Sunday, August 28, 2016

Magic Formula Investing Tracking Portfolio - 8/26/2015

Monthly Tracking Portfolio

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we reach the end of August 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 (wait for it) lost by 5.5 percentage points.. Technically, 16 of the past 17 have lost, although last month was almost a tie. Here are the 50 stocks in descending performance order:

Stock  Initial Price   End Price  Percent Change  52 week low   Mkt Cap 
WTW                5.98           10.75 79.8%                 5.63            341
VA              32.76           55.97 70.8%               26.30         1,418
NATH              33.65           48.60 44.4%               32.00            155
IDCC              48.70           69.82 43.4%               41.01         1,777
NLS              16.22           22.50 38.7%               13.82            512
VEC              24.05           33.18 38.0%               17.25            254
KING              13.50           18.00 33.3%               12.00         4,250
LBMH                2.52             3.35 32.9%                 1.96            137
LQDT                7.36             9.67 31.4%                 4.42            221
CA              26.34           34.08 29.4%               25.18       11,885
AGX              37.97           48.91 28.8%               28.03            568
PETS              15.90           20.22 27.2%               15.56            335
CPLA              47.75           60.44 26.6%               39.06            596
CSCO              25.13           31.35 24.7%               22.46     131,638
VC              57.09           71.06 24.5%               58.83         3,909
PPC              18.63           22.84 22.6%               17.39         5,404
CLCT              16.88           20.63 22.2%               13.67            162
NHTC              26.53           32.36 22.0%               15.90            331
DLX              57.64           68.74 19.3%               49.46         2,939
TIVO                9.15           10.86 18.7%                 7.29            888
FLR              44.86           52.94 18.0%               39.48         6,637
GHM              16.58           19.32 16.5%               14.39            172
KORS              43.17           49.59 14.9%               34.83         8,493
QCOM              55.36           62.97 13.8%               42.24       90,656
TDC              29.49           32.29 9.5%               21.98         4,176
VDSI              17.59           18.71 6.4%               12.35            700
VIAB              39.39           41.11 4.4%               30.11       16,278
SPOK              15.95           16.64 4.4%               15.49            359
HSII              19.16           19.27 0.6%               16.23            359
PSDV                3.94             3.93 -0.3%                 2.37            116
PBI              19.15           18.77 -2.0%               16.24         4,030
DHX                7.82             7.54 -3.6%                 5.99            405
AAPL            110.92         106.94 -3.6%               89.47     646,365
STRA              52.87           50.23 -5.0%               42.39            583
IQNT              17.92           16.17 -9.7%               14.56            625
OUTR              60.10           51.87 -13.7%               24.81         1,135
NSR              28.21           23.78 -15.7%               20.00         1,547
WILN                1.92             1.59 -17.2%                 0.93            240
MSB              12.33             9.91 -19.6%                 3.00            171
APOL              11.47             8.83 -23.0%                 6.31         1,235
RPXC              13.83           10.49 -24.2%                 8.60            786
GILD            105.79           79.77 -24.6%               77.92     158,760
UIS              13.95           10.18 -27.0%                 6.72            697
VNCE                9.06             6.35 -29.9%                 3.31            333
LCI              49.87           34.23 -31.4%               16.91         1,809
BKE              39.73           26.82 -32.5%               22.00         2,067
ICON              13.52             8.50 -37.1%                 4.67            654
PDLI                5.12             2.86 -44.1%                 2.58            924
ENTA              41.18           22.38 -45.7%               16.75            770
NLNK              47.75           10.05 -79.0%                 9.23         1,551


I find it telling that 4 of the bottom six are in the pharma space in some way.  I have mentioned that a "Dogs of MFI" approach has shown some promise.  ENTA, ICON, PDLI and UIS 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 -8.7% 0.4% 0
7/30/2015 3.96% 4.02% 0
8/28/2015 5.6% 10.2% 0
9/25/2015 8.5% 13.5% 0
10/30/2015 6.2% 6.1% 1
11/27/2015 4.6% 5.0% 0
12/31/2015 9.1% 7.7% 1
1/29/2016 16.3% 14.3% 1
2/26/2016 14.2% 13.4% 1
3/24/2016 13.6% 8.3% 1
4/22/2016 4.2% 4.8% 0
5/27/2016 9.2% 4.3% 1
6/30/2016 9.9% 4.0% 1
7/29/2016 2.1% 0.1% 1


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, up about 8.5%.   The Dogs portfolio was subpar, up 3.6%.  The New approach was solid, up 8.3% (led by NLS and VC).  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      184,344
Total Russell 3K      207,647
New      173,160
Dogs      252,088
Dividend      394,652

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