May 29th 2015 MFI Tracking Portfolio

May 29th 2015 Tracking Portfolio

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we near Memorial 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 16 points. That makes it 14 of the last 15 to close have lost. In addition, this was the seventh straight portfolio to lose $ (sadly, all 11 open portfolios are also trailing).  Here are the 50 stocks in descending performance order:

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
VA	28.44	55.98	96.8%	26.30	1,228
ONE	2.84	3.78	33.1%	1.85	136
KING	14.74	18.00	22.1%	N/A	4,648
PETS	16.00	18.93	18.3%	14.53	338
APEI	24.17	28.26	16.9%	13.80	414
NATH	39.06	44.51	14.0%	30.20	176
CA	29.37	32.07	9.2%	25.16	13,261
PPC	22.91	24.84	8.4%	17.39	6,626
GORO	2.84	2.98	5.1%	1.14	159
STRA	45.83	47.85	4.4%	41.50	503
DLX	62.53	65.19	4.3%	49.46	3,187
SPOK	16.72	17.08	2.2%	15.26	380
CPLA	51.27	52.31	2.0%	39.06	651
CSCO	28.37	28.92	1.9%	22.46	149,276
IDCC	57.73	57.89	0.3%	41.01	2,106
VEC	25.09	24.95	-0.6%	17.25	264
CLCT	19.72	19.49	-1.2%	11.66	190
PSDV	3.93	3.85	-2.0%	2.37	116
IQNT	17.04	16.65	-2.3%	14.56	591
AGX	35.08	34.22	-2.4%	28.03	524
DEPO	20.86	20.34	-2.5%	12.25	1,251
TIVO	10.53	10.02	-4.8%	7.29	1,022
FLR	55.47	52.71	-5.0%	39.48	8,263
POZN	6.45	5.94	-7.9%	5.49	208
KFY	31.70	28.65	-9.6%	25.21	1,617
KORS	46.50	41.79	-10.1%	34.83	9,284
PBI	21.01	18.55	-11.7%	16.24	4,392
NSR	27.32	23.49	-14.0%	20.00	1,505
NSU	3.97	3.35	-15.5%	2.27	833
DHX	8.47	7.06	-16.6%	6.05	466
QCOM	66.68	55.27	-17.1%	42.24	113,787
GILD	110.41	85.82	-22.3%	81.28	165,823
TDC	38.94	27.94	-28.2%	21.98	5,526
LQDT	9.92	6.90	-30.4%	4.42	298
GME	41.77	28.80	-31.0%	24.33	4,675
VIAB	64.62	44.24	-31.5%	30.11	26,558
HRB	30.95	20.97	-32.2%	19.18	8,734
MSB	13.59	9.16	-32.6%	3.00	185
RPXC	15.91	9.94	-37.5%	8.85	899
EVOL	8.39	5.24	-37.6%	4.79	104
BKE	39.89	24.36	-38.9%	22.00	2,066
ENTA	40.88	24.39	-40.3%	16.75	764
PDLI	6.00	3.34	-44.3%	2.58	1,092
APOL	16.58	9.21	-44.5%	6.31	1,785
OUTR	74.95	40.84	-45.5%	24.81	1,418
LCI	55.63	23.75	-57.3%	16.91	2,010
UIS	20.54	8.02	-61.0%	7.04	1,025
VNCE	15.92	5.75	-63.9%	3.31	585
ACHI	5.38	1.76	-67.3%	1.72	517
NLNK	43.15	11.17	-74.1%	9.23	1,390

Obviously when 19 of the 50 stocks are down 20% or more over a year - it is a struggle.

I have mentioned that a "Dogs of MFI" approach has shown some promise.  OUTR and ACHI 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	-17.1%	-1.9%	0
4/24/2015	-15.4%	-0.8%	0
5/29/2015	-14.1%	0.1%	0
6/26/2015	-10.2%	0.0%	0
7/30/2015	-3.5%	0.0%	0
8/28/2015	0.7%	5.7%	0
9/25/2015	2.4%	8.9%	0
10/30/2015	-3.9%	1.7%	0
11/27/2015	-4.6%	0.7%	0
12/31/2015	-1.3%	3.3%	0
1/29/2016	5.8%	9.6%	0
2/26/2016	6.3%	8.8%	0
3/24/2016	3.4%	3.9%	0
4/22/2016	-3.4%	0.5%	0

Wow, that is a bad streak. At what point to say it doesn't work?

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 "ok", down about 6.3%. (PDLI,  BKE etc)  The Dogs portfolio was on par, down 16.3% (ONE was up 33%).  The New approach was ok, up 1.5% (helped by VA).  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	169,269
Total Russell 3K	199,145
New	149,542
Dogs	226,886
Dividend	368,717

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.