MFI Tracking Portfolio - August 29th, 2014

Tracking Portfolio Update

Another month has zipped by. As my faithful readers know, I have been tracking the Magic Formula Stocks as described by Joel Greenblatt in The Little Book That Beats the Stock Market since January 2006.  Every month I take the top 50 stocks over $100m market cap from his website and track how that portfolio of stocks fares versus the Russell 3000 for the next 12 months.  It has been an uphill struggle as the tracking portfolios have under-performed, driven in part by Chinese reverse merger fiascos, for-profit education stocks and home health care stocks all being proverbial albatrosses.

Onward

 Fearless readers will recall we had a 29 month "losing streak"..  Then we had a 13 month winning streak. This month, we had our sixth straight loss (-2.2% to 1.0%).  This was the first portfolio to end up in the red since 7/29/2011. Too many bad stocks (WTW, ESI, PFMT etc). Here are the 50 stocks in descending performance order:

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
USNA	73.03	145.50	99.2%	69.76	991
EBIX	15.25	28.21	84.9%	12.64	584
DEPO	15.35	28.38	84.9%	13.47	892
PENN	11.29	18.43	63.2%	10.50	885
IQNT	11.67	18.59	59.3%	11.84	397
NOC	124.82	165.54	32.6%	118.24	26,534
AFOP	14.65	19.05	30.1%	10.75	268
TTWO	23.51	29.78	26.7%	20.13	2,280
CNVR	27.54	34.44	25.1%	N/A	1,752
RGR	49.49	61.69	24.7%	33.60	956
PETS	13.45	16.56	23.1%	12.07	286
BAH	21.77	26.63	22.3%	22.12	3,400
ITRN	21.03	24.22	15.2%	19.53	458
SPOK	14.37	16.55	15.2%	12.93	319
ETM	9.13	10.48	14.8%	7.86	356
HLF	50.98	57.33	12.5%	27.60	4,693
RTN	94.00	104.25	10.9%	92.96	29,841
KING	12.52	13.50	7.8%	10.68	4,380
CSCO	24.26	26.00	7.2%	22.49	125,617
NUS	43.03	45.75	6.3%	38.00	2,686
GIB	35.47	37.56	5.9%	31.99	11,145
HRB	32.71	34.47	5.4%	27.42	9,203
BRCD	10.41	10.71	2.8%	8.91	4,517
DLX	58.43	58.82	0.7%	51.46	2,957
MYGN	36.19	36.43	0.7%	30.30	2,941
CA	27.31	27.26	-0.2%	25.16	12,380
AGX	39.19	38.73	-1.2%	28.62	574
NSR	29.49	28.21	-4.3%	20.32	1,788
IILG	21.32	19.97	-6.3%	18.83	1,232
BKE	45.88	42.59	-7.2%	39.72	2,381
LBMH	2.82	2.57	-8.8%	1.96	156
RPXC	15.19	13.83	-9.0%	11.94	844
BCOR	15.58	13.81	-11.4%	12.61	638
STRA	60.72	52.87	-12.9%	41.50	651
ANIK	42.00	35.94	-14.4%	31.36	620
COH	35.52	29.96	-15.7%	27.62	9,967
APEI	30.36	22.36	-26.4%	19.22	517
LFVN	1.27	0.80	-36.8%	0.20	128
PDLI	9.34	5.65	-39.5%	4.58	1,739
UIS	23.41	13.95	-40.4%	12.13	1,172
TZOO	17.05	9.85	-42.2%	8.30	251
SPRT	2.41	1.30	-46.1%	1.12	130
VIAB	79.59	40.91	-48.6%	36.32	34,271
ONE	3.88	1.97	-49.2%	1.85	178
LQDT	15.24	7.36	-51.7%	7.02	434
ESI	8.43	3.83	-54.6%	1.93	190
PTIE	4.22	1.86	-55.9%	1.53	190
APOL	27.77	11.47	-58.7%	10.20	3,103
PFMT	9.62	2.68	-72.1%	2.33	460
WTW	24.69	5.98	-75.8%	3.67	1,403

Looking at the list, it is stunning to see the spread.  If you just randomly picked 5 stocks from this list, the variance of actual results would be very wide.

