Weekend Update 5/23/15

Weekend Update 5/23/15

Up early this Saturday morning.  Coffee is on - so understandable if I make typing errrors. Cool morning, just 43 degrees, but sunny and beautiful.

I am up 12% on the year, that is very good.  Honestly a good chunk of that is NHTC, which is my largest holding as it is up 145%. But even witha more subdued NHTC, I'd be beating the indices.  So it has been a good first 5 months.

Paying Dividends

Usually I start off discussing MFI. But today I thought I'd give the unsung dividend paying stocks a salute.  Here are the stocks I consider part of my "dividend" portfolio, in that I reinvest all the dividends:

Row Labels	Sum of Cost	Sum of Value	Sum of Dividends	Sum of Gain	Sum of Shares
CSQ	20,323	22,142	2,790	4,609	1,920
AOD	17,586	18,830	1,562	2,806	2,069
OIBAX	9,317	8,972	1,865	1,521	1,534
O	6,079	7,839	1,000	2,760	167
NTC	5,526	5,535	187	196	440
FSC	2,049	1,999	26	-23	288
Grand Total	60,879	65,318	7,429	11,868	6,418

Now what is interesting about this table (which has been multiplied by a factor to remain mysterious) is that it represents my reinvested dividends.  So on CSQ, I have received $20,323 in dividends.  Those have been reinvested and are now worth $22,142. And on top of that, the stock I bought with those dividends has paid another $2,790 in dividends.  This is classic compounding.

Here is a look at the dividend stocks in a different way.  Note this also includes TGONF, a holding I do not reinvest dividends:

Stock	Avg Cost	Current Price	Dividends	Gain per Share	Pct Gain
AOD	8.08	9.10	1.33	2.35	29.1%
FSC	7.08	6.95	0.18	0.05	0.7%
CSQ	9.18	11.53	2.24	4.59	50.0%
NTC	12.04	12.59	0.88	1.43	11.9%
TGONF	10.24	9.88	0.71	0.35	3.4%
O	22.02	46.96	16.79	41.72	189.4%
OIBAX	5.03	5.85	2.07	2.89	57.4%

Finally, here is a graph of my dividend income by quarter by year (with multiplier).  Note how dividend income has increased steadily over time (the plan).

I note that 2015 is a bit lower than 2014.  That is because it is a projected number and I have not included the prospects of any special dividends.  I quite often get a few of those and the 4th quarter is a common stretch for them.

MFI Select

This portfolio continues to absolutely torch the Russell 3000.

8/15/2014	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$24.40	$29.26	$0.59	22.3%	10.4%
AGX	$36.71	$35.65	$0.70	-1.0%	10.4%
ITRN	$21.32	$24.39	$0.71	17.7%	10.4%
BRCD	$9.34	$12.54	$0.11	35.5%	10.4%
CBI	$58.25	$56.31	$0.14	-3.1%	10.4%
Totals				14.3%	10.4%
11/15/2014	Start	Current	Dividend	Pct Gain	R3K Gain
FLR	$64.80	$57.97	$0.42	-9.9%	5.9%
IPCM	$38.45	$49.26	$0.00	28.1%	5.9%
VIAB	$72.29	$66.80	$0.66	-6.7%	5.9%
NHTC	$12.19	$30.25	$0.06	148.6%	5.9%
AWRE	$4.40	$3.97	$0.00	-9.8%	5.9%
Totals				30.1%	5.9%
2/1/2015	Start	Current	Dividend	Pct Gain	R3K Gain
VEC	$28.00	$25.71	$0.00	-8.2%	7.4%
QCOM	$62.73	$69.51	$0.42	11.5%	7.4%
VIAB	$63.91	$66.80	$0.33	5.0%	7.4%
UIS	$22.03	$21.00	$0.00	-4.7%	7.4%
NHTC	$12.44	$30.25	$0.05	143.6%	7.4%
Totals				29.4%	7.4%
5/6/2015	Start	Current	Dividend	Pct Gain	R3K Gain
CBI	$50.38	$56.31	$0.00	11.8%	2.1%
PSDV	$4.12	$4.01	$0.00	-2.8%	2.1%
TSRA	$38.94	$38.74	$0.00	-0.5%	2.1%
KORS	$62.24	$61.63	$0.00	-1.0%	2.1%
DEPO	$23.50	$20.76	$0.00	-11.7%	2.1%
Totals				-0.8%	2.1%
Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	14.3%	30.1%	29.4%	-0.8%	18.5%
Previous Tranche	41.4%	14.2%	8.5%	18.3%	19.2%
Tranche -2	14.1%	43.7%	78.3%	33.0%	42.3%
MFI Overall Gain	84.4%	113.5%	150.2%	56.0%	101.0%
Current Balance	46,088	53,382	62,561	39,002	201,033
R3K Current Tranche	10.4%	5.9%	7.4%	2.1%	6.4%
R3K Overall Gain	61.0%	65.7%	46.8%	37.0%	52.6%
R3K Balance	40,248	41,413	36,712	34,243	152,616
Annualized IRR	24.7%	35.1%	48.9%	24.3%	28.4%

So just looking at some key numbers. Since I started this re-boot in August 2012, my annual IRR is 28.4%.  That is not far from the book which was around 31%.  You can see I am at a double: 201,033 if I had started with $100,000. In reality it is more complex as I have added money to each tranche over time.  I should note that the 28.4% considers those adds (I track all my actual cash flows).

