MFI Diary: Weekend Update 11.8/14

Schloss Investing Rules

Weekend Update

After another really bad week, I want to go back to some basics. I have lost a lot since September with my two largest positions, GTAT and GNW taking major hits. What was my mistake?

I think they are vastly different examples - though they both boil down to the same issue, management not really being honest with shareholders. That is difficult as an outsider investor to catch - I was joined by many "smart" investors as well. GTAT was over 5% owned by Morgan Stanley, Barron's had written several articles about GNW suggesting 50% undervalued.

There were red flags obviously in hindsight. GTAT senior management selling shares. GNW disclosing a potential shortfall in LTC last quarter, even after CEO had said a couple weeks before things were fine (Genworth CEO Apologizes to Analysts After Reserve Shortfall). But there are red flags in many investments.

Thinking long and hard about it, I think my real mistake was having positions that were so out sized in my portfolio. While having concentrated positions is the fastest way to wealth, it is more risky to have more eggs in a single basket. You are going to have failures. I do think the fact that I had two so close to each other was more poor luck than something out and out wrong with my approach. So if a position becomes out sized, I should pare it back some. I don't really need that beachfront home in Hawaii, I do not really need home runs, just a lots of base hits, walks and solid defense.

I do apologize to my readers if you lost money on either of these two stocks. I actually feel worse about that than the 15% hit I took on my portfolio. I am just a blogger, certainly not a financial advisor. I tell people what I am doing, why, and what I am feeling - but that should never be construed as financial advice.

MFI Tranches

While it feels like I have had nothing but bad news of late, that is not really true. My MFI tranches went up nicely this week and also extended their lead over the IWV. I was helped by AVG popping 12% yesterday - I think on buyout rumors.

11/15/13 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
AVG	$17.22	$19.77	$0.00	14.8%	14.0%
ATVI	$17.71	$20.65	$0.20	17.7%	14.0%
GA	$9.04	$11.90	$0.23	34.2%	14.0%
RPXC	$17.04	$13.93	$0.00	-18.3%	14.0%
SYNA	$48.01	$63.66	$0.00	32.6%	14.0%
Totals				16.2%	14.0%

2/1/14 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
ATVI	$17.13	$20.65	$0.20	21.7%	14.1%
KLAC	$61.47	$80.00	$1.40	32.4%	14.1%
RPXC	$16.22	$13.93	$0.00	-14.1%	14.1%
SNDK	$69.55	$92.83	$0.83	34.7%	14.1%
WNR	$39.11	$46.39	$1.04	21.3%	14.1%
Totals				19.2%	14.1%

5/6/2014	Start	Current	Dividend	Pct Gain	R3K Gain
AVG	$19.57	$19.77	$0.00	1.0%	8.5%
CA	$29.54	$30.05	$0.50	3.4%	8.5%
CSCO	$22.79	$25.33	$0.38	12.8%	8.5%
NSR	$25.82	$26.44	$0.00	2.4%	8.5%
RCII	$28.78	$31.42	$0.46	10.8%	8.5%
Totals				6.1%	8.5%

8/15/2014	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$24.40	$25.33	$0.19	4.6%	3.9%
AGX	$36.71	$34.07	$0.70	-5.3%	3.9%
ITRN	$21.32	$20.38	$0.19	-3.5%	3.9%
BRCD	$9.34	$10.92	$0.04	17.3%	3.9%
CBI	$58.25	$55.58	$0.07	-4.5%	3.9%
Totals				1.7%	3.9%

Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	1.7%	16.2%	19.2%	6.1%	10.8%
Previous Tranche	41.4%	43.7%	78.3%	33.0%	49.3%
Tranche -2	14.1%	-	-	-	3.5%
MFI Overall Gain	64.1%	67.1%	112.5%	41.1%	71.2%
Current Balance	41,021	41,766	53,115	35,279	171,181
R3K Current Tranche	3.9%	14.0%	14.1%	8.5%	10.2%
R3K Overall Gain	51.6%	55.9%	38.2%	29.1%	43.7%
R3K Balance	37,901	38,966	34,548	32,263	143,678
Annualized IRR	24.8%	29.6%	53.2%	25.6%	34.0%

This will be the final week for my November 15th tranche. Hopefully no meltdowns! It does have a two point edge and if it wins it will be my fifth straight tranche to win.

