Saturday, March 14, 2015

Weekend Update - Happy Pi Day

Weekend Update

Pretty funny. Today is Pi day, being 3/14. But this year, as you can see from the factoid to the left goes a few more decimals. at 9:26:53 it will have Pi to the first nine places.  This is truly a once in a lifetime moment. Get ready to pop the champagne corks.

The second funny thing about this is that it may actually matter to us. My son is a senior in high school and we're waiting on pins and needles on hearing back on his college applications.  He has applied to be in the Physics program at MIT, Case Western, Northwestern, Carnegie Mellon, Vanderbilt & Boston U.  The first two, sent him a note yesterday saying they would be sending out their acceptance letters (email) today at 9:26:53.

Overview

I mentioned yesterday morning the the markets were going around like a drunken sailor and that continued yesterday.  I show the following YTD results:

Annual Inception to Date
Year Russell MFI Russell ITD MFI ITD
2006 11.40% 15.03% 11.40% 15.03%
2007 4.09% -6.69% 15.96% 7.34%
2008 -37.05% -37.97% -27.00% -33.42%
2009 32.51% 45.18% -3.27% -3.34%
2010 18.38% 22.77% 14.50% 18.67%
2011 -0.56% -10.47% 13.87% 6.25%
2012 16.43% 9.70% 32.57% 16.56%
2013 33.01% 51.70% 76.34% 76.82%
2014 12.26% 12.07% 97.95% 98.15%
2015 0.80% 1.17% 98.74% 99.30%

So the R3K is up 0.80% and MFI Index is up 1.17% on Pi day for the year.  Here are my results:

  • Overall: 4.86%
  • MFI Select: 1.66%
  • MFI Formula: 5.59%
The interesting thing about MFI formula is that result is with only two of four tranches active. So it is literally "one arm tied behind my back".  As 1/2 the money is up 0% and the other half (the invested half) is up 11%.

MFI Select

Speaking of drunken sailors, look at the staggering of the value of this portfolio month by month assuming $100,000 initial investment spread over four tranches:

Date Differential MFI Value R3K Value
12/1/2012 -2.20%       99,765         101,965
1/1/2013 -1.78%      102,798         104,575
2/1/2013 -2.26%      102,594         104,856
3/1/2013 -2.23%      102,881         105,114
4/1/2013 -0.43%      106,804         107,234
5/1/2013 2.00%      110,423         108,423
6/1/2013 4.75%      115,831         111,085
7/1/2013 4.29%      114,888         110,597
8/1/2013 6.91%      124,799         117,889
9/1/2013 10.46%      124,536         114,079
10/1/2013 19.67%      138,655         118,990
11/1/2013 19.75%      143,514         123,764
12/1/2013 23.70%      150,105         126,405
1/1/2014 26.63%      157,138         130,503
2/1/2014 24.70%      150,619         125,918
3/1/2014 25.66%      158,116         132,458
4/1/2014 30.38%      162,991         132,616
5/1/2014 29.65%      162,428         132,779
6/1/2014 31.44%      167,001         135,559
7/1/2014 39.23%      177,971         138,740
8/1/2014 31.13%      167,054         135,922
9/1/2014 35.90%      177,792         141,892
10/1/2014 29.38%      168,321         138,944
11/1/2014 26.14%      168,810         142,666
12/1/2014 30.22%      176,420         146,198
1/1/2015 28.17%      174,306         146,140
2/1/2015 20.63%      162,833         142,201
3/1/2015 25.15%      175,476         150,324
Current 29.66%      176,983         147,320

So I started the year at $174,306. Dropped to 162,833. But have bounced back to 176,983.

5/6/2014 Start Current Dividend Pct Gain R3K Gain
AVG $19.57 $22.52 $0.00 15.1% 11.3%
CA $29.54 $31.39 $1.00 9.6% 11.3%
CSCO $22.79 $27.94 $0.57 25.1% 11.3%
NSR $25.82 $22.26 $0.00 -13.8% 11.3%
RCII $28.78 $27.24 $0.70 -2.9% 11.3%
Totals 6.6% 11.3%
8/15/2014 Start Current Dividend Pct Gain R3K Gain
CSCO $24.40 $27.94 $0.38 16.1% 6.5%
AGX $36.71 $32.40 $0.70 -9.8% 6.5%
ITRN $21.32 $22.33 $0.38 6.5% 6.5%
BRCD $9.34 $11.96 $0.11 29.2% 6.5%
CBI $58.25 $45.48 $0.14 -21.7% 6.5%
Totals 4.1% 6.5%
11/15/2014 Start Current Dividend Pct Gain R3K Gain
FLR $64.80 $56.69 $0.42 -11.9% 2.2%
IPCM $38.45 $45.74 $0.00 19.0% 2.2%
VIAB $72.29 $68.13 $0.66 -4.8% 2.2%
NHTC $12.19 $16.69 $0.03 37.2% 2.2%
AWRE $4.40 $4.44 $0.00 0.9% 2.2%
Totals 8.1% 2.2%
2/1/2015 Start Current Dividend Pct Gain R3K Gain
VEC $28.00 $32.03 $0.00 14.4% 3.6%
QCOM $62.73 $68.64 $0.42 10.1% 3.6%
VIAB $63.91 $68.13 $0.33 7.1% 3.6%
UIS $22.03 $23.20 $0.00 5.3% 3.6%
NHTC $12.44 $16.69 $0.02 34.3% 3.6%
Totals 14.2% 3.6%

