Saturday, November 26, 2016

Weekend Update 11/26/16

Weekend Update

Greetings.  I am at my highest weight of the year. Thanksgiving is great, but I am weak when I have pies and cookies around the house. Took a long walk yesterday, but I needed more calories burnt apparently.  Oh well.

Markets went up yet again yesterday. It has been quite a run for me.  I am not sure the gains are sustainable, but am glad I have largely been in the markets.

I seem to have gained a few readers this week.  Perhaps some are interested in my findings and MFI stats. To you I say Hola! Welcome.  Feel free to drop a comment.

Sitting here with a month to go on the year, I am up exactly 11% on my active investments.  Guess what? If I had just put money in Russell 3000 I'd also be up 11%.  It is tough to beat the market.  I have made some unbelievably great picks this year, including REXI and BAC warrants. But I have also picked some absolute dogs, such as EMG which seems headed towards bankruptcy and SPCB. As my daughter would say, "the struggle is real".

MFI Select

For my ten new readers, I tend every week to comment on my various portfolios. Probably dull to read, but it helps me.  I split my Magic Formula Investing (MFI) approach into two portfolios.  One is MFI Select, which is four tranches of five stocks.  This one is pretty free form and started in August 2012. So I pick pretty much whatever stocks I want.  I usually use the official MFI website, but I also have my own spreadsheet that replicates the official website and I occasionally pick from it.  Here are my four tranches:



2/1/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 VEC  $19.64 $23.10 $0.00 17.6% 17.8%
 QCOM  $45.18 $68.29 $1.54 54.6% 17.8%
 PERI  $2.45 $1.14 $0.00 -53.5% 17.8%
 DEPO  $15.34 $20.39 $0.00 32.9% 17.8%
 TDC  $24.02 $27.35 $0.00 13.9% 17.8%
 Totals  13.1% 17.8%
5/6/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 BRCD  $7.97 $12.38 $0.11 56.7% 10.5%
 CBI  $37.82 $33.68 $0.00 -10.9% 10.5%
 HSII  $18.51 $21.25 $0.26 16.2% 10.5%
 RHI  $38.51 $45.26 $0.66 19.2% 10.5%
 UTHR  $107.99 $134.55 $0.00 24.6% 10.5%
 Totals  21.2% 10.5%
8/15/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 CSCO  $31.20 $30.09 $0.26 -2.7% 2.6%
 GNC  $19.79 $15.34 $0.19 -21.5% 2.6%
 VLO  $54.73 $64.86 $0.60 19.6% 2.6%
 MSGN  $16.68 $19.90 $0.00 19.3% 2.6%
 GILD  $79.33 $75.44 $0.47 -4.3% 2.6%
 Totals  2.1% 2.6%
11/15/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 MPAA  $26.55 $26.35 $0.00 -0.8% 2.4%
 ATHM  $22.61 $28.05 $0.00 24.1% 2.4%
 AMGN  $145.14 $145.43 $0.00 0.2% 2.4%
 RHI  $43.23 $45.26 $0.22 5.2% 2.4%
 CA  $31.11 $31.78 $0.00 2.2% 2.4%
 Totals  6.2% 2.4%


So you can see that two tranches are leading and two are trailing. PERI and GNC have hurt me.  I also publish a table that summarizes each tranche over time:


 Category/Tranche   August   November   February   May   Total 
 Initial Investment         25,000          25,000       25,000        25,000         100,000
 Current Tranche  2.1% 6.2% 13.1% 21.2% 9.3%
 Previous Tranche  2.8% 8.0% -14.3% -25.2% 6.5%
 Tranche -2  11.2% 69.4% 8.5% 18.3% 26.8%
 Tranche -3  41.4% 14.2% 78.3% 33.0% 41.7%
 Tranche -4  14.1% 43.7% 0.0% 0.0% 14.5%
 MFI Overall Gain  88.3% 219.1% 87.4% 42.5% 109.3%
 Current Balance         47,065          79,767       46,854        35,620         209,306
 R3K Current Tranche  2.6% 2.4% 17.8% 10.5% 8.3%
 R3K Overall Gain  71.4% 74.5% 57.0% 33.0% 57.9%
 R3K Balance         41,779          43,623       39,238        33,238         157,876
 Annualized IRR  15.9% 33.3% 17.9% 10.5% 19.4%

So this shows that this approach has been extremely successful. If I had invested $100,000 in 4 $25,000 slugs over the four tranches, then the current balance would be $209,306.  That works out to a 19.4% annulaized IRR (internal rate of return).  I do not think I am a great stock picker, rather I have had a few very lucky picks in here.  One can also see that November has been my most successful series of tranches, up 219%. May has been a struggle, only up 42%.

