Back in Switzerland again. Yesterday was gorgeous here, took a jog around the lake and had fresh bread, cheese, salami and wine for dinner on a terrace. Little overcast today, but still nice. I will be here through next Saturday.
The Week
I had a lot of companies I own report earnings this past week. It seemed like a pretty mixed bag with perhaps more bad apples than good apples.
- IQNT - I thought their earnings were ok (Inteliquent Reports First Quarter Results). When trading first started, they dropped out of the chute on Thursday from $18.03 to under $17.00. But the market had a re-think and they closed up on Friday to $19.31. This is a stock you could have bought under $16 less than a month ago.
- UIS - Their earnings were a bit of a hot mess (Unisys Announces First-Quarter 2015 Financial Results). They always have lumpy earnings and this was a bad lump. They announced plans to lay off 8% of work-force. The stock traded down 7% on Friday and is starting to look like a mistake. That being said, the best time to buy UIS is after a bad quarter as they often seem to rebound pretty nicely.
- CBI - Again, not great earnings (CB&I Reports 2015 First Quarter Results). They traded down 4% to $48.97. I have to say that I think this is a buying opportunity as I think they were over-sold. Reading through the material, backlog seems ok. One of the bigger issues was revenues missed a bit due to the strong dollar. Unlike some, I am willing to give a bit of a pass for that. Income from operations was $247 million. It was $982m for all of 2014, so pretty much on pace with last year - though one might expect 1st quarter to be seasonably lower due to weather. This is a $5.3 billion company - so pushing $1 billion in operating income seems strong. They do have some debt - I think if they stay under $50, CBI is a strong candidate to add in May.
- QCOM - they announced on Wednesday and while the current quarter was solid, the outlook was weak due to loss of Samsung business (Qualcomm Announces Second Quarter Fiscal 2015 Results). They also announced plans for restructuring. With job cuts coming from QCOM and UIS along with energy sector, I wonder how strong the US recovery is.
- AWRE announced earnings that I felt were very disappointing (Aware, Inc. Reports First Quarter 2015 Financial Results). The market certainly just gave it a yawn though. Light volume and little change in price.
I think that is it. As I read my thoughts, it was more bad news than good news. Interestingly, my stocks in total were up on the week.
I am now up 9.6% on the year versus 4.1% for the R3K.
MFI Select
Another solid week here. If I look at my post from last week, I have stretched my performance and my lead on the benchmark. The NHTC recovery from the short hit piece has help.
| Start | Current | Dividend | Pct Gain | R3K Gain | |
| AVG | $19.57 | $21.54 | $0.00 | 10.0% | 14.8% |
| CA | $29.54 | $32.24 | $1.00 | 12.5% | 14.8% |
| $22.79 | $28.82 | $0.57 | 29.0% | 14.8% | |
| NSR | $25.82 | $27.92 | $0.00 | 8.2% | 14.8% |
| $28.78 | $26.54 | $0.94 | -4.5% | 14.8% | |
| Totals | 11.0% | 14.8% | |||
| Start | Current | Dividend | Pct Gain | R3K Gain | |
| $24.40 | $28.82 | $0.59 | 20.5% | 9.9% | |
| AGX | $36.71 | $32.57 | $0.70 | -9.4% | 9.9% |
| ITRN | $21.32 | $23.44 | $0.71 | 13.3% | 9.9% |
| $9.34 | $12.10 | $0.11 | 30.7% | 9.9% | |
| $58.25 | $48.97 | $0.14 | -15.7% | 9.9% | |
| Totals | 7.9% | 9.9% | |||
| Start | Current | Dividend | Pct Gain | R3K Gain | |
| FLR | $64.80 | $60.11 | $0.42 | -6.6% | 5.5% |
| IPCM | $38.45 | $52.25 | $0.00 | 35.9% | 5.5% |
| VIAB | $72.29 | $70.74 | $0.66 | -1.2% | 5.5% |
| NHTC | $12.19 | $22.44 | $0.03 | 84.3% | 5.5% |
| $4.40 | $4.40 | $0.00 | 0.0% | 5.5% | |
| Totals | 22.5% | 5.5% | |||
| Start | Current | Dividend | Pct Gain | R3K Gain | |
| VEC | $28.00 | $25.85 | $0.00 | -7.7% | 7.0% |
| $62.73 | $68.24 | $0.42 | 9.5% | 7.0% | |
| VIAB | $63.91 | $70.74 | $0.33 | 11.2% | 7.0% |
| $22.03 | $21.82 | $0.00 | -1.0% | 7.0% | |
| NHTC | $12.44 | $22.44 | $0.02 | 80.5% | 7.0% |
| Totals | 18.5% | 7.0% |
| Category/Tranche | August | November | February | May | Total |
