Weekend Update 4/11/15

Weekend Update

Up early this morning.  Wearing a new shirt I bought last week.  Just says "Game Changer" and then has a picture f a steaming cup of coffee.  Listening to Pandora, I recently took a laptop no one was using and made it into a little media center.  It is hooked up to a decent sound system (Bose) and it has a slide slow screensaver as well. It works pretty well, it is a Lenovo Yoga, so has a touchscreen in tent mode. I still type these blogs on my Lenovo ThinkPad X220 - I have been doing so for the past ten years. Though I have to admit I am looking at the new

Dell XPS 13. 

Okay, I suspect most of you did not come here for a computer review. On to my portfolio.

Overview

My portfolio is firing on all cylinders.  Things are going so well right now, that is an indication the wheels will soon fall off.  I am up 8.5% on the year.  I am very happy with that against the back drop of the Russell 3000 being up 3.3% and my MFI Index being up 3.7%.  To be honest, the majority of my out-performance is from a single stock, NHTC.  But that is the nature of MFI.  You get some stocks that do really well - hopefully that is enough to offset the duds.

MFI Select

As a reminder, I really split my investing into 4 components:

1. MFI Select - 4 tranches of 5 MFI stocks that I pick from the official screen plus my own screen.
2. MFI Formula - currently three tranches of 5 MFI stocks (but will be four on July 1st) that are picked by formula and random number generator.
3. Dividend securities - a group of securities (many are closed end funds) that I am growing to build a steady income stream as I near retirement.
4. Discretionary - self evident.

The Select Portfolio has really gone up of late.  Just since April 1st it is up 5% and so is now up 8% for 2015.  Recall that this portfolio started off the year terribly, it was down over 6% in January as every stock seemed to have pre-announced a poor fourth quarter.  That is the beauty of MFI, by committing to hold stocks for a year, I avoid the emotional mistake of selling on some negative news.

5/6/2014	Start	Current	Dividend	Pct Gain	R3K Gain
AVG	$19.57	$21.88	$0.00	11.8%	14.1%
CA	$29.54	$31.55	$1.00	10.2%	14.1%
CSCO	$22.79	$28.04	$0.57	25.6%	14.1%
NSR	$25.82	27.82	$0.00	7.8%	14.1%
RCII	$28.78	$27.41	$0.94	-1.5%	14.1%
Totals				10.8%	14.1%
8/15/2014	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$24.40	$28.04	$0.59	17.3%	9.2%
AGX	$36.71	$34.44	$0.70	-4.3%	9.2%
ITRN	$21.32	$22.99	$0.71	11.2%	9.2%
BRCD	$9.34	$12.21	$0.11	31.9%	9.2%
CBI	$58.25	$49.62	$0.14	-14.6%	9.2%
Totals				8.3%	9.2%
11/15/2014	Start	Current	Dividend	Pct Gain	R3K Gain
FLR	$64.80	$59.13	$0.42	-8.1%	4.8%
IPCM	$38.45	$48.65	$0.00	26.5%	4.8%
VIAB	$72.29	$69.27	$0.66	-3.3%	4.8%
NHTC	$12.19	$22.17	$0.03	82.1%	4.8%
AWRE	$4.40	$4.43	$0.00	0.7%	4.8%
Totals				19.6%	4.8%
2/1/2015	Start	Current	Dividend	Pct Gain	R3K Gain
VEC	$28.00	$27.82	$0.00	-0.6%	6.3%
QCOM	$62.73	$69.16	$0.42	10.9%	6.3%
VIAB	$63.91	$69.27	$0.33	8.9%	6.3%
UIS	$22.03	$23.07	$0.00	4.7%	6.3%
NHTC	$12.44	$22.17	$0.02	78.4%	6.3%
Totals				20.5%	6.3%
Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	8.3%	19.6%	20.5%	10.8%	15.0%
Previous Tranche	41.4%	14.2%	8.5%	33.0%	21.8%
Tranche -2	14.1%	43.7%	78.3%	-	34.0%
MFI Overall Gain	74.7%	96.3%	132.9%	47.3%	87.8%
Current Balance	43,678	49,076	58,215	36,832	187,800
R3K Current Tranche	9.2%	4.8%	6.3%	14.1%	8.6%
R3K Overall Gain	59.3%	63.9%	45.3%	35.6%	51.0%
R3K Balance	39,832	40,984	36,330	33,901	151,047
Annualized IRR	23.4%	32.4%	47.1%	22.2%	28.6%

Looking at the 4 tranches, you will note November and February are blowing the doors off. Of course in February it helps to have NHTC up 78%.  It is certainly possible NHTC pulls back a bit, but it is not expensive, especially if they can grow by 20% in 2015.  I am a bit worried about the impact of the strengthening USD for NHTC though.

Going into Friday, my August tranche had actually moved ahead. But it gave it back on AGX earnings (Argan, Inc. Reports Fourth Quarter and Year End Results).  The amazing stock has been NSR, which has moved from $22 to $27.80 in the past two+ weeks post their "bad news" from FCC. Again, the discipline of MFI helps.

The table below shows the month by month progression of MFI Seelect against R3K assuming $25,000 invested in each of the 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
4/1/2015	29.95%	178,565	148,612
Current	36.75%	187,800	151,047

The keen-eyed reader will note that the current balance of 187,800 is an all-time high. And the 36.75% differential is 2nd highest.  Hopefully the wheels stay on!

