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.