS | 20.43 | 19.25 | 19.36 | -5.2% | 0.6% | 11.41 |
| 12 | CSCO | 22.43 | 21.97 | 21.90 | -2.4% | -0.3% | 10.39 |
| 13 | COH | 56.13 | 48.81 | 48.82 | -13.0% | 0.0% | 4.15 |
| 14 | CRTX | 9.49 | 9.50 | 9.50 | 0.1% | 0.0% | 24.56 |
| 15 | DLX | 52.19 | 50.73 | 52.39 | 0.4% | 3.3% | 4.47 |
| 16 | DHX | 7.25 | 7.36 | 7.25 | 0.0% | -1.5% | 32.15 |
| 17 | EBIX | 14.71 | 16.25 | 17.16 | 16.6% | 5.6% | 15.85 |
| 18 | EGL | 33.40 | 41.73 | 44.91 | 34.5% | 7.6% | 6.98 |
| 19 | GME | 49.26 | 37.31 | 38.52 | -21.8% | 3.2% | 4.73 |
| 20 | GTIV | 12.41 | 10.71 | 8.72 | -29.7% | -18.6% | 18.78 |
| 21 | GNI | 68.10 | 20.82 | 21.80 | -68.0% | 4.7% | 3.42 |
| 22 | HLF | 78.70 | 66.60 | 65.04 | -17.4% | -2.3% | 2.96 |
| 23 | IQNT | 11.41 | 13.96 | 14.81 | 29.8% | 6.1% | 20.43 |
| 24 | ESI | 33.58 | 31.03 | 29.85 | -11.1% | -3.8% | 6.94 |
| 25 | LPS | 37.38 | 37.30 | 37.30 | -0.2% | 0.0% | 6.24 |
| 26 | LQDT | 22.66 | 25.62 | 26.72 | 17.9% | 4.3% | 10.29 |
| 27 | LO | 50.68 | 49.06 | 53.61 | 5.8% | 9.3% | 4.60 |
| 28 | MSFT | 37.41 | 38.31 | 38.18 | 2.1% | -0.3% | 6.23 |
| 29 | MYGN | 20.98 | 36.21 | 38.17 | 81.9% | 5.4% | 11.11 |
| 30 | NATR | 17.32 | 15.11 | 15.62 | -9.8% | 3.4% | 13.46 |
| 31 | NOC | 114.61 | 121.03 | 124.91 | 9.0% | 3.2% | 2.03 |
| 32 | PDLI | 8.44 | 8.57 | 8.27 | -2.0% | 0.0% | 27.62 |
| 33 | PFMT | 10.30 | 7.91 | 8.00 | -22.3% | 1.1% | 22.63 |
| 34 | PETS | 16.63 | 13.97 | 14.42 | -13.3% | 3.2% | 14.02 |
| 35 | PRSC | 25.72 | 26.59 | 28.85 | 12.2% | 8.5% | 9.06 |
| 36 | QCOR | 54.45 | 61.05 | 66.30 | 21.8% | 8.6% | 4.28 |
| 37 | RTN | 90.70 | 97.91 | 101.27 | 11.7% | 3.4% | 2.57 |
| 38 | RAI | 49.99 | 50.83 | 53.55 | 7.1% | 5.4% | 4.66 |
| 39 | RPXC | 16.90 | 16.02 | 15.95 | -5.6% | -0.4% | 13.79 |
| 40 | SAIC | 33.07 | 37.58 | 38.06 | 15.1% | 1.3% | 7.05 |
| 41 | SWHC | 13.49 | 11.50 | 13.79 | 2.2% | 19.9% | 17.28 |
| 42 | STRA | 34.47 | 47.77 | 47.49 | 37.8% | -0.6% | 6.76 |
| 43 | RGR | 73.09 | 63.74 | 64.42 | -11.9% | 1.1% | 3.19 |
| 44 | UIS | 33.57 | 34.22 | 33.32 | -0.7% | -2.6% | 6.94 |
| 45 | UNTD | 13.76 | 11.21 | 11.07 | -19.5% | -1.2% | 16.94 |
| 46 | USMO | 14.28 | 14.45 | 14.68 | 2.8% | 1.6% | 16.32 |
| 47 | USNA | 75.58 | 73.17 | 73.39 | -2.9% | 0.3% | 3.08 |
| 48 | VCI | 34.25 | 34.02 | 34.02 | -0.7% | 0.0% | 6.81 |
| 49 | VGR | 16.37 | 19.53 | 20.75 | 26.8% | 6.2% | 14.24 |
| 50 | WTW | 32.93 | 21.26 | 20.46 | -37.9% | -3.8% | 7.08 |
| Total | 17,682 | 17,654 | 18,016 | 1.9% | 2.0% |
So it seems March is off to a decent start, up 2%.
