Wednesday, September 30, 2015

MFI Formula Tranche 9/30/15

New MFI Formula Tranche

Out with the old and in with the new.  My first ever MFI Formula tranche came of age today. While it wasn't a roaring success, it did beat the benchmark by about a point.  I also bought five "new" stocks today to start a new tranche.

I have to put the "new" in quotes as none of them are new to me in total and two of them were actually in the 9/30/14 tranche (CA and BKE).  I did rebalance shares, which kept CA about flat but increased share count for BKE by about 25%.

Also, pretty funny. I am just outside Boston this evening as I have my head to toe physical at Lahey Clinic tomorrow.  I was cutting through some parking lots to grab a bite of dinner, and what did I see? The Corporate Headquarters of Aware (AWRE), a member of my November tranche and not doing very well. Probably this empty parking lot doesn't bode well.

Old Tranche

Here is my tranche that hit a year today (it says 10/1 - but I actually started on 9/30):

10/1/2014 Stocks Start Current Dividend Pct Gain R3K Gain
BAH $23.52 $26.21 $0.50 13.5% -0.6%
BKE $45.55 $36.97 $3.68 -10.8% -0.6%
CA $27.87 $27.30 $1.00 1.5% -0.6%
GME $41.70 $41.21 $1.41 2.2% -0.6%
NUS $44.56 $41.28 $1.40 -4.2% -0.6%
Totals 0.5% -0.6%


I know, like watching paint dry. Still, a win is a win.

New Tranche

Here is my new tranche:

10/1/2015 Start Current Dividend Pct Gain R3K Gain
BKE $36.83 $36.97 $0.00 0.4% 0.0%
IQNT $21.96 $22.33 $0.00 1.7% 0.0%
QCOM $53.45 $53.73 $0.00 0.5% 0.0%
CSCO $26.37 $26.25 $0.00 -0.5% 0.0%
CA $27.30 $27.30 $0.00 0.0% 0.0%
Totals 0.4% 0.0%

We'll see how it does.

Saturday, September 26, 2015

MFI Tracking Portfolio - 9/26/14

MFI Tracking Portfolio

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 broke a 6 month losing streak, albeit barely (-0.6% to -0.9%).  This was the second straight portfolio to end up in the red. Too many bad stocks (WTW, APOL, PFMT etc). Here are the 50 stocks in descending performance order:


Stock  Initial Price   End Price  Percent Change 52 week low  Mkt Cap 
EBIX              14.00           27.01 92.9%         12.64            544
USNA              71.98         135.87 88.8%         71.03            965
IQNT              12.07           22.54 86.8%         12.14            413
EXLS              24.93           39.81 59.7%         24.20            816
DEPO              15.21           22.76 49.6%         13.55            889
PENN              11.83           16.95 43.3%         10.50            930
AFOP              12.59           16.98 34.9%         10.75            237
SPOK              13.27           17.54 32.1%         12.93            296
TTWO              23.42           30.06 28.4%         20.13         2,377
NOC            129.44         165.57 27.9%       118.24       27,590
PETS              13.19           16.60 25.9%         12.07            279
RGR              47.43           59.70 25.9%         33.60            938
BAH              22.94           27.17 18.4%         23.07         3,601
HRB              30.52           36.05 18.1%         27.42         8,602
ETM                8.37             9.86 17.8%           7.86            327
KING              12.04           13.40 11.3%         10.68         4,092
NSR              24.74           27.23 10.1%         20.32         1,484
CSCO              24.27           26.03 7.2%         22.49     126,375
AGX              33.12           35.09 5.9%         28.62            489
GIB              33.89           35.89 5.9%         31.99       10,560
ITRN              20.41           21.16 3.7%         18.52            445
MYGN              37.89           38.48 1.6%         30.30         3,094
CA              26.97           27.36 1.4%         25.16       12,278
GME              40.65           41.00 0.9%         31.69         4,742
DLX              55.30           54.90 -0.7%         51.46         2,804
BRCD              10.65           10.49 -1.5%           8.91         4,673
IILG              19.58           19.23 -1.8%         18.60         1,141
STRA              59.23           57.20 -3.4%         41.50            646
NUS              43.20           41.21 -4.6%         38.00         2,641
RPXC              14.55           13.70 -5.8%         11.94            815
ANIK              36.48           32.70 -10.4%         31.36            540
BCOR              15.54           13.82 -11.1%         12.61            638
BKE              43.02           37.44 -13.0%         37.25         2,220
APEI              27.60           23.59 -14.5%         19.22            476
COH              34.96           28.48 -18.5%         27.62         9,845
ONE                2.49             2.00 -19.7%           1.85            118
AVID              10.34             8.10 -21.7%           7.60            405
PDLI                6.93             5.22 -24.7%           4.58         1,317
ESI                4.34             3.12 -28.1%           1.93            101
LFVN                1.19             0.79 -34.0%           0.20            122
FLR              66.64           42.14 -36.8%         40.71       10,662
UIS              22.68           13.11 -42.2%         12.13         1,148
VIAB              75.32           43.52 -42.2%         36.32       32,743
LQDT              14.11             7.53 -46.6%           7.02            418
TZOO              15.88             8.26 -48.0%           8.23            234
SPRT                2.22             1.15 -48.4%           1.08            119
PTIE                3.88             1.91 -50.8%           1.53            178
APOL              25.39           11.33 -55.4%         10.20         2,865
PFMT                8.46             2.53 -70.1%           2.33            411
WTW              27.64             6.42 -76.8%           3.67         1,566


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 -0.6% -0.9% 1
10/31/2014 -1.4% -2.9% 1
11/28/2014 -8.4% -5.2% 0
12/31/2014 -8.3% -5.2% 0
1/30/2015 -6.0% -2.5% 0
2/27/2015 -12.7% -7.7% 0
3/27/2015 -12.2% -6.4% 0
4/24/2015 -14.5% -8.9% 0
5/29/2015 -11.5% -8.5% 0
6/26/2015 -12.1% -8.6% 0
7/30/2015 -7.3% -8.6% 1
8/28/2015 -2.0% -3.3% 1
Average 8.5% 8.4% 0

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 great, up about 11%.  The new portfolio was great, up 19%.  The Dogs approach was terrible, down 22%(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.

The dividend portfolio way outperformed my MFI Formula tranche I picked 10/1. IQNT was up 87%.

Category Value
Total      169,570
Total Russell 3K      182,279
New      174,521
Dogs      244,699
Dividend      364,760


In the past two months, the Russell has gone from $199,000 to 182,000. Tough sledding indeed.