Wow, This was just one of those weeks where pretty much everything worked. I gained 1.7% on the week in total and am now up over 10.5% for 2016. I had two speculative positions going into the week, JACK and PN and they both won big time.
On the MFI front, the Formula approach faltered a bit from some subpar earnings, while my Select approach was very strong... again largely earnings-driven. Finally, my BAC warrants sky-rocketed as the strong jobs report on Friday has put rate hikes once again back into play.
MFI Select
I had some very strong moves here this week:
- LCI was up 4.3%. This stock is up 83% since their May earnings. Sadly I bought shares then been then sold for a quick 10% gain.
- UTHR was up 3.5%. The whole drug space seems up. THis stock is up 27% since the Brexit vote.
- TDC was up 11.2%. Strong earnings. Also up 27% post Brexit.
- SALE was up 21.8%! Strong earnings as well. Up 47% post Brexit.
- DEPO was up 11.6% (note the pharma theme). Strong earnings. They're up 35% since May earnings.
Note just a few trading days left on my 8/15/15 tranche... which will likely end up a loser.
| 8/17/2015 | Start | Current | Dividend | Pct Gain | R3K Gain |
| VDSI | $18.66 | $17.07 | $0.00 | -8.5% | 4.8% |
| SALE | $9.34 | $10.17 | $0.00 | 8.9% | 4.8% |
| CSCO | $28.95 | $31.04 | $0.94 | 10.5% | 4.8% |
| TGNA | $25.30 | $21.48 | $0.56 | -12.9% | 4.8% |
| HSII | $20.14 | $19.02 | $0.39 | -3.6% | 4.8% |
| Totals | -1.1% | 4.8% | |||
| 11/15/2015 | Start | Current | Dividend | Pct Gain | R3K Gain |
| LCI | $34.01 | $32.55 | $0.00 | -4.3% | 7.2% |
| SAVE | $34.48 | $40.91 | $0.00 | 18.7% | 7.2% |
| PPC | $18.98 | $23.00 | $2.75 | 35.7% | 7.2% |
| VEC | $23.60 | $32.06 | $0.00 | 35.8% | 7.2% |
| VNCE | $3.99 | $4.75 | $0.00 | 19.0% | 7.2% |
| Totals | 21.0% | 7.2% | |||
| 2/1/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| VEC | $19.64 | $32.06 | $0.00 | 63.3% | 14.0% |
| QCOM | $45.18 | $62.00 | $1.01 | 39.5% | 14.0% |
| PERI | $2.45 | $1.38 | $0.00 | -43.7% | 14.0% |
| DEPO | $15.34 | $21.17 | $0.00 | 38.0% | 14.0% |
| TDC | $24.02 | $31.55 | $0.00 | 31.3% | 14.0% |
| Totals | 25.7% | 14.0% | |||
| 5/6/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| BRCD | $7.97 | $9.48 | $0.06 | 19.6% | 6.9% |
| CBI | $37.82 | $34.52 | $0.00 | -8.7% | 6.9% |
| HSII | $18.51 | $19.02 | $0.13 | 3.5% | 6.9% |
| RHI | $38.51 | $37.33 | $0.22 | -2.5% | 6.9% |
| UTHR | $107.99 | $125.27 | $0.00 | 16.0% | 6.9% |
| Totals | 5.6% | 6.9% |
So I have two tranches leading and two tranches losing.
| Category/Tranche | August | November | February | May | Total |
| Initial Investment | 25,000 | 25,000 | 25,000 | 25,000 | 100,000 |
| Current Tranche | -1.1% | 21.0% | 25.7% | 5.6% | 13.8% |
| Previous Tranche | 11.2% | 69.4% | -14.3% | -25.2% | 8.4% |
| Tranche -2 | 41.4% | 14.2% | 8.5% | 18.3% | 20.6% |
| Tranche -3 | 14.1% | 43.7% | 78.3% | 33.0% | 42.3% |
| MFI Overall Gain | 77.3% | 236.5% | 108.3% | 24.2% | 111.6% |
| Current Balance | 44,326 | 84,129 | 52,065 | 31,038 | 211,558 |
| R3K Current Tranche | 4.8% | 7.2% | 14.0% | 6.9% | 8.2% |
| R3K Overall Gain | 66.2% | 69.0% | 51.9% | 33.0% | 55.0% |
| R3K Balance | 41,556 | 42,262 | 37,979 | 33,238 | 155,034 |
| Annualized IRR | 15.5% | 38.5% | 23.2% | 6.9% | 22.3% |
But overall, my current tranches are up 13.8% (recall that now the tranches are not equal in weight as November has done so well). The benchmark against the open tranches is up 8.2%. Woo-hoo!
