The thoughts from Joel Greenblatt and Tobias Carlisle from the Deep Value Summit video corpraider posted here the other day really has me thinking.
- Do I make it too complicated?
- Do I really add value above & beyond the model?
- Should I change my approach?
I have been relatively successful lately, so there is a decent argument to just keep what I am doing.
2014: I am up 15.1%, beating the index by about 6 points.
2013: I was up 45% (vs 33% for benchmark)
2012: I was up 18% (16.4% for benchmark)
2011 was marred by my being too involved in Chinese Reverse Merger stocks.
But to be honest, I make quite a few "snap" decisions, that end up generally not working well. I have enough core positions and allocate a relatively small amount to those snap plays that I overcome them. So why do I do it? I expect I enjoy the thrill of a little mad money. I suppose like others, I want that occasional home run.
What Would Be a Potential Simple Model?
On the MFI side, that seems pretty obvious. I have shown that stocks with market caps above $750m with a decent dividend yield (26%+), have done very very well since 2006 (essentially 19% a year while R3K has compounded at 7.4% annually). So I could take the leap of faith and try that in November and simply randomly pick my five stocks.
As a note, these 6 stocks were up 1.1% last week. It feels restrictive, but it is a simple formula.
Dividend Simple Formula
This could be a fall out of my top 200 rankings. Perhaps 5 picks changed once a year from my top 200 list. To be picked I would take the stocks with yields over 4% that have the highest earnings yield. That simple. I would retain all the ones I have right now that are monthly payers - but sell the others (eventually). Here are my dividend holdings:
|Stock||Shares||Ann Dividend / Share||Yield|
So by my definition, I would sell TPVG, TNH, TLM, TIME, TGONF, NADL and GPS.
I would buy (note these stocks are more for illustrative purposes, the list is a bit out-dated).
|Ticker||Rank||Stock Price||Market Cap||Earnings Yield||Dividend Yield|
(note I listed a couple extras)
It doesn't really make sense to have rules for "discretionary" portfolio. But I could say no more than 5 positions and they cannot be more than 20% of my total.
Hmmm, stuff to think about. While it might be difficult to let go and just trust "the force", there is a real chance I would have better results with less effort - that seems worthwhile.