First Football Sunday

First Football Sunday

We have made it to football season.  I watched some of the college games last night. As a graduate of Indiana University, I tend to root for the so called Big Ten teams in non conference play. They were very unimpressive.  Maybe IU has a shot at winning a few games this season. Then my Dallas Cowboys kick off against the 49ers.  I suspect it is going to be a very long season, so while I will still be rooting for Dallas first, I have bought an Andrew Luck jersey to reflect my Indiana heritage. Go Colts!

I just read through Barron's magazine for the weekend.  It is surprising how bullish everyone is.  One person commented that a reason to be bullish is that investors still are under-weight equities.  That made me stop and think. How can the market be at record highs AND investors be underweight stocks?  The only possible way that happens (as we know the numerator is an all time high) is if the denominator is going up faster.  The US is awash in money to put to work.  So while the stock market may continue to move upwards as people do not have other viable investment options, it seems clear to me that we are borrowing from future gains.

MFI Overall Performance

As I mentioned last week in "The Struggle Is Real", MFI continues to lag.  My MFI index is now 7.9%, which exactly matched GARIX (Gotham's long/short MFI fund).  The R3K is up 9.26%.  Not a surprise, we have to expect MFI to under-perform for stretches. Here are the 50 stocks in my index:

Index	Stock	Start	29-Aug	Current	YTD Change	Change Since Aug 29
1	ATVI	17.83	23.74	24.22	35.8%	2.0%
2	MO	38.39	44.04	44.35	15.5%	0.7%
3	APOL	27.32	27.77	27.47	0.5%	-1.1%
4	AAPL	561.02	727.13	702.42	25.2%	-3.4%
5	AGX	27.56	40.05	38.22	38.7%	-4.6%
6	BAH	19.15	22.39	23.04	20.3%	2.9%
7	BKE	52.56	49.84	49.27	-6.3%	-1.1%
8	CA	33.65	28.99	29.97	-10.9%	3.4%
9	CACI	73.22	72.12	72.35	-1.2%	0.3%
10	CHE	76.62	106.01	105.62	37.8%	-0.4%
11	CRUS	20.43	24.18	23.52	15.2%	-2.7%
12	CSCO	22.43	25.35	25.36	13.1%	0.0%
13	COH	56.13	37.51	38.50	-31.4%	2.7%
14	CRTX	9.49	9.50	9.50	0.1%	0.0%
15	DLX	52.19	60.40	60.68	16.3%	0.5%
16	DHX	7.25	8.49	8.74	20.6%	2.9%
17	EBIX	14.71	15.59	15.23	3.5%	-2.3%
18	EGL	33.40	35.14	33.95	1.6%	-3.4%
19	GME	49.26	42.86	46.23	-6.2%	7.9%
20	GTIV	12.41	18.07	17.80	43.4%	-1.5%
21	GNI	68.10	28.55	29.10	-57.3%	1.9%
22	HLF	78.70	51.28	50.11	-36.3%	-2.3%
23	IQNT	11.41	12.35	12.70	11.3%	2.8%
24	ESI	33.58	8.43	8.33	-75.2%	-1.2%
25	LPS	37.38	37.30	37.30	-0.2%	0.0%
26	LQDT	22.66	15.24	15.17	-33.1%	-0.5%
27	LO	50.68	60.93	61.65	21.6%	1.2%
28	MSFT	37.41	45.99	46.75	25.0%	1.7%
29	MYGN	20.98	36.19	36.29	73.0%	0.3%
30	NATR	17.32	16.65	17.37	0.3%	4.3%
31	NOC	114.61	128.53	129.54	13.0%	0.8%
32	PDLI	8.44	10.39	10.06	19.2%	0.0%
33	PFMT	10.30	9.62	9.20	-10.7%	-4.4%
34	PETS	16.63	14.59	15.05	-9.5%	3.2%
35	PRSC	25.72	45.53	45.41	76.6%	-0.3%
36	QCOR	54.45	94.50	94.50	73.6%	0.0%
37	RTN	90.70	97.55	98.97	9.1%	1.5%
38	RAI	49.99	59.81	60.30	20.6%	0.8%
39	RPXC	16.90	15.19	15.23	-9.9%	0.3%
40	SAIC	33.07	46.96	46.73	41.3%	-0.5%
41	SWHC	13.49	11.07	10.47	-22.4%	-5.4%
42	STRA	34.47	60.72	60.15	74.5%	-0.9%
43	RGR	73.09	51.44	53.43	-26.9%	3.9%
44	UIS	33.57	23.41	23.29	-30.6%	-0.5%
45	UNTD	13.76	12.77	12.17	-11.6%	-4.7%
46	SPOK	14.28	15.18	15.18	6.3%	0.0%
47	USNA	75.58	73.03	73.50	-2.8%	0.6%
48	VCI	34.25	34.02	34.02	-0.7%	0.0%
49	VGR	16.37	24.69	24.69	50.8%	0.0%
50	WTW	32.93	24.69	24.43	-25.8%	-1.1%
	Total	17,682	19,092	19,079	7.9%	-0.1%

You would have done well to go with the tobacco stocks at the start of the year. MO (15.5%), LO (21.6%), RAI (20.6%) and VGR (50.8%). I know at the start of the year, I had thought really hard about buying MO, PDLI and VCI in my dividend portfolio.  VCI would have been a silly buy as they were being bought out, so only had a month of existance left, but PDLI and MO would have returned 17% so far - doing much better than my dividend portfolio of 9%.

Strategy Going Forward

I do think I am going to make some changes going forward.  I think any new dividend stocks will have to be in my top 200 list; or be some CEF that is well below NAV.  I will look to exit some positions based on that over next twelve months.  TLM, TCMCF, NADL, EXETF, TIME and TPVG will all be on the potential chopping block.

Then I think I need to pare back discretionary picks/options to be no more than 20% of total investment (currently at 22%):

Portfolio	Proportion
Dividend	31.3%
Mfi	20.8%
Discretionary	21.9%
Cash	26.0%

MFI needs to be higher.  I do not expect to achieve that over night, but as I get new cash, it should go towards MFI.  I may revisit the idea of a formal annual dividend/MFI tranche. I will definitely bulk up my November 2014 MFI tranche:

11/15/13 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
AVG	$17.22	$17.35	$0.00	0.8%	12.8%
ATVI	$17.71	$24.02	$0.20	36.8%	12.8%
GA	$9.04	$11.90	$0.23	34.2%	12.8%
RPXC	$17.04	$15.23	$0.00	-10.6%	12.8%
SYNA	$48.01	$84.39	$0.00	75.8%	12.8%
Totals				27.4%	12.8%

Recall I had added about 21% increase to August tranche. I may go as high as 33% in November.