I have mentioned that a "Dogs of MFI" approach has shown some promise.  APOL and WTW are still on the list.  It would take some courage to buy any of those - but I guess that is why they are called dogs. I did find another site that has been tracking since 2006 this week.  It uses a different approach, just 5 stocks picked randomly every quarter. They have had better results than me (TrackJGreenblatt's Stock Picks). I found it very interesting and would encourage people to take a looksee.

Here is a listing of every portfolio I have tracked:

Date	MFI	R3K	Lead
1/6/2006	16.0%	10.9%	1
2/17/2006	21.2%	14.6%	1
3/29/2006	13.0%	9.6%	1
4/7/2006	10.3%	12.1%	0
5/12/2006	20.4%	18.6%	1
5/31/2006	29.2%	23.3%	1
6/30/2006	22.4%	20.0%	1
7/31/2006	19.7%	17.3%	1
8/31/2006	13.0%	13.3%	0
9/28/2006	12.7%	14.6%	0
10/27/2006	10.3%	12.0%	0
11/29/2006	-0.3%	4.8%	0
12/28/2006	-6.9%	3.4%	0
1/26/2007	-10.2%	-6.6%	0
2/27/2007	-3.7%	-1.0%	0
3/26/2007	-9.8%	-5.5%	0
4/27/2007	-10.9%	-5.0%	0
5/29/2007	-11.5%	-6.3%	0
7/3/2007	-30.0%	-15.6%	0
7/30/2007	-19.9%	-11.5%	0
8/30/2007	-12.5%	-8.7%	0
9/27/2007	-19.0%	-18.2%	0
11/2/2007	-40.4%	-34.3%	0
11/28/2007	-40.1%	-38.3%	0
12/28/2007	-36.3%	-40.0%	1
1/25/2008	-36.4%	-35.9%	0
2/26/2008	-51.7%	-41.5%	0
3/24/2008	-40.9%	-36.8%	0
4/25/2008	-25.6%	-31.0%	1
5/28/2008	-22.2%	-33.6%	1
7/2/2008	-11.7%	-25.3%	1
7/29/2008	-10.5%	-20.9%	1
8/29/2008	-13.8%	-17.9%	1
9/26/2008	-4.3%	-10.0%	1
10/31/2008	18.7%	13.9%	1
11/26/2008	50.9%	27.7%	1
12/26/2008	48.9%	32.3%	1
1/23/2009	59.3%	36.4%	1
2/27/2009	92.8%	55.6%	1
3/27/2009	85.8%	48.1%	1
4/24/2009	69.7%	45.8%	1
5/29/2009	31.8%	22.8%	1
6/29/2009	21.3%	24.0%	0
7/29/2009	19.5%	15.9%	1
8/28/2009	7.4%	8.8%	0
9/25/2009	12.6%	12.4%	1
10/30/2009	22.7%	18.3%	1
11/27/2009	24.3%	13.6%	1
12/31/2009	23.7%	18.1%	1
1/22/2010	19.0%	20.6%	0
2/26/2010	18.6%	23.6%	0
3/25/2010	10.0%	15.4%	0
4/23/2010	7.1%	11.4%	0
5/28/2010	19.3%	25.4%	0
6/29/2010	16.7%	25.7%	0
7/29/2010	5.4%	20.1%	0
9/2/2010	7.3%	10.1%	0
9/24/2010	-4.3%	0.3%	0
10/29/2010	-2.9%	10.4%	0
11/26/2010	-8.5%	1.4%	0
1/3/2011	-11.4%	0.1%	0
1/28/2011	-7.6%	4.9%	0
2/25/2011	-5.5%	5.0%	0
3/24/2011	-4.4%	7.4%	0
4/21/2011	-16.0%	3.2%	0
5/27/2011	-12.0%	-0.4%	0
6/24/2011	-9.5%	5.0%	0
7/29/2011	-4.3%	8.1%	0
8/26/2011	12.0%	21.6%	0
9/30/2011	23.5%	29.6%	0
10/28/2011	0.4%	11.5%	0
11/25/2011	13.9%	24.0%	0
12/29/2011	9.9%	15.9%	0