The May 2015 tranche is off to a slow start. But the other three are all winning nicely.  That is expected.  Greenblatt in his book commented at length how MFI will have some stinkers and that would make it difficult for mutual funds or hedge funds to use it.  Fingers crossed that May 2015 isn't a "stinker", since my reboot, I have not had an out and out disaster.  Here is my worst tranche:

8/15/12 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
DLB	$34.43	$33.04	$4.00	7.6%	22.1%
KFY	$13.98	$18.95	$0.00	35.6%	22.1%
MSFT	$30.19	$31.92	$0.92	8.8%	22.1%
NSU	$3.62	$3.33	$0.12	-4.6%	22.1%
UIS	$19.96	$24.52	$0.00	22.8%	22.1%
Totals				14.1%	22.1%

The first one after the reboot lost by eight points.

Here is my month by month progression:

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
5/1/2015	37.31%	186,655	149,348
Current	48.42%	201,033	152,616

You can see that my absolute dollar gain in May (over $14k) is my highest. On a percentage basis, September 2013 (up about 11%) is the winner.

MFI Formula

Not such a good week for these three tranches.  It seemed like bad news most of the week.  BAH and BKE each missed on earnings.  That caused BAH to sell off 10%.  So now my seminal tranche for my formula approach is now trailing (gasp). Still plenty of time, but also possible I lose.  My studies have shown that over the long term this approach works very well, but it also shows that individual tranches may struggle.

Recall in my formula there is an element of chance.  I only get five stocks from the overall pool picked by a random number generator.  It is noteworthy that the stocks I did not pick are up about 14%.

10/1/2014 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
BAH	$23.52	$25.11	$0.24	7.8%	9.9%
BKE	$45.55	$44.07	$3.45	4.3%	9.9%
CA	$27.87	$31.33	$0.50	14.2%	9.9%
GME	$41.70	$40.80	$0.69	-0.5%	9.9%
NUS	$44.56	$52.44	$1.05	20.0%	9.9%
Totals				9.2%	9.9%
12/31/14 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
CA	$30.83	$31.33	$0.25	2.4%	3.3%
CSCO	$28.36	$29.26	$0.40	4.6%	3.3%
RGR	$34.81	$55.44	$0.49	60.7%	3.3%
GME	$34.21	$40.80	$0.36	20.3%	3.3%
IQNT	$19.87	$17.82	$0.15	-9.6%	3.3%
Totals				15.7%	3.3%
3/31/2015	Start	Current	Dividend	Pct Gain	R3K Gain
HRB	$31.99	$32.09	$0.00	0.3%	2.0%
GME	$37.69	$40.80	$0.00	8.3%	2.0%
KING	$15.85	$15.25	$0.00	-3.8%	2.0%
NSU	$3.43	$4.06	$0.00	18.4%	2.0%
PPC	$22.65	$26.50	$0.00	17.0%	2.0%
Totals				8.0%	2.0%

Still in total a success, the first tranche is certainly not a disaster.  I will be picking my fourth and final tranche at the end of June.  If I were picking today, here is what would make the cut (over $600m market cap and over 2.4% yield):

Number	Ticker	Market Cap	Price	Dividend	Yield
1	HRB	8,833	32.09	0.80	2.5%
2	CA	13,644	31.33	1.00	3.2%
3	CPLA	656	53.63	1.48	2.8%
4	CSCO	148,407	29.26	0.84	2.9%
5	GME	4,394	40.80	1.44	3.5%
6	NSU	811	4.06	0.16	3.9%
7	PDLI	1,089	6.66	0.60	9.0%
8	PPC	6,864	26.50	5.77	21.8%
9	PBI	4,621	22.99	0.75	3.3%
10	QCOM	113,510	69.51	1.92	2.8%
11	RTN	32,640	106.70	2.68	2.5%

We shall see what the list looks like in a month.  Finally, here is month by month progression of the formula tranches (still not fully invested):

Date	Differential	Value	R3K Value
10/1/2014	0.00%	100,000	100,000
11/1/2014	1.63%	102,288	100,658
12/1/2014	0.30%	101,375	101,075
1/1/2015	-0.33%	100,664	100,995
2/1/2015	1.67%	101,281	99,611
3/1/2015	3.62%	106,073	102,454
4/1/2015	5.09%	106,781	101,695
5/1/2015	5.78%	107,859	102,077
Current	4.43%	108,212	103,779

Have a great weekend everyone.