MFI Struggles Continue

The Struggle Continues

I have been tracking Magic Formula Investing since 2006 and I have to tell you the results are pretty mixed.  At what point does one say, "it just isn't working particularly well"?

When I look at my tracking portfolios of 50 stocks that I buy and hold  for a month, the approach is losing to the Russell 3000.  Of the past 25 portfolios ( a two year period), only two have won or are leading. And the average MFI stock in the 25 portfolios is down 2.5%.

Looking at my stuff,  my MFI Select tranches are down 4.25 this year. My MFI Formula tranches are down 1.2%.  And my MFI Index is up 80 basis points.  All this while the Russell 3000 is up over 3%.

Bigger picture, I am hanging in there despite the 25 month head wind mentioned above due largely to two NHTC picks.

I don't know. I  am discouraged.  While conceptually I understand that MFI worked over Greenblatt's back testing, I wonder whether macro trends are causing a disproportionate number of value traps in the MFI lists of late.

List Of  Stocks Losing 50% Or More

Date	Stock	Start	End	Change
2/27/2015	SMT	$     1.27	$     0.25	-80%
7/25/2014	WTW	$  20.17	$     4.14	-79%
11/28/2014	APOL	$  31.22	$     6.91	-78%
12/31/2014	APOL	$  34.11	$     7.67	-78%
4/25/2014	ESI	$  27.06	$     6.13	-77%
9/26/2014	WTW	$  27.64	$     6.42	-77%
8/29/2014	WTW	$  24.69	$     5.98	-76%
6/27/2014	WTW	$  20.54	$     5.10	-75%
10/31/2014	APOL	$  28.66	$     7.26	-75%
2/27/2015	MSB	$  17.15	$     4.35	-75%
5/30/2014	ESI	$  17.22	$     4.37	-75%
6/27/2014	ESI	$  16.62	$     4.29	-74%
1/30/2015	MSB	$  16.80	$     4.40	-74%
5/30/2014	WTW	$  20.83	$     5.48	-74%
7/25/2014	ESI	$  14.80	$     3.90	-74%
10/31/2014	PFMT	$     8.63	$     2.31	-73%
12/31/2014	PFMT	$     6.65	$     1.79	-73%
12/31/2014	MSB	$  16.60	$     4.52	-73%
8/29/2014	PFMT	$     9.62	$     2.68	-72%
11/28/2014	PFMT	$     6.80	$     1.97	-71%
2/27/2015	APOL	$  27.65	$     8.11	-71%
7/25/2014	PFMT	$  10.18	$     3.02	-70%
9/26/2014	PFMT	$     8.46	$     2.53	-70%
7/30/2015	LCI	$  59.44	$  18.64	-69%
1/30/2015	APOL	$  25.26	$     7.94	-69%
6/26/2015	LCI	$  58.95	$  18.64	-68%
3/27/2015	SMT	$     1.18	$     0.37	-68%
5/30/2014	PFMT	$     9.49	$     3.04	-68%
6/27/2014	PTIE	$     5.47	$     1.77	-68%
5/29/2015	LCI	$  55.63	$  18.64	-66%
4/24/2015	NLNK	$  52.10	$  17.65	-66%
3/27/2015	UIS	$  23.00	$     7.79	-66%
6/27/2014	PFMT	$  10.00	$     3.40	-66%
1/30/2015	PFMT	$     4.96	$     1.71	-66%
7/30/2015	NLNK	$  51.16	$  17.65	-66%
3/27/2015	BCOR	$  14.00	$     4.88	-65%
4/24/2015	UIS	$  21.82	$     7.61	-65%
6/27/2014	LFVN	$     1.35	$     0.49	-64%
9/25/2015	NLNK	$  48.15	$  17.65	-63%