1/27/2012	7.4%	16.6%	0
2/24/2012	7.8%	13.3%	0
3/23/2012	9.1%	15.2%	0
4/27/2012	10.5%	15.3%	0
5/25/2012	26.5%	27.5%	0
6/22/2012	26.1%	24.6%	1
7/27/2012	30.4%	25.7%	1
8/24/2012	26.0%	19.8%	1
9/28/2012	39.3%	22.1%	1
10/26/2012	48.3%	28.9%	1
11/23/2012	45.7%	32.1%	1
12/31/2012	52.3%	33.0%	1
1/25/2013	39.5%	22.0%	1
2/22/2013	46.5%	26.4%	1
3/28/2013	40.1%	21.2%	1
4/26/2013	35.0%	20.5%	1
5/24/2013	20.4%	19.2%	1
6/28/2013	26.9%	24.1%	1
7/29/2013	17.8%	19.0%	0
8/30/2013	17.5%	24.6%	0
9/27/2013	12.9%	17.7%	0
10/25/2013	11.8%	15.4%	0
11/29/2013	12.3%	15.6%	0
12/31/2013	12.7%	11.9%	1
1/31/2014	14.2%	13.0%	1
2/28/2014	15.4%	13.9%	1
3/28/2014	6.1%	12.3%	0
4/25/2014	8.6%	15.8%	0
5/30/2014	5.9%	11.7%	0
6/27/2014	2.5%	9.2%	0
7/25/2014	3.3%	8.7%	0
8/29/2014	-2.2%	1.0%	0
9/26/2014	2.3%	2.5%	0
10/31/2014	0.5%	0.4%	1
11/28/2014	-5.1%	-2.0%	0
12/31/2014	-5.3%	-1.9%	0
1/30/2015	-3.0%	0.8%	0
2/27/2015	-10.5%	-4.6%	0
3/27/2015	-8.6%	-3.2%	0
4/24/2015	-12.8%	-5.8%	0
5/29/2015	-9.2%	-5.4%	0
6/26/2015	-9.1%	-5.4%	0
7/30/2015	-5.1%	-5.4%	1

Subsets

I also have tracked 2 subsets of the larger portfolios:  (1) dividend stocks (those with a yield per Yahoo of at least 2.6%) and (2) new stocks (those new to the tracking portfolios in past 12 months.  I am going to try to add a third one , which I call "dogs".  It is like the dogs of the Dow in that you take the worst five performing stocks from the prior year that renew or all those that dropped more that 29%. The dividend portfolio was okay, up about 3.3%.  The new portfolio was poor, down over 3%.  The Dogs approach was terrible, down 34%(maybe that approach should be tossed). Finally, I like to track cash as it is more "honest" than percentages as if you go up by 25% and then down by 25%, that is a different result than up by 5% then down by 5%.  So I track what you would have today if you had spread $100,000 over the first twelve portfolios evenly. It is telling that even though MFI and R3K have both averaged 9.2% per year, that R3K is ahead due to less variability.

Category	Value
Total	174,377
Total Russell 3K	188,514
New	176,513
Dogs	242,357
Dividend	362,738

Wow, that is quite a drop.  Last month the Russell 3000 was at 199,000. The struggle is real.  You can see why I am using the dividend offshoot in my MFI formula, it continues to shine.  Well, that is all she wrote. Have a good one everyone.