Then here is a table that shows my balances (assuming I started at $100K month by month since I started.


 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
9/1/2016 67.04%        222,481            155,446
10/1/2016 42.98%        198,563            155,582
11/1/2016 41.86%        195,726            153,863
Current 51.43%        209,306            157,876

You can see here that I am basically flat for 2016 and down over the past 12 months.  A February tranche stock from the prior year, NHTC, was a big cause of this.  In November 2015 it was around $50 a share. But when sold at end of January it was $19.95. That February 2015 tranche was just pretty bad.

Of my current holdings, 
  • BRCD is being bought by AVGO at about $12.80, so that looks pretty locked in as a good gainer. 
  • A lot of noise about DEPO getting sold.  
  • GNC was rumored to being bought by Chinese firm and popped to about $24, but since then has collapsed. 
  • CBI has really bounced back with Trump ($28.09 to $33.68).
  • VEC has been all over the place.  It was as high as $34, then dropped off a cliff to $17 when they announced loss of two major contracts.  Now about $23.
Here are how Select stocks fared during week:


 Stock   Last Week   Current   Dividend   Change 
 RHI              44.76                   45.26                       -   1.1%
 ATHM              26.32                   28.05                       -   6.6%
 CA              31.48                   31.78                       -   1.0%
 AMGN            145.23                145.43                       -   0.1%
 MPAA              26.08                   26.35                       -   1.0%
 QCOM              67.31                   68.29                       -   1.5%
 MSGN              19.75                   19.90                       -   0.8%
 VLO              63.39                   64.86                       -   2.3%
 BRCD              12.38                   12.38                       -   0.0%
 DEPO              20.47                   20.39                       -   -0.4%
 CSCO              30.18                   30.09                       -   -0.3%
 VEC              21.63                   23.10                       -   6.8%
 TDC              27.07                   27.35                       -   1.0%
 GILD              74.62                   75.44                       -   1.1%

MFI Formula

As suggested by the name, this is a portfolio of four tranches that I pick by formula.  I want to human bias out. I run the mfi screen, 50 stocks over $100m market cap. I then take a subset of that list: stocks over $600m market cap and that yield 2.4% or higher (via regular dividend or special dividends).  I do allow myself to discard one name at this point.  Then I use a random number generator and pick five stocks.

I started this approach in October 2014 based on studies I had done on all my tracking portfolios.  That being said, I have been aware of it for longer and it has driven many of my picks (although not random) in my Select portfolio.


 12/31/15 Stocks   Start   Current   Dividend   Pct Gain   R3K Gain 
 BBY  $30.31 $46.58 $1.29 57.9% 10.6%
 GME  $28.34 $25.82 $1.11 -5.0% 10.6%
 ILG  $15.89 $18.40 $0.36 18.1% 10.6%
 PPC  $22.22 $18.18 $2.75 -5.8% 10.6%
 VIAB  $40.93 $37.64 $1.00 -5.6% 10.6%
 Totals  11.9% 10.6%
 4/1/16 Stocks  Start Current Dividend Pct Gain R3K Gain
 CALM  $51.27 $40.35 $0.44 -20.4% 10.4%
 HPQ  $12.10 $15.18 $0.25 27.5% 10.4%
 TIME  $15.24 $13.80 $0.38 -7.0% 10.4%
 ILG  $13.85 $18.40 $0.24 34.5% 10.4%
 TSRA  $30.79 $40.55 $0.60 33.7% 10.4%
 Totals  13.7% 10.4%
7/1/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 ILG  $16.76 $18.40 $0.12 10.5% 6.1%
 VIAB  $44.00 $37.64 $0.20 -14.0% 6.1%
 CPLA  $53.22 $88.55 $0.78 67.9% 6.1%
 HRB  $23.62 $23.98 $0.22 2.5% 6.1%
 PBI  $17.69 $14.86 $0.38 -13.9% 6.1%
 Totals  10.6% 6.1%
10/3/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 CPLA  $58.15 $88.55 $0.39 52.9% 3.2%
 LDOS  $43.01 $49.98 $0.00 16.2% 3.2%
 GME  $27.70 $25.82 $0.00 -6.8% 3.2%
 PBI  $18.15 $14.86 $0.19 -17.1% 3.2%
 CSCO  $31.72 $30.09 $0.26 -4.3% 3.2%
 Totals  8.2% 3.2%

As you can see, all four current tranches are leading. Sweet. Obviously a big shout out to CPLA, up 68% and 53%.  This was a matter of controversy whether to allow stocks to be picked multiple times. If this was my entire net worth, I might say "no" as you do not want eggs in too few baskets.  But my backtesting did allow stocks to be picked multiple times and you will generally have repeats as the stock names do not change that quickly.

