Saturday, September 13, 2014

Okay, I Think I Have Convinced Myself

Am I The Biggest Obstacle?

Do not know if everyone has read my previous blog on MFI statistics, but it seems as clear a road map for making money that anyone could ask for.  When I was struggling with MFI in 2011, the best thing I ever did was sell everything and start with a clean slate and a new rule book a year later.  I think I need to do that again.  Here are all my current holdings:

Stock Avg Cost Current Price Dividends Gain per Share Pct Gain Pct of Portfolio
GNW       10.08           13.15                 -                3.07 30.5% 6.7%
GTAT          9.15           12.79             1.08              4.72 51.6% 6.5%
AOD          8.04             8.84             0.82              1.61 20.1% 4.6%
BBEP       16.78           21.67             2.02              6.90 41.1% 4.6%
KLIC       11.48           14.71                 -                3.24 28.2% 3.8%
RIOM          1.97             2.85                 -                0.88 44.5% 3.6%
ATVI       17.39           23.34             1.08              7.02 40.4% 3.4%
TLM       10.72             9.60             0.07            (1.05) -9.8% 3.3%
BAC-WTA          6.05             7.58                 -                1.53 25.2% 3.3%
GPS       40.55           44.28             0.22              3.95 9.7% 3.2%
NTC       12.02           12.43             0.45              0.86 7.2% 3.1%
FSC          9.57             9.75             0.53              0.71 7.4% 3.0%
CSQ          8.74           11.77             2.12              5.15 58.9% 3.0%
TGONF       10.27           11.28             0.49              1.50 14.6% 2.9%
TPVG       15.54           15.23             0.70              0.39 2.5% 2.9%
CSCO       23.68           25.15             0.08              1.55 6.6% 2.7%
TNH     148.10         144.79             3.11            (0.20) -0.1% 2.6%
TCMCF       13.89           14.75                 -                0.86 6.2% 2.6%
NADL          9.48             8.68             0.40            (0.40) -4.2% 2.3%
RPXC       16.51           14.82                 -              (1.69) -10.2% 2.3%
AVG       18.32           17.23                 -              (1.10) -6.0% 2.1%
SNDK       70.20           98.89             0.53            29.22 41.6% 2.1%
AGX       15.60           37.36             0.75            22.51 144.3% 2.0%
TSL       12.58           13.00             1.45              1.88 14.9% 1.9%
SYNA       48.01           83.47                 -              35.46 73.9% 1.9%
KLAC       61.35           78.36             1.40            18.40 30.0% 1.9%
TIME       22.89           23.80                 -                0.91 4.0% 1.7%
HIG-WT       21.24           28.70                 -                7.46 35.1% 1.7%
EXETF          7.82             7.53                 -              (0.29) -3.7% 1.6%
BRCD          9.34           10.25                 -                0.91 9.8% 1.6%
WNR       39.80           43.14             0.77              4.11 10.3% 1.6%
CBI       58.25           61.85                 -                3.61 6.2% 1.5%
ITRN       21.32           21.93                 -                0.61 2.9% 1.5%
NSR       25.82           26.71                 -                0.89 3.5% 1.1%
RCII       28.78           28.76             0.23              0.21 0.7% 1.1%
CA       29.54           28.52             0.50            (0.53) -1.8% 1.1%
O       21.11           42.57          15.69            37.15 175.9% 0.9%
OIBAX          5.01             6.08             1.98              3.06 61.0% 0.9%


I think I will sell a large proportion of these stocks.  Looking on the list, here is what I should sell:

BBEP, KLIC, RIOM, TLM, GPS, FSC, TPVG, TSL, TIME and EXETF. In addition, cut my GTAT share in half and GNW in half.  With multiplier, that would equal about $1,000,000.  Then I create 4 new MFI tranches that are dedicated to this new top right quadrant (650 million or greater market cap and 2.6% yield or greater), with 250,000 in each one.  Then I stop any discretionary purchases, only way to buy discretionary is to sell discretionary.

It is bold.  But I think the time may have come to be bold. I believe it will ultimately give me better results with less churning.  I start on Monday. First purchase will be October 1st.

As a note, the stocks that would be considered today would come from this list:

Ticker Mkt Cap Date Yield
BAH 3,479.04 12-Sep 15.0%
PDLI 1,660.45 12-Sep 6.1%
BKE 2,316.26 12-Sep 4.3%
RGR 994.88 12-Sep 4.0%
COH 10,016.16 12-Sep 3.6%
CA 12,546.84 12-Sep 3.5%
NUS 2,460.95 12-Sep 3.2%
GME 4,919.21 12-Sep 2.9%
CSCO 127,183.80 12-Sep 2.9%
Yes, looking at that list, I can see this will take some courage!  But it is going to start happening.  If it takes 100 years to grow an Oak Tree, you are best off starting as soon as possible.

2 comments:

Eric Yuen said...

Great analyses, Marsh! Thanks as always for your blog. I find it very interesting! Two questions:

First, I seem to recall that in JG's books, small caps outperformed large caps. So I wonder if the recent outperformance by the large cap dividend payers is cyclical or will it persist? Maybe only time will tell.

Second, your analysis suggests that the really high dividend yielders underperform, perhaps because the market is saying their dividends are not sustainable. BAH has had some 'special dividends' lately. PDLI will lose some key patents and revenue from those patents, which means their cash flow will decrease substantially. They may be able to sustain the dividend, but their future earnings yield will likely come down significantly. How much do you take the sustainability of the dividends into account? Good luck with your new strategy!

Marsh_Gerda said...

Eric - thanks for your note. I believe your comment about his book is incorrect. He did not say small caps outperformed large caps. Instead, he said when you ran the screen at a lower level (say $200 m as opposed to $1 b), the total results were better. he did not say that within the $200 million screen that small caps outperformed large caps.

My plan is not to take sustainability of dividends into account. I am letting go. I am going to just use a simple formula and not bring that sort of judgment in.