4/25/2014	PTIE	$     5.70	$     2.10	-63%
11/28/2014	WILN	$     2.96	$     1.09	-63%
8/28/2015	NLNK	$  47.75	$  17.65	-63%
3/27/2015	VNCE	$  17.04	$     6.31	-63%
5/29/2015	UIS	$  20.54	$     7.61	-63%
6/26/2015	UIS	$  20.51	$     7.61	-63%
8/28/2015	LCI	$  49.87	$  18.64	-63%
12/31/2014	UIS	$  29.48	$  11.05	-63%
2/27/2015	TPUB	$  20.22	$     7.58	-63%
4/25/2014	PFMT	$     8.55	$     3.22	-62%
9/25/2015	LCI	$  49.49	$  18.64	-62%
7/25/2014	PTIE	$     4.63	$     1.76	-62%
4/24/2015	SMT	$     1.17	$     0.45	-62%
6/26/2015	NLNK	$  44.60	$  17.65	-60%
5/30/2014	PTIE	$     4.95	$     1.97	-60%
1/30/2015	GORO	$     3.36	$     1.34	-60%
2/27/2015	EGL	$  36.10	$  14.44	-60%
4/25/2014	WTW	$  20.51	$     8.25	-60%
5/29/2015	NLNK	$  43.15	$  17.65	-59%
2/27/2015	ACHI	$     6.10	$     2.50	-59%
8/29/2014	APOL	$  27.77	$  11.47	-59%
3/27/2015	MSB	$  14.96	$     6.20	-59%
4/24/2015	APOL	$  17.51	$     7.26	-59%
4/24/2015	ACHI	$     5.66	$     2.35	-58%
5/29/2015	VNCE	$  15.92	$     6.62	-58%
10/30/2015	LCI	$  44.77	$  18.64	-58%
4/24/2015	BCOR	$  13.94	$     5.81	-58%
2/27/2015	BCOR	$  14.82	$     6.21	-58%
12/31/2014	TPUB	$  21.96	$     9.22	-58%
11/28/2014	CJREF	$  17.64	$     7.59	-57%
5/29/2015	ACHI	$     5.38	$     2.35	-56%
3/27/2015	AVID	$  14.73	$     6.44	-56%
5/29/2015	APOL	$  16.58	$     7.26	-56%
8/29/2014	PTIE	$     4.22	$     1.86	-56%
6/26/2015	APOL	$  16.35	$     7.26	-56%
9/26/2014	APOL	$  25.39	$  11.33	-55%
1/30/2015	UIS	$  21.93	$     9.82	-55%
1/30/2015	ACHI	$     5.85	$     2.62	-55%
8/29/2014	ESI	$     8.43	$     3.83	-55%
3/27/2015	ACHI	$     5.83	$     2.65	-55%
11/27/2015	NLNK	$  38.42	$  17.65	-54%
11/28/2014	TPUB	$  20.22	$     9.29	-54%
10/30/2015	NLNK	$  38.27	$  17.65	-54%
7/25/2014	APOL	$  28.79	$  13.29	-54%
12/31/2015	LCI	$  40.12	$  18.64	-54%
12/31/2014	WILN	$     2.81	$     1.32	-53%
2/27/2015	LQDT	$     9.88	$     4.64	-53%
2/27/2015	PDLI	$     6.23	$     2.93	-53%
1/30/2015	TPUB	$  19.75	$     9.34	-53%
11/28/2014	UIS	$  26.72	$  12.68	-53%
2/27/2015	AVID	$  15.68	$     7.48	-52%
7/30/2015	UIS	$  15.94	$     7.61	-52%
2/27/2015	UIS	$  22.64	$  10.89	-52%
1/30/2015	PDLI	$     6.51	$     3.14	-52%
8/29/2014	LQDT	$  15.24	$     7.36	-52%
12/31/2015	NLNK	$  36.39	$  17.65	-52%
3/27/2015	PFMT	$     3.34	$     1.64	-51%
3/27/2015	PDLI	$     6.32	$     3.11	-51%
9/26/2014	PTIE	$     3.88	$     1.91	-51%
11/27/2015	LCI	$  36.98	$  18.64	-50%

That is 100 stocks out of the 1250 stock years in past 25 tracking portfolios losing 50% or more.  That seems like a lot.  Another 125 lost 30% or more - and recall 1/2 of the stocks in my list are still open.

I don't know, the struggle does indeed continue.