2/27/15 Monthly Tracking Portfolio - Magic Formula Investing

Monthly Tracking Portfolio Update

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we near leap day 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 11.7 points. That makes it 11 of the last twelve to close have lost. In addition, this was the fourth straight portfolio to lose $ (though sadly 9 of the 11 open ones are also in the red).  Here are the 50 stocks in descending performance order:

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
NHTC	12.99	33.17	155.3%	13.20	167
RGR	50.94	69.91	37.2%	47.38	974
ONE	3.30	4.12	24.8%	1.85	157
KING	14.85	18.00	21.2%	N/A	5,084
IQNT	14.28	17.23	20.7%	14.56	494
MSFT	42.69	51.30	20.2%	39.72	360,359
RTN	106.12	124.48	17.3%	95.32	33,425
USNA	100.01	116.32	16.3%	92.00	1,237
ANIK	39.92	46.40	16.2%	30.93	593
PETS	14.74	16.67	13.1%	14.53	312
AGX	31.79	32.02	0.7%	28.03	471
SPOK	17.93	17.61	-1.8%	15.26	403
IDCC	52.05	50.18	-3.6%	41.01	1,952
NSR	26.52	24.87	-6.2%	20.00	1,461
CA	31.37	29.38	-6.4%	25.16	14,254
REX	54.36	50.63	-6.9%	43.50	435
CSCO	28.61	26.41	-7.7%	22.46	150,708
DLX	65.21	57.41	-12.0%	49.46	3,320
PPC	27.43	23.71	-13.6%	17.39	7,104
GILD	102.31	88.10	-13.9%	81.89	155,192
GME	35.65	30.54	-14.3%	24.33	4,041
FLR	57.27	46.81	-18.3%	39.48	8,621
BRCD	12.19	9.93	-18.6%	7.40	5,249
PBI	22.33	18.04	-19.2%	16.24	4,657
ENTA	35.82	28.40	-20.7%	16.75	666
TZOO	10.08	7.80	-22.6%	6.63	148
ADMS	17.28	13.20	-23.6%	12.02	293
CLCT	21.05	15.86	-24.7%	11.66	202
TSRA	39.08	28.98	-25.8%	26.21	2,113
STRA	60.87	44.68	-26.6%	41.50	664
CPLA	62.99	45.73	-27.4%	39.06	794
WILN	2.48	1.80	-27.5%	0.93	317
RPXC	14.58	9.84	-32.5%	9.15	821
BKE	47.32	31.75	-32.9%	26.05	2,433
PSDV	4.40	2.77	-37.0%	2.65	129
VEC	31.81	19.21	-39.6%	17.25	334
GORO	3.33	1.94	-41.7%	1.14	187
TDC	44.52	25.11	-43.6%	21.98	6,553
VIAB	67.95	36.23	-46.7%	30.11	28,487
UIS	22.64	10.89	-51.9%	8.15	1,130
AVID	15.68	7.48	-52.3%	5.77	615
PDLI	6.23	2.93	-53.0%	2.58	1,125
LQDT	9.88	4.64	-53.0%	4.42	296
BCOR	14.82	6.21	-58.1%	5.82	593
ACHI	6.10	2.50	-59.0%	1.77	586
EGL	36.10	14.44	-60.0%	11.46	635
TPUB	20.22	7.58	-62.5%	5.45	547
APOL	27.65	8.11	-70.7%	6.31	2,996
MSB	17.15	4.35	-74.6%	3.00	229
SMT	1.27	0.25	-80.3%	0.19	155

Obviously when 22 of the 50 stocks are down 25% or more over a year - it is a struggle.

I have mentioned that a "Dogs of MFI" approach has shown some promise.  VEC and VIAB 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	-12.4%	-2.8%	0
2/27/2015	-19.0%	-7.3%	0
3/27/2015	-19.5%	-5.9%	0
4/24/2015	-22.7%	-8.4%	0
5/29/2015	-20.4%	-8.0%	0
6/26/2015	-17.6%	-8.1%	0
7/30/2015	-11.4%	-8.1%	0
8/28/2015	-8.5%	-2.8%	0
9/25/2015	-6.4%	0.1%	0
10/30/2015	-11.0%	-6.5%	0
11/27/2015	-7.9%	-7.4%	0
12/31/2015	-3.1%	-5.0%	1
1/29/2016	3.3%	0.7%	1

So you can see the -19.0% to -7.3% loss in 2/27/15. Sadly, as my gentle readers have noted, MFI isn't doing so well of late.  And 9 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 have added 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 15%. (PDLI, MSB, TPUB etc)  The new portfolio was worse, down 28% (mostly SMT & PSDV).  The Dogs approach was also bad, down 29% (that approach is admittedly exciting).  I think we can safely say that nothing besides 100% NHTC was working. 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.

Category	Value
Total	158,542
Total Russell 3K	183,000
New	153,630
Dogs	217,151
Dividend	340,163

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

Date	Stock	Initial Price	Mkt Cap	New
2/26/2016	WNC	11.78	777.41	1
2/26/2016	TIME	13.67	1,453.12	1
2/26/2016	SRDX	19.46	252.90	1
2/26/2016	RHI	39.58	5,191.16	1
2/26/2016	RECN	14.14	525.05	1
2/26/2016	MKSI	32.91	1,751.37	1
2/26/2016	LEA	101.78	7,578.95	1
2/26/2016	FFIV	97.12	6,677.10	1

Dividend

Date	Stock	Initial Price	Mkt Cap	Yield
2/26/2016	VIAB	36.23	14,351	4.4%
2/26/2016	TIME	13.67	1,453	5.6%
2/26/2016	TSRA	28.98	1,473	2.8%
2/26/2016	RECN	14.14	525	2.8%
2/26/2016	PBI	18.04	3,554	4.2%
2/26/2016	PETS	16.67	339	4.3%
2/26/2016	OUTR	31.55	524	3.8%
2/26/2016	IQNT	17.23	584	3.5%
2/26/2016	HPQ	10.64	18,482	4.7%
2/26/2016	GME	30.54	3,204	4.7%
2/26/2016	CSCO	26.41	133,423	3.9%
2/26/2016	CPLA	45.73	541	3.4%
2/26/2016	CALM	52.44	2,543	5.7%
2/26/2016	BKE	31.75	1,540	3.1%
2/26/2016	BPT	25.30	541	9.5%
2/26/2016	BBY	32.45	10,546	2.8%

Dogs

Stock	Initial Price	52 week low	Mkt Cap
WILN	1.80	0.93	217.52
VIAB	36.23	30.11	14,350.70
VEC	19.21	17.25	202.86
FLR	46.81	39.48	6,507.43
BKE	31.75	26.05	1,540.26