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%