MFI Tracking Portfolio - October 31st, 2014

Monthly Tracking Portfolio

Another month has flown by. And so it is time to look at another monthly tracking portfolio as we reach All Hallow's Eve.  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, it was essentially a tie - but technically MFI did lose. NHTC was one of the best stocks ever, which offset a plethora of low performance stocks. Here are the 50 stocks in descending performance order:

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
NHTC	9.94	49.26	395.6%	10.05	121
EBIX	14.57	27.73	90.3%	14.46	566
XLS	17.60	24.66	40.1%	15.00	3,362
KING	10.72	14.96	39.5%	11.32	3,645
RGR	40.92	56.94	39.2%	33.60	809
NOC	135.36	187.75	38.7%	134.83	28,030
PETS	12.65	16.82	32.9%	12.93	268
IQNT	16.29	20.72	27.2%	14.31	557
TTWO	26.45	33.20	25.5%	23.30	2,681
CSCO	23.74	28.85	21.5%	23.03	124,968
HRB	31.53	37.26	18.2%	29.15	8,888
TSRA	29.80	34.97	17.3%	29.42	1,587
RTN	101.33	117.40	15.9%	95.32	31,995
ONE	2.57	2.94	14.4%	1.85	122
DEPO	15.40	17.50	13.6%	14.00	900
GME	41.35	46.07	11.4%	31.69	4,823
AGX	34.12	36.95	8.3%	29.63	503
GIB	34.35	37.14	8.1%	31.99	10,703
OMC	69.94	74.92	7.1%	64.12	17,834
AFOP	12.76	13.61	6.7%	12.22	241
ITRN	19.73	21.01	6.5%	18.52	430
NSR	26.41	27.19	3.0%	20.32	1,510
MYGN	39.49	40.37	2.2%	30.30	3,225
RPXC	14.05	14.24	1.4%	11.94	788
ORCL	38.51	38.84	0.9%	35.14	190,213
CA	28.10	27.71	-1.4%	25.16	12,796
BRCD	10.58	10.42	-1.5%	9.67	4,642
ANIK	40.14	38.52	-4.0%	30.93	574
COH	33.08	31.20	-5.7%	27.22	9,455
LBMH	2.75	2.42	-12.0%	1.96	153
PBI	23.94	20.65	-13.7%	18.59	4,963
IILG	20.62	17.65	-14.4%	17.05	1,202
AVID	10.05	8.45	-15.9%	7.56	394
LFVN	9.45	7.72	-18.3%	0.20	138
PDFS	12.97	10.56	-18.6%	9.68	400
BKE	45.95	35.44	-22.9%	33.44	2,386
HPQ	35.15	26.96	-23.3%	24.30	67,185
NUS	51.25	38.21	-25.4%	34.03	3,133
FLR	65.35	47.81	-26.8%	40.61	10,384
STRA	73.19	52.92	-27.7%	41.50	798
APEI	30.99	21.73	-29.9%	19.22	535
GORO	3.74	2.60	-30.4%	1.99	211
VIAB	70.94	49.31	-30.5%	36.32	30,838
TZOO	13.09	8.94	-31.7%	8.02	193
LQDT	12.78	8.19	-35.9%	6.65	379
PDLI	7.79	4.58	-41.2%	4.40	1,480
BCOR	16.95	9.80	-42.2%	8.85	696
UIS	25.64	13.40	-47.7%	11.49	1,298
PFMT	8.63	2.31	-73.2%	2.20	419
APOL	28.66	7.26	-74.7%	6.83	3,121

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 LQDT 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	4.3%	4.4%	0
11/28/2014	-4.5%	1.9%	0
12/31/2014	-4.7%	1.9%	0
1/30/2015	-0.7%	4.8%	0
2/27/2015	-8.8%	-0.8%	0
3/27/2015	-8.1%	0.6%	0
4/24/2015	-11.3%	-2.1%	0
5/29/2015	-12.1%	-1.6%	0
6/26/2015	-8.1%	-1.7%	0
7/30/2015	-0.5%	-1.7%	1
8/28/2015	3.7%	3.9%	0
9/25/2015	5.2%	7.0%	0
Average	8.6%	8.8%	0

So you can see the 4.3% to 4.4% loss in 10/31/14. Sadly, as my gentle readers have noted, MFI isn't doing so well of late.  And 10 of the other 11 open portfolios are trailing. 

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 blah, up about 2.7%.  The new portfolio was great, up 74% (helped by NHTC).  The Dogs approach was terrible, down 15%(that approach is admittedly exciting). 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	177,201
Total Russell 3K	195,838
New	175,370
Dogs	266,735
Dividend	372,614