Wednesday, December 21, 2016

Money With My Mouth

Putting Money Where My Mouth Is

As my readers know, I have been tracking magic formula investing since 2006. I did "give up on it" back in 2011, but rebooted after some analysis in 2012.  Since then, I have done quite well.

A couple weeks ago, I did quite a bit more digging through all of the data I have gathered and believe more than ever that this approach works. The key/problem has been a small subset of stocks that have way underperformed (about 14% over time).  I believe that being smart about picks can reduce the stinker impact from 14% to 5%, and that reduction makes this approach very satisfactory.  People can read my analysis starting with (Bored & Beer-Infused Ramble). But the key is pretty obvious, you want stocks that have a higher predictability about their income and opportunities for reinvestment, like Jake's Bubble Gum Shop.

Upcoming 12/31 Tranche

So I have my 12/31/15 tranche about to hit anniversary date. It has been a slight underperformer as you can see from table below:


 12/31/15 Stocks   Start   Current   Dividend   Pct Gain   R3K Gain 
 BBY  $30.31 $47.26 $1.57 61.1% 13.6%
 GME  $28.34 $26.12 $1.48 -2.6% 13.6%
 ILG  $15.89 $18.34 $0.48 18.4% 13.6%
 PPC  $22.22 $18.65 $2.75 -3.7% 13.6%
 VIAB  $40.93 $34.63 $1.20 -12.5% 13.6%
 Totals  12.2% 13.6%


I have decided to materially increase my investment.  I have been reducing my speculative plays and trading less (no buys since 11/15). I am going to probably increase funding by 30 to 50%.   I will still calculate annualized IRRs as in table below so readers can see how MFI has done for me without the messiness of funds added.


 Category/Tranche   October   January   April   July   Total 
 Initial Investment      249,820        249,939     250,180      249,728         999,667
 Current Tranche  11.2% 12.2% 22.9% 10.5% 14.1%
 Previous Tranche  5.5% 11.0% -0.2% -12.5% 1.1%
 Tranche -2  0.5%                 -                 -                  -   0.1%
 MFI Overall Gain  17.9% 24.5% 22.6% -3.2% 15.4%
 Current Balance      294,536        311,211     306,670      241,643      1,154,060
 R3K Current Tranche  6.0% 13.6% 13.3% 8.9% 10.5%
 R3K Overall Gain  19.7% 13.3% 12.1% 8.6% 13.4%
 R3K Balance      299,131        283,178     280,373      271,294      1,133,976
 Annualized IRR  7.7% 11.7% 12.5% -2.2% 7.4%

Note this table just assumes $1,000,000 invested at very start over the four tranches.

Onwards.

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