Posts
11 comments:
Hi Marshall,
For stocks in your next tranche when will you narrow your list down? Also I am sure you have it on your site but exactly what do you look at when evaluating the stock? The fundamentals and if they are improving, the business itself or technicals?
You have a really good track record and I would like to learn a little bit more.
Thanks
Ronald,
probably about two weeks before the new tranche I will write about the stocks I am considering. I would say that I often have different themes of what I think is important. In August I felt the economy was starting to gather steam and felt construction stocks would be good. Another time I was looking for stocks that had potential to be acquired. This time I will likely be looking for larger cap stocks as I feel mid-caps have gotten too extended.
Hi Marshall,
What do you think about a completely quantitative strategy? For example, what if an investor bought the best stock (according to JG's metrics of EY & ROIC) every month without researching and making any qualitative judgments? After a year, sell and replace with the current best quantitative stock... Has this strategy outperformed buying the group of 30 mfi stocks?
Also, JG stated that the best holding period was more than a year but he put a year time frame in his book for simplicity. Do you have any inclinations about what the best holding period would be?
Are there other metrics that an investor could use to improve on mfi results? Examples: buy stocks that have been on the mfi list but have been beaten down, buy low p/b, buy mfi stocks that pay high dividends, etc.
Last question (for now at least), is there an absolute EY and ROIC that should be a minimum in order to buy a stock. For example, should an investor only buy stocks with a EY of 10%+ and a ROIC of 100%+? If yes, what do you think those minimums should be?
btw, I very much enjoy your blog :)
Brian - interesting question. I have not "scored" the tracking portfolio stocks to see if top ones work better. I did try to look at my top 200 list a year later and see if the top deciles of the list did better. I recall that being inconclusive and a lot of work. It might not be too difficult to merge some of my top 200 lists with past tracking portfolios, though the timing may be off by a week or two. I might look at that post my ACL surgery.
Brian - regarding holding period, I have no idea what is "optimal" and I think JG said pretty much the same thing. I have been tracking run-off of my tranches just to see what happens, but that is not a large enough sample size to draw conclusions.
I have tried to find other metrics. I have clearly shown that since 2006 stocks with dividends in excess of 2.5% have out-performed. I have also shown that stocks with a market cap in excess of about a billion have done better. I am starting to track price to book, but I believe a better metric would be price to tangible book - but I have not found a good resource for that. I looked at short ratios and did not find much useful. I did look once at %above or below 50 ema - but that would be a good one to follow up on. I have also looked at stocks new to my tracking portfolios in past 12 months and that was inconclusive. I have also looked at seen that stocks with two or three letters in ticker have done better than four letters.
Brian - regarding the EY and ROIC question, I do not have an answer. You are making me think I should really start marrying my top 200 list with the tracking portfolio. It would take some effort, but might be very interesting.
Thanks for the thoughtful thoughts.
It would be interesting to divide the mfi stocks (the top 50) into deciles (5 per decile) and see if it worked in order. It would obviously take some work. You could do it with your top 200. (20 stocks per decile) which would give a larger sample size and more reliable results perhaps.
If you made a top 200 list every month for the last few years, I would be happy to compile the data and give a report. I searched your blog and it appears that you just recently started posting a top 200...
I agree Marshall that WSTC looks like a interesting company to dig a little deeper into for a possible investment.
Marsh,
Concerning holding period, JG was asked by one of his students at Columbia and he commented that 1 year was not the best holding period. He refrained from giving the best holding period though. He also refrained from answering whether it's better to weight EY or ROIC heavier. I have the class notes from the investing class he taught. Let me know if you want them and I'll email them to you.
I went back and looked and I have top 200 runs going back to July 2011. Within each of those files, I embedded the official mfi list at that time (top 50) and where each stock scored in my top 200. So we essentially have a database with official top 50, the ranking of those 50, the ey and Roc of each of the 50 and price at that time.
I started aggregating and have done about 6 months. One issue is stocks that no longer exist IR changed tickers (for example SOLR changed to GTAT). I am not sure three years is enough data to draw conclusions. But I will continue to build up the data. Would you have good tools to get the closing prices a year from the start date?
I would be interested in notes. Marshgerda@outlook.com.
Hi Marshall,
Here is the latest pick from Mark Gomes, interesting play on the pot stocks? Your thoughts
http://seekingalpha.com/article/2077343-riding-high-on-aerogrow
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