Friday, January 01, 2016

MFI Tracking Portfolio 12/31/14

MFI Monthly Tracking Portfolio

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we reach 2016.  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, MFI lost by about 9.5 points. In addition, this was only the second straight portfolio to lose $ (though sadly the next 7 open ones are also in the red). NHTC was one of the best stocks ever, which was not enough to 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              11.45           33.53 192.8%               10.40            145
EBIX              16.83           32.79 94.9%               16.14            633
RGR              33.95           59.61 75.6%               33.89            667
ADMS              17.37           28.32 63.0%               12.73            290
USNA            102.59         127.75 24.5%               96.04         1,278
PETS              13.77           17.14 24.5%               13.91            294
TTWO              28.03           34.84 24.3%               23.30         3,262
KING              14.45           17.88 23.8%               11.63         5,040
DEPO              16.11           18.13 12.5%               15.03            927
SPOK              16.74           18.32 9.4%               15.26            375
UBNT              29.64           31.69 6.9%               25.50         2,639
LFVN                9.10             9.52 4.6%                 0.20            132
AFOP              14.51           15.16 4.5%               13.31            276
CSCO              26.99           27.16 0.6%               23.03     143,672
AGX              32.98           32.40 -1.8%               29.63            496
CA              29.42           28.56 -2.9%               25.16       13,558
IDCC              52.10           49.04 -5.9%               44.28         2,066
ANIK              40.74           38.16 -6.3%               30.93            594
LCI              42.88           40.12 -6.4%               33.13         1,552
IQNT              19.01           17.77 -6.5%               14.31            642
WTW              24.84           22.80 -8.2%                 3.67         1,437
COH              36.10           32.73 -9.3%               27.22       10,434
NUS              42.30           37.89 -10.4%               31.15         2,626
DLX              61.05           54.54 -10.7%               51.61         3,122
ITRN              21.27           18.93 -11.0%               17.76            463
PBI              23.55           20.65 -12.3%               18.59         4,960
NSR              27.80           23.97 -13.8%               20.32         1,790
GME              32.60           28.04 -14.0%               27.90         3,698
STRA              74.28           60.12 -19.1%               41.50            812
RPXC              13.78           11.00 -20.2%               10.28            789
LQDT                8.17             6.50 -20.4%                 6.20            245
FLR              59.65           47.22 -20.8%               40.61         9,544
ONE                4.21             3.24 -23.0%                 1.85            204
IILG              20.42           15.61 -23.5%               13.98         1,173
VEC              27.40           20.89 -23.8%               20.27            283
AWRE                4.54             3.26 -28.2%                 2.82            105
BCOR              13.85             9.80 -29.2%                 8.85            568
TZOO              12.62             8.37 -33.7%                 7.54            188
BKE              48.92           30.78 -37.1%               29.28         2,583
TDC              43.68           26.42 -39.5%               24.00         6,839
VIAB              73.11           41.16 -43.7%               36.32       31,641
PDLI                6.89             3.54 -48.6%                 3.29         1,287
AVID              14.21             7.29 -48.7%                 5.77            562
GORO                3.24             1.66 -48.7%                 1.60            184
WILN                2.81             1.32 -53.1%                 0.97            355
TPUB              21.96             9.22 -58.0%                 7.33            582
UIS              29.48           11.05 -62.5%               10.34         1,480
MSB              16.60             4.52 -72.8%                 3.90            228
PFMT                6.65             1.79 -73.1%                 1.65            331
APOL              34.11             7.67 -77.5%                 6.83         3,725


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 PDLI 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 -2.9% 2.9% 0
12/31/2014 -9.3% 0.3% 0
1/30/2015 -4.5% 3.1% 0
2/27/2015 -13.9% -2.4% 0
3/27/2015 -13.9% -0.9% 0
4/24/2015 -14.3% -3.6% 0
5/29/2015 -16.0% -3.2% 0
6/26/2015 -9.8% -3.3% 0
7/30/2015 -4.2% -3.2% 0
8/28/2015 0.4% 2.3% 0
9/25/2015 0.6% 5.4% 0
10/30/2015 -6.8% -1.5% 0
11/27/2015 -4.8% -2.5% 0
So you can see the -9.3% to +0.3% loss in 12/31/14. Sadly, as my gentle readers have noted, MFI isn't doing so well of late.  And 11 of the other 11 open portfolios are trailing - several by a wide margin. Just 1 win/lead in past 21.  Ouch.

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 terrible, down about 14.7%. (PDLI, GORO, WILN etc)  The new portfolio was worse, down 34% (mostly MSB and TDC).  The Dogs approach was also bad, down 8.3%(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      169,564
Total Russell 3K      192,808
New      165,252
Dogs      263,921
Dividend      338,784

That is a sobering table.  It strongly indicates (assuming a guy with a spreadsheet hasn't made too many errors) that for the $100m + bucket that it hasn't worked very well since 2006.  

Newest Tracking Portfolio

I did pull in the newest 50 stocks.  Here are how they split into my subsets:

New

Stock Initial Price 52 week low Mkt Cap New
PII              85.95 81.42         5,635 1
BPT              24.94 22.35            534 1
Dividend

Stock  Initial Price   52 week low   Mkt Cap  Yield
BBY              30.45               28.32       10,501 3.0%
BKE              30.78               29.28         1,493 6.5%
BPT              24.94               22.35            534 11.3%
CALM              46.34               34.03         2,247 6.5%
CLCT              15.50               11.66            138 9.0%
CPLA              46.22               43.58            554 3.4%
CSCO              27.16               23.03     138,002 3.1%
GME              28.04               27.90         2,941 5.1%
HPQ              11.84               11.04       21,359 4.2%
IILG              15.61               13.98            897 3.1%
IQNT              17.77               14.31            599 3.4%
OUTR              36.54               36.51            630 3.3%
PBI              20.65               18.59         4,089 3.6%
PDLI                3.54                 3.29            579 16.9%
PETS              17.14               13.91            348 4.2%
PPC              22.09               17.39         5,728 26.1%
QCOM              49.99               45.93       76,177 3.8%
VIAB              41.16               36.32       16,382 3.9%
Dogs

Stock  Initial Price   52 week low   Mkt Cap  12 month Drop
BKE              30.78               29.28         1,493 -31%
FLR              47.22               40.61         6,716 -21%
IILG              15.61               13.98            897 -27%
PDLI                3.54                 3.29            579 -47%
VIAB              41.16               36.32       16,382 -31%

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