You can see my two most recent tranches are really doing well. The May tranche seems likely to be a loser, which would take my losing streak to three.  But overall, the approach is working as you can see from this table:

Category/Tranche August November February May Total
Initial Investment      25,000       25,000     25,000      25,000    100,000
Current Tranche 4.1% 8.1% 14.2% 6.6% 8.4%
Previous Tranche 41.4% 14.2% 8.5% 33.0% 21.9%
Tranche -2 14.1% 43.7% 78.3%             -   34.0%
MFI Overall Gain 67.9% 77.4% 120.9% 41.8% 77.0%
Current Balance      41,964       44,346     55,216      35,458    176,983
R3K Current Tranche 6.5% 2.2% 3.6% 11.3% 5.9%
R3K Overall Gain 55.4% 59.9% 41.7% 32.3% 47.3%
R3K Balance      38,851       39,971     35,428      33,069    147,320
Annualized IRR 22.2% 27.9% 45.5% 20.7% 26.9%

Nothing wrong with a 26.9% annualized IRR. And the 30 point lead on R3K is starting to look like real money.

MFI Formula

As a reminder, this is my second approach to MFI that I started last September.  While MFI select allows me to pick the stocks, and frankly I pick from my top 200 rather than the official list; MFI Formula is purely a formula approach, using stocks from official 50 over 100m list.  It has really done well, which is what my back testing predicted.

10/1/2014 Stocks Start Current Dividend Pct Gain R3K Gain
BAH $23.52 $28.54 $0.24 22.3% 6.0%
BKE $45.55 $48.04 $3.22 12.5% 6.0%
CA $27.87 $31.39 $0.50 14.4% 6.0%
GME $41.70 $40.70 $0.69 -0.8% 6.0%
NUS $44.56 $55.74 $0.70 26.6% 6.0%
Totals 15.0% 6.0%
12/31/14 Stocks Start Current Dividend Pct Gain R3K Gain
CA $30.83 $31.39 $0.25 2.6% -0.3%
CSCO $28.36 $27.94 $0.19 -0.8% -0.3%
RGR $34.81 $52.28 $0.17 50.7% -0.3%
GME $34.21 $40.70 $0.36 20.0% -0.3%
IQNT $19.87 $15.49 $0.15 -21.3% -0.3%
Totals 10.2% -0.3%

As my readers know, there are often only 10 or 11 stocks that meet my formula criteria, so I will get repeating of stocks between tranches.  I believe this is important for the method to work, but it does certainly have the potential to increase volatility.  GME and CA are both in first two tranches.  They are up about 11% in aggregate in second tranche.  The three stocks I would have had to pick from if duplicates had not been allowed were COH (up 9.8%), PBI (down 9%) and KING (up 2%). Another repeat was NUS, it is up 267%, but sadly I didn't randomize them.

I will be adding a third tranche at the end of the month. I guess that will be March 30th (a Friday).

Other News

My UCO/Covered Call approach is working pretty poorly.  While the covered calls help soften things, they have not (yet) been enough to offset the decline in price of oil. I will stay with it through the summer.

Here is an illustrative table of how it has performed:

Type Date Shares Purchase Current Cost Value Gain/Loss
Stock 2/19/2015 3,000 $8.69 $6.86          26,070          20,580             (5,490)
Stock 3/3/2015 3,000 $8.34 $6.86          25,020          20,580             (4,440)
Stock 3/11/2015 3,000 $7.69 $6.86          23,070          20,580             (2,490)
Sold Call 2/19/2015 3,000 $0.20                600                   600
Sold Call 3/2/2015 3,000 $0.25                750                   750
Sold Call 3/4/2015 3,000 $0.45            1,350               1,350
Sold Call 3/11/2015 3,000 $0.40            1,200               1,200

While the share counts are illustrative, my readers can rest assured this is an expirement and actual dollars at stake are relatively small.


2 comments:

ChrisO said...

"Pi day" and I think some people looking for trending in stock prices and such, shows an interesting property of humans.

The ability to notice the patterns that they would like to see and reject data that contradict that pattern/assumption. As in the year is actual 2015, not 15.

Marsh_Gerda said...

Chris - your comment is spot on. Humans love to look for patterns and often find them when they don't exist.