Here is the same table showing IRRs etc:


 Category/Tranche   October   January   April   July   Total 
 Initial Investment      249,820        249,939     250,180      249,728         999,667
 Current Tranche  8.2% 11.9% 13.7% 10.6% 11.0%
 Previous Tranche  5.5% 11.0% -0.2% -12.5% 1.0%
 Tranche -2  0.5%                 -                 -                  -   0.1%
 MFI Overall Gain  14.7% 24.3% 13.4% -3.2% 12.3%
 Current Balance      286,468        310,568     283,654      241,726      1,122,415
 R3K Current Tranche  3.2% 10.6% 10.4% 6.1% 7.6%
 R3K Overall Gain  16.6% 10.4% 9.2% 5.8% 10.5%
 R3K Balance      291,294        275,850     273,088      264,211      1,104,443
 Annualized IRR  6.5% 12.1% 7.9% -2.3% 6.7%

You can see the current tranhes are +11% versus R3K up 7.6%. July has been a problem, in aggregate losing $.  Here I start at hypothetical $250,000 per tranche (as opposed to $25,000 in Select). Can't remember why I did it differently,doesn't really matter.

Here is month by month listing:


 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
9/1/2016 -0.34%        106,704            107,048
10/1/2016 -0.85%        106,377            107,230
11/1/2016 0.42%        105,421            105,003
Current 1.80%        112,242            110,444

One can see that here 2016 has been strong, going from 96,830 to 112,242... over 16%. But my lead over R3K has been pretty hit or miss.

Here are how Formula stocks did during the week. Strong move by GME.


 Stock   Last Week   Current   Dividend   Change 
 ILG              18.24                   18.40                       -   0.9%
 CPLA              85.80                   88.55                  0.39 3.7%
 GME              23.46                   25.82                       -   10.1%
 VIAB              37.77                   37.64                       -   -0.3%
 BBY              44.79                   46.58                       -   4.0%
 PBI              14.67                   14.86                       -   1.3%
 TSRA              40.20                   40.55                       -   0.9%
 HPQ              15.87                   15.18                       -   -4.3%
 LDOS              48.36                   49.98                       -   3.3%
 CSCO              30.18                   30.09                       -   -0.3%
 PPC              18.31                   18.18                       -   -0.7%
 TIME              13.75                   13.80                       -   0.4%
 HRB              23.15                   23.98                       -   3.6%
 CALM              40.00                   40.35                       -   0.9%

Dividend/Income Portfolio

As I approach 60, I am making a conscious effort to build up a sustainable income stream.  So largely the two MFI tranches are "fixed", I am not adding or removing $.  New money is going into income/dividend stocks.  Here I do not have an approach, I simply look for securities to buy and hold. I do like closed end funds as they can be bought at a discount (look at CEF Connect). I do have a couple Warren Buffett plays with PSX and their pipeline company PSXP.  I also have SJT, which I am frankly selling (they seem expensive given the amount of gas in the ground).  I own TGONF, which is like a closed end fund and sells at big discount. I have a reit, SBRA... though I am unsure whether they are "cheap".

Hmm, this will have to be continued.  My spreadsheet just crashed.  It links to Yahoo Finance, which has really become embarrassingly unstable. At some point I am going to need to revamp it.

Wait, got it to work.  Here are my holdings here:


 Dividend Stocks  Start  Current   Dividends   Overall Pct Gain   Weekly Pct Gain   7/1/16 Price   % Chg Since 7/1/16 
 CSQ      9.09       10.16              2.16 35.5% 1.5%           9.99 5.9%
 AOD      7.64         7.52              1.65 20.1% 3.6%           7.33 6.4%
 SBRA    22.46       21.98              0.42 -0.3% 0.7%         22.46 -2.1%
 SJT      7.76         6.17              0.30 -16.7% -0.3%           7.26 -13.1%
 JQC      7.83         8.63              0.60 17.8% 3.0%           8.10 9.7%
 TGONF    10.24       11.00              1.85 25.6% -1.3%         10.05 11.1%
 PSXP    46.95       44.78              0.53 -3.5% 3.3%         46.95 -4.6%
 PSX    80.00       84.89              2.25 8.9% 1.5%         80.00 6.1%
 DSL    18.43       18.34              0.88 4.3% 2.4%         18.59 2.7%
 GLDI    10.67         9.21              0.68 -7.3% -2.5%         10.87 -9.9%
 O    24.07       56.57           19.16 214.7% 2.6%         69.64 -17.3%
 DHF      3.11         3.24                   -   4.2% 0.9%           3.11 4.2%
 OIBAX      5.07         5.59              2.29 55.4% -0.2%           5.84 -2.8%
 Totals  15.2% 1.6%



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