| Date | Differential | MFI Value | R3K Value |
| 12/1/2012 | -2.20% | 99,765 | 101,965 |
| 1/1/2013 | -1.78% | 102,798 | 104,575 |
| 2/1/2013 | -2.26% | 102,594 | 104,856 |
| 3/1/2013 | -2.23% | 102,881 | 105,114 |
| 4/1/2013 | -0.43% | 106,804 | 107,234 |
| 5/1/2013 | 2.00% | 110,423 | 108,423 |
| 6/1/2013 | 4.75% | 115,831 | 111,085 |
| 7/1/2013 | 4.29% | 114,888 | 110,597 |
| 8/1/2013 | 6.91% | 124,799 | 117,889 |
| 9/1/2013 | 10.46% | 124,536 | 114,079 |
| 10/1/2013 | 19.67% | 138,655 | 118,990 |
| 11/1/2013 | 19.75% | 143,514 | 123,764 |
| 12/1/2013 | 23.70% | 150,105 | 126,405 |
| 1/1/2014 | 26.63% | 157,138 | 130,503 |
| 2/1/2014 | 24.70% | 150,619 | 125,918 |
| 3/1/2014 | 25.66% | 158,116 | 132,458 |
| 4/1/2014 | 30.38% | 162,991 | 132,616 |
| 5/1/2014 | 29.65% | 162,428 | 132,779 |
| 6/1/2014 | 31.44% | 167,001 | 135,559 |
| 7/1/2014 | 39.23% | 177,971 | 138,740 |
| 8/1/2014 | 31.13% | 167,054 | 135,922 |
| 9/1/2014 | 35.90% | 177,792 | 141,892 |
| 10/1/2014 | 29.38% | 168,321 | 138,944 |
| 11/1/2014 | 26.14% | 168,810 | 142,666 |
| 12/1/2014 | 30.22% | 176,420 | 146,198 |
| 1/1/2015 | 28.17% | 174,306 | 146,140 |
| 2/1/2015 | 20.63% | 162,833 | 142,201 |
| 3/1/2015 | 25.15% | 175,476 | 150,324 |
| 4/1/2015 | 29.95% | 178,565 | 148,612 |
| 5/1/2015 | 37.31% | 186,655 | 149,348 |
| 6/1/2015 | 51.53% | 202,897 | 151,371 |
| 7/1/2015 | 62.69% | 211,437 | 148,743 |
| 8/1/2015 | 40.75% | 192,117 | 151,369 |
| 9/1/2015 | 36.41% | 178,603 | 142,195 |
| 10/1/2015 | 43.12% | 181,175 | 138,052 |
| 11/1/2015 | 69.02% | 217,959 | 148,936 |
| 12/1/2015 | 73.49% | 223,435 | 149,946 |
| 1/1/2016 | 63.33% | 209,514 | 146,186 |
| 2/1/2016 | 49.49% | 187,428 | 137,934 |
| 3/1/2016 | 56.48% | 194,415 | 137,934 |
| 4/1/2016 | 47.34% | 195,770 | 148,430 |
| 5/1/2016 | 46.38% | 194,301 | 147,923 |
| 6/1/2016 | 51.44% | 201,999 | 150,558 |
| 7/1/2016 | 50.41% | 201,092 | 150,680 |
| 8/1/2016 | 52.72% | 207,223 | 154,501 |
| Current | 56.52% | 211,558 | 155,034 |
You know, I think I should give myself some credit here. Taking $100,000 to $211,558 over 4 years is actually pretty impressive. That is a 22% annualized IRR when you recognize the $100,000 was spread over four quarters. I'll also give MFI some credit, although this select approach has done better (so far). Of course I had a few outsized winners... NHTC and NUS (those "gasp" MLM firms).
I have 10 to 15 names I am considering for newest tranche. I listed ten or so on Monday and they almost ran away from me this week... up 5%!
MFI Formula
I may have thumped my chest too much last week as this portfolio is now trailing the benchmark again. Rocky earnings from IQNT and TIME set the negative bar.