MFI Formula

This portfolio also continues to do very well.  It is a little more difficult to say how much it is "up" on the year as it isn't fully funded. It was 50% funded at start of the year and is now 25% funded as of April 1st.  I will fund the final 1/4 on June 30th. Even so, it is up almost 7% so far even assuming that 1/2 of it was sterile (making nothing) for the first quarter). Impressive, non?

10/1/2014 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
BAH	$23.52	$28.53	$0.24	22.3%	8.7%
BKE	$45.55	$48.85	$3.22	14.3%	8.7%
CA	$27.87	$31.55	$0.50	15.0%	8.7%
GME	$41.70	$40.40	$0.69	-1.5%	8.7%
NUS	$44.56	$60.76	$0.70	37.9%	8.7%
Totals				17.6%	8.7%
12/31/14 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
CA	$30.83	$31.55	$0.25	3.1%	2.2%
CSCO	$28.36	$28.04	$0.40	0.3%	2.2%
RGR	$34.81	$47.78	$0.17	37.7%	2.2%
GME	$34.21	$40.40	$0.36	19.1%	2.2%
IQNT	$19.87	$17.02	$0.15	-13.6%	2.2%
Totals				9.3%	2.2%
3/31/2015	Start	Current	Dividend	Pct Gain	R3K Gain
HRB	$31.99	$31.79	$0.00	-0.6%	0.9%
GME	$37.69	$40.40	$0.00	7.2%	0.9%
KING	$15.85	$16.90	$0.00	6.6%	0.9%
NSU	$3.43	$3.52	$0.00	2.6%	0.9%
PPC	$22.65	$23.29	$0.00	2.8%	0.9%
Totals				3.7%	0.9%

The newest tranche is off to a nice start. The other two tranches enjoy comfortable leads.  We often debate on whether I should allow the formula to double up on stocks.  From a diversification view, I understand the answer not to double up.  But again with GME it was a good call (so far).  Interestingly, the formula did not allow a double up on IQNT as it had fallen beneath the 600m threshold.   Perhaps a shame as it is up 8% since 3/31.  Here is a similar month by month table.  Keep in mind that $50,000 was not yet invested as of 1/1 and still 25,000 is waiting on sidelines.

Date	Differential	Value
10/1/2014	0.00%	100,000
11/1/2014	1.63%	102,288
12/1/2014	0.30%	101,375
1/1/2015	-0.33%	100,664
2/1/2015	1.67%	101,281
3/1/2015	3.62%	106,073
4/1/2015	5.09%	106,781
Current	4.70%	107,660

Dividend Securities

I thought my readers might want to know what securities are here and how they are doing in 2015.  I do not track them as thoroughly as MFI.

Stock	12/31/2014	Current	Dividend	Gain
AOD	$          8.49	$       9.05	$        0.17	8.6%
FSC	$          7.07	$       7.09	$        0.06	1.1%
CSQ	$        11.44	$     11.27	$        0.33	1.4%
NTC	$        12.54	$     12.73	$        0.17	2.9%
TGONF	$          9.80	$       9.85	$        0.15	2.0%
O	$        47.71	$     49.51	$        0.57	5.0%
OIBAX	$          5.92	$       5.94	$        0.04	1.0%

Note that FSC was added in March.  So while not setting the world afire, recall the goal here is income stream.  With my multiplier, these are now creating almost $43,000 a year in income. And right now it is all being reinvested.  The blended yield is 7.5%, so if I do not touch these and just keep up the reinvestment the income will double in 10 years. Right when I turn 65 :).

Discretionary Stocks

I really just have three core holdings here, GNW, BAC-WTA and HIG-WT.  They are not "going to the moon" at this time.  But I am patient (at times).  Actually BAC and GNW are down pretty substantially in 2015 (-15% and -9%).

Then I have been "trading" some other names with some success.

• UCO has not been a success, though it could have just as easily been.  It has moved around a lot.
• TCMCF - these are associated with TC.  I got them at a great "discount", but to have really benefited I would had to short TC. I did not do that, so relative to having bought TC, I have done "well" but overall a bit of a disaster.
• NADL - one of my worst trades ever (lost 80%). I finally sold this dog this past week.  I do think there is money to be made in the drilling space, but NADL is too speculative and too highly leveraged.  Should have realized it earlier.
• RDC - this is a drilling stock I bought on 3/24. I sold yesterday for a 7.5% gain.  Just need to do that 10 more times to make up for NADL loss.  Actually, I also had a successful 18% trade with RIG earlier this year. So I just need to repeat that pair trade 5 times.
• ENTA - this a a pharma stock on MFI screen that I have been watching and trading.  I bought and sold at the start of the week for a quick 3% gain.  I have re-bought and am up 3% again.
• BXE - this is my main oil and gas play.  It is a Seth Klarman holding and is esentially flat for me.  I almost nought CRC instead, a spin-off from OXY play. So far that was the wrong move as CRC is up 27% in the same stretch.  That being said, I do believe the same type of gains are potentially in BXE as well, they are trading at $2.70 and have a present value NAV of about $9. That is a margin of safety.
• SFUN - this is a company from my top 200 listing that I bought and sold and broke even.  Right after I sold it popped up about 20% from $6 to $7.40. Oh well, had it been a real MFI stock I would have held - fear kills.

Ok, I think I have filled up enough blank space. Have a great weekend.

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