| Initial Investment | 25,000 | 25,000 | 25,000 | 25,000 | 100,000 |
| Current Tranche | 7.9% | 22.5% | 18.5% | 11.0% | 15.2% |
| Previous Tranche | 41.4% | 14.2% | 8.5% | 33.0% | 21.7% |
| Tranche -2 | 14.1% | 43.7% | 78.3% | - | 34.0% |
| MFI Overall Gain | 74.0% | 101.0% | 129.1% | 47.7% | 88.0% |
| Current Balance | 43,506 | 50,262 | 57,278 | 36,924 | 187,969 |
| R3K Current Tranche | 9.9% | 5.5% | 7.0% | 14.8% | 9.3% |
| R3K Overall Gain | 60.4% | 65.0% | 46.3% | 36.5% | 52.0% |
| R3K Balance | 40,095 | 41,255 | 36,571 | 34,123 | 152,044 |
| Annualized IRR | 22.8% | 33.1% | 45.1% | 21.9% | 28.4% |
| Date | Differential | MFI Value | R3K Value |
| -2.20% | 99,765 | 101,965 | |
| -1.78% | 102,798 | 104,575 | |
| -2.26% | 102,594 | 104,856 | |
| -2.23% | 102,881 | 105,114 | |
| -0.43% | 106,804 | 107,234 | |
| 2.00% | 110,423 | 108,423 | |
| 4.75% | 115,831 | 111,085 | |
| 4.29% | 114,888 | 110,597 | |
| 6.91% | 124,799 | 117,889 | |
| 10.46% | 124,536 | 114,079 | |
| 19.67% | 138,655 | 118,990 | |
| 19.75% | 143,514 | 123,764 | |
| 23.70% | 150,105 | 126,405 | |
| 26.63% | 157,138 | 130,503 | |
| 24.70% | 150,619 | 125,918 | |
| 25.66% | 158,116 | 132,458 | |
| 30.38% | 162,991 | 132,616 | |
| 29.65% | 162,428 | 132,779 | |
| 31.44% | 167,001 | 135,559 | |
| 39.23% | 177,971 | 138,740 | |
| 31.13% | 167,054 | 135,922 | |
| 35.90% | 177,792 | 141,892 | |
| 29.38% | 168,321 | 138,944 | |
| 26.14% | 168,810 | 142,666 | |
| 30.22% | 176,420 | 146,198 | |
| 28.17% | 174,306 | 146,140 | |
| 20.63% | 162,833 | 142,201 | |
| 25.15% | 175,476 | 150,324 | |
| 29.95% | 178,565 | 148,612 | |
| Current | 35.92% | 187,969 | 152,044 |
That closing value of $188,000 is my all time high. I had listed 13 stocks on a watch list for my next May tranche. They are already up in aggregate 5.8%. MFI seems to be alive and well right now.
MFI Formula
Like my Select portfolio, these guys also had a solid week - up a bit less than 2%. IQNT certainly helped as has RGR. A third catalyst may be CSCO, which has been named to Goldman's conviction list (Goldman Sachs Adds Cisco (CSCO) to Conviction Buy List; Analyst Points to 'Once-in-a-Decade Refresh').
| 10/1/2014 Stocks | Start | Current | Dividend | Pct Gain | R3K Gain |
| BAH | $23.52 | $29.01 | $0.24 | 24.3% | 9.5% |
| $45.55 | $47.70 | $3.45 | 12.3% | 9.5% | |
| CA | $27.87 | $32.24 | $0.50 | 17.4% | 9.5% |
| $41.70 | $40.71 | $0.69 | -0.7% | 9.5% | |
| $44.56 | $58.44 | $0.70 | 32.7% | 9.5% | |
| Totals | 17.2% | 9.5% | |||
| 12/31/14 Stocks | Start | Current | Dividend | Pct Gain | R3K Gain |
| CA | $30.83 | $32.24 | $0.25 | 5.4% | 2.9% |
| $28.36 | $28.82 | $0.40 | 3.0% | 2.9% | |
| $34.81 | $56.18 | $0.17 | 61.9% | 2.9% | |
| $34.21 | $40.71 | $0.36 | 20.1% | 2.9% | |
| IQNT | $19.87 | $19.31 | $0.15 | -2.1% | 2.9% |
| Totals | 17.7% | 2.9% | |||
| Start | Current | Dividend | Pct Gain | R3K Gain | |
| $31.99 | $32.26 | $0.00 | 0.8% | 1.6% | |
| $37.69 | $40.71 | $0.00 | 8.0% | 1.6% | |
| KING | $15.85 | $16.76 | $0.00 | 5.7% | 1.6% |
| NSU | $3.43 | $3.82 | $0.00 | 11.4% | 1.6% |
| PPC | $22.65 | $23.62 | $0.00 | 4.3% | 1.6% |
| Totals | 6.1% | 1.6% |
| Date | Differential | Value | R3K Value |
| 0.00% | 100,000 | 100,000 | |
| 1.63% | 102,288 | 100,658 | |
| 0.30% | 101,375 | 101,075 | |
| -0.33% | 100,664 | 100,995 | |
| 1.67% | 101,281 | 99,611 | |
| 3.62% | 106,073 | 102,454 | |
| 5.09% | 106,781 | 101,695 | |
| Current | 6.74% | 110,220 | 103,476 |
Looking at the "rejects" from my formula, you can see the out-performance has not just been good fortune.
September 30th - Me: 17.2%, Rejects: 18.6% (before dividends)
December 31st - Me: 17.7%, Rejects: 11.7% (before dividends)
March 31st - Me: 6.1%, Rejects: 2%
People can make up their own minds, but I am convinced the Formula works. A reminder:
- Start with MFI top 50 list > $100m market cap
- Screen for stocks greater than $600m market cap and a 2.4% dividend yield or higher
- Randomly select 5 of them.
- Rinse and repeat once a quarter.
Wrap-Up
Today is the closing of another MFI tracking tranche. i will publish the results this weekend.
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