| Date | Differential | Value | R3K Value |
| 10/1/2014 | 0.00% | 100,000 | 100,000 |
| 11/1/2014 | 1.63% | 102,288 | 100,658 |
| 12/1/2014 | 0.30% | 101,375 | 101,075 |
| 1/1/2015 | -0.33% | 100,664 | 100,995 |
| 2/1/2015 | 1.67% | 101,281 | 99,611 |
| 3/1/2015 | 3.62% | 106,073 | 102,454 |
| 4/1/2015 | 5.09% | 106,781 | 101,695 |
| 5/1/2015 | 5.78% | 107,859 | 102,077 |
| 6/1/2015 | 5.08% | 108,213 | 103,134 |
| 7/1/2015 | 4.82% | 106,423 | 101,604 |
| 8/1/2015 | 3.71% | 107,112 | 103,404 |
| 9/1/2015 | 4.38% | 101,523 | 97,139 |
| 10/1/2015 | 6.39% | 100,703 | 94,312 |
| 11/1/2015 | 2.93% | 104,835 | 101,907 |
| 12/1/2015 | -3.48% | 99,443 | 102,926 |
| 1/1/2016 | -3.36% | 96,830 | 100,012 |
| 2/1/2016 | -0.72% | 93,797 | 94,367 |
| 3/1/2016 | 4.07% | 98,588 | 94,367 |
| 4/1/2016 | 0.34% | 102,371 | 101,548 |
| 5/1/2016 | -1.91% | 99,774 | 101,200 |
| 6/1/2016 | -0.42% | 103,145 | 103,568 |
| 7/1/2016 | -0.19% | 103,022 | 103,216 |
| 8/1/2016 | 2.56% | 109,419 | 106,857 |
| Current | -0.76% | 106,571 | 107,330 |
So I gave back almost 3% during the week. Yuck. I was leading by 2.56% and now trail by 76 basis points.
| 10/1/2015 | Start | Current | Dividend | Pct Gain | R3K Gain |
| BKE | $36.83 | $26.00 | $1.98 | -24.0% | 13.7% |
| IQNT | $21.96 | $16.36 | $0.45 | -23.5% | 13.7% |
| QCOM | $53.45 | $62.00 | $1.49 | 18.8% | 13.7% |
| CSCO | $26.37 | $31.04 | $0.94 | 21.3% | 13.7% |
| CA | $27.30 | $34.05 | $0.76 | 27.5% | 13.7% |
| Totals | 4.0% | 13.7% | |||
| 12/31/15 Stocks | Start | Current | Dividend | Pct Gain | R3K Gain |
| BBY | $30.31 | $34.25 | $1.01 | 16.3% | 7.6% |
| GME | $28.34 | $30.04 | $0.74 | 8.6% | 7.6% |
| IILG | $15.89 | $17.53 | $0.24 | 11.8% | 7.6% |
| PPC | $22.22 | $23.00 | $2.75 | 15.9% | 7.6% |
| VIAB | $40.93 | $43.68 | $0.80 | 8.7% | 7.6% |
| Totals | 12.3% | 7.6% | |||
| 4/1/16 Stocks | Start | Current | Dividend | Pct Gain | R3K Gain |
| CALM | $51.27 | $43.39 | $0.44 | -14.5% | 7.3% |
| HPQ | $12.10 | $14.28 | $0.13 | 19.0% | 7.3% |
| TIME | $15.24 | $14.13 | $0.19 | -6.1% | 7.3% |
| IILG | $13.85 | $17.53 | $0.12 | 27.4% | 7.3% |
| TSRA | $30.79 | $31.93 | $0.20 | 4.4% | 7.3% |
| Totals | 6.0% | 7.3% | |||
| 7/1/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| IILG | $16.76 | $17.53 | $0.00 | 4.6% | 3.2% |
| VIAB | $44.00 | $43.68 | $0.00 | -0.7% | 3.2% |
| CPLA | $53.22 | $60.02 | $0.00 | 12.8% | 3.2% |
| HRB | $23.62 | $23.80 | $0.00 | 0.8% | 3.2% |
| PBI | $17.69 | $18.62 | $0.00 | 5.3% | 3.2% |
| Totals | 4.5% | 3.2% |
So pretty much a coin flip thus far.
| Category/Tranche | October | January | April | July | Total |
| Initial Investment | 249,820 | 249,939 | 250,180 | 249,728 | 999,667 |
| Current Tranche | 4.0% | 12.3% | 6.0% | 4.5% | 6.7% |
| Previous Tranche | 0.5% | 11.0% | -0.2% | -12.5% | -0.1% |
| Tranche -2 | 0.0% | - | - | - | 0.0% |
| MFI Overall Gain | 4.5% | 24.6% | 5.8% | -8.5% | 6.6% |
| Current Balance | 261,042 | 311,520 | 264,654 | 228,494 | 1,065,710 |
| R3K Current Tranche | 13.7% | 7.6% | 7.3% | 3.2% | 8.0% |
| R3K Overall Gain | 13.0% | 7.4% | 6.2% | 2.9% | 7.4% |
| R3K Balance | 282,391 | 268,336 | 265,618 | 256,948 | 1,073,294 |
| Annualized IRR | 2.4% | 14.7% | 4.2% | -7.7% | 4.4% |
Dividend/Warrants
As I mentioned, BAC-WTA jumped a ton.