Date	Differential	Value
12/1/2012	-2.20%	99,765
1/1/2013	-1.78%	102,798
2/1/2013	-2.26%	102,594
3/1/2013	-2.23%	102,881
4/1/2013	-0.43%	106,804
5/1/2013	2.00%	110,423
6/1/2013	4.75%	115,831
7/1/2013	4.29%	114,888
8/1/2013	6.91%	124,799
9/1/2013	10.46%	124,536
10/1/2013	19.67%	138,655
11/1/2013	19.75%	143,514
12/1/2013	23.70%	150,105
1/1/2014	26.63%	157,138
2/1/2014	24.70%	150,619
3/1/2014	25.66%	158,116
4/1/2014	30.38%	162,991
5/1/2014	29.65%	162,428
6/1/2014	31.44%	167,001
7/1/2014	39.23%	177,971
8/1/2014	31.13%	167,054
9/1/2014	35.90%	177,792
10/1/2014	29.38%	168,321
11/1/2014	26.14%	168,810
Current	27.50%	171,181

Large MFI/Dividend Approach

As I have explained, I have started a new MFI strategy, larger cap stocks with dividends that are picked totally randomly (gasp). There is only one tranche right now with this approach. I will start my second tranche at the end of the year. It had a bit of a rocky week with NUS having extremely poor earnings and guidance.

10/1/2014 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
BAH	$23.52	$25.74	$0.11	9.9%	3.4%
BKE	$45.55	$49.50	$0.22	9.2%	3.4%
CA	$27.87	$30.05	$0.00	7.8%	3.4%
GME	$41.70	$43.69	$0.00	4.8%	3.4%
NUS	$44.56	$40.50	$0.00	-9.1%	3.4%
Totals				4.5%	3.4%

So actually hanging in there.

Discretionary Portfolio

This is where the pain has been.

Stock	Shares	Avg Cost	Current Price	Pct Change	R3K Change	Diff
AGX	190	36.71	34.07	-7.2%	3.5%	-10.7%
BAC-WTA	12,000	6.05	7.25	19.8%	15.3%	4.5%
GNW	13,880	10.08	8.41	-16.5%	25.8%	-42.3%
HIG-WT	1,650	21.24	31.90	50.2%	23.1%	27.1%
HYH	2,000	36.27	36.96	1.9%	1.0%	0.9%
VEC	7,000	20.19	24.68	22.2%	6.8%	15.5%










Total Open				8.8%	14.1%	-5.3%
Closed				0.9%	1.3%	-0.4%
Combined				1.5%	2.2%	-0.7%

Dividend Portfolio

Last, but not least any more (thanks to crash and burn of discretionary) is my dividend portfolio. It is really underperforming (still). NADL, TCMCF and now EXETF have really, really done poorly. I am getting lots of dividend income, but I have had some poor picks here. Down 2.3% on the year.

Stock	Shares	Avg Cost	Current Price	Dividends Received	Pct Change	R3K Change	Diff
AOD	14,281	8.04	8.68	13,326.21	19.6%	24.6%	-5.0%
CCUR	9,400	7.20	6.98	-	-3.1%	5.9%	-9.0%
CSQ	8,665	9.04	11.83	15,995.71	51.4%	48.6%	2.8%
EXETF	6,000	7.82	5.94	480.00	-23.0%	0.7%	-23.7%
KMF	2,000	34.07	37.61	-	10.4%	9.0%	1.3%
NADL	9,572	9.11	5.44	2,727.85	-37.2%	4.3%	-41.5%
NTC	6,847	12.02	12.66	3,450.33	9.5%	9.0%	0.6%
O	603	21.12	46.87	9,791.02	198.9%	120.7%	78.2%
OIBAX	4,167	5.01	5.99	8,381.18	59.8%	131.4%	-71.6%
PGN	10,000	4.86	5.20	-	7.0%	3.8%	3.2%
TCMCF	4,903	13.89	9.70	1,991.00	-27.2%	1.9%	-29.1%
TGONF	7,000	10.27	10.43	3,452.50	6.3%	23.0%	-16.7%
TNH	823	144.82	139.24	1,555.00	-2.5%	5.0%	-7.5%







Total Open				61,151	6.4%	17.6%	-11.2%
Closed					11.6%	10.5%	1.1%
Combined					10.8%	11.6%	-0.8%
Annualized IRR Since 12/31/10					14.8%
2014 Gain					-2.3%

Well, painful week to write about. Next week is a new week. Hopefully things get a little bit better. I will likely wait until Monday (the 17th) to refresh my 11/15 tranche.