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%