| Div and Warrants | Start | Current | Dividend | Pct Gain | Pct Gain Last Week | June 1 2016 |
| BAC-WTA | $4.90 | $4.15 | $0.00 | -15.3% | -19.2% | -20.6% |
| AOD | $7.64 | $7.61 | $1.46 | 18.8% | 20.5% | 17.1% |
| JQC | $7.82 | $8.43 | $0.40 | 12.9% | 13.0% | 8.4% |
| CSQ | $9.06 | $10.51 | $1.90 | 37.0% | 36.7% | 30.5% |
| DSL | $18.41 | $19.05 | $0.30 | 5.1% | 6.8% | 0.0% |
| TGONF | $10.24 | $10.28 | $1.69 | 16.9% | 12.2% | 12.5% |
| HIG-WT | $21.24 | $36.90 | $0.00 | 73.8% | 73.8% | 75.7% |
| O | $23.57 | $68.56 | $18.80 | 270.6% | 282.1% | 249.0% |
| OIBAX | $5.06 | $5.93 | $2.25 | 61.6% | 61.1% | 58.1% |
| SJT | $8.75 | $6.06 | $0.22 | -28.3% | -23.6% | -14.4% |
| GLDI | $10.68 | $10.67 | $0.29 | 2.6% | 2.9% | 0.0% |
| Totals | 11.0% | 10.9% | 9.0% |
But SJT and AOD were down... so week was very flat. Still, this approach has been great in 2016... up almost 14%. Recall I reconstituted in June after I sold my REXI which was up 74% for the year due to being acquired. Speaking of REXI, that leads me into a little toe-dipping exercise I am trying out.
Strategic Alternatives and Other Stocks
REXI kind of opened my eyes to how inefficient the markets really can be. I am not a rocket scientist, but you can go back and read my blog. REXI was trading well under book value, they were paying a nice dividend... yet the market refused to value them properly. They announced back in January that they were going to explore "strategic alternatives". I went back and looked. That announcement was made 1/29/16 (Resource America, Inc. to Evaluate Strategies for Enhancing Shareholder Value).
If you look, the stock spiked that day from $4.36 to $4.66. But this market has ADHD. By mid February... less than a month later it was back at $4.07. WTF? This was like the buying opportunity of a lifetime. The stock is yielding over 5%. Trading well beneath book value and they are willing to sell themselves. The downside is limited, but there is a large upside potential. The rest is history. In May they announced they were being acquired (Resource America, Inc. Signs Definitive Agreement to Be Acquired by C-III Capital Partners LLC). The stock popped $6.46 to $9.61 that day. More than a double from thos February lows.
The moral? There is gold in them thar hills. So I have taken my pick axe (also known as Google) and started looking for other smaller cap stocks that are willing to sell themselves and the market is not pricing it properly (in my judgment).
My first pick was PN. I know this company a little bit as they are in the insurance space. They announced on 2/29 that they were winning to sell themselves (). They had an buyout offer from EBIX on June 14th for about $9.50. (as an aside, EBIX should be a company familiar to MFI faithful. It was on the screen a ton in 2015 and was one of the best buys in my MFI Index of 2015. If you had bought 1/1/15 and held through today, you'd be up 230%). The stock spiked from $6.92 to $8.75. Then things were quiet. And the market... remember ADHD just let it trickle down. By mid July it was $7.40. I decided to buy. My average price was about $7.70. This week I was rewarded (). The stock has popped to $9.60. I feel the value of the offer is about $11.00. I am not greedy, I sold 25% of my position this week at $9.80 and may sell the rest if/when goes above $10.
The moral? There is gold in them thar hills and it can be successfully mined. I have now made a list of other companies that are similar and are tracking their prices daily. I do not want this to be overweight, as I suspect there is potential for disappointment. But I may have one or two in my overall portfolio at any time. Here are the other names:
- FOE
- GNC
- SPA
- ANCB
- CXRX
- EMG
- MCK
There are many others (use google). But I highlighted these as they all seemed to have characteristics (to me) that might make someone want to buy them. I did buy a half position in EMG at $4.10. They said they have several unsolicited offers and are going to consider them (Emergent Capital to explore strategic alternatives). I think they could be sold for $6.50. If they dip below $4 I will add shares.
I am also going to strongly consider GNC for my August MFI tranche.
Other Stocks
Besides the big gain on PN this week, it was a great week for my few discretionary stocks. GNW (I know, I still own) was up 22% and they may have turned the corner. I bought JACK on expectation of strong earnings and they came through and popped 9%. I have since sold. Then WLDN (along with MGIC and SPCB) a holdover from my MFI micro portfolio spiked over 20% on Friday from strong earnings. It was a very good week.
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