Sunday, February 28, 2016

Formula Starting To Work?

Formula For The Magic Formula

As my readers know,  I have several "versions"  of the MFI approach  running. (1) I have the traditional approach, where I select 5 stocks once a quarter and hold for a year.  I do allow myself some flexibility in this approach and can pick stocks from my own internal screen rather than the official screen. (2) I have the formula approach,  which is also once a quarter and I have set rules (a) draw 50 stocks from  official screen, (b) get a subset of stocks with $600m market cap and 2.4%+ yield, (c)  discard up to one stock and (d) randomly pick five stocks from that list. Finally (3) I do have two  micro portfolios going which I may discontinue whenever I want.

Anyway, the formula approach (2), after struggling, seems to be working.  I have my March 31st tranche counting down.  It has been pretty solid and has really picked up some  ground of late:

3/31/2015  Start   Current   Dividend   Pct Gain   R3K Gain 
 HRB  $31.99 $33.73 $0.60 7.3% -6.8%
 GME  $37.69 $30.54 $1.08 -16.1% -6.8%
 KING  $15.85 $17.95 $0.00 13.6% -6.8%
 NSU  $3.43 $3.27 $0.12 -1.2% -6.8%
 PPC  $22.65 $23.71 $0.00 4.7% -6.8%
 Totals  1.7% -6.8%

 Three of the five are in the black and NSU has a lot of momentum of late.

Here is what that tranche looked like at year end:

3/31/2015 Start Current Dividend Pct Gain R3K Gain
HRB $31.99 $33.31 $0.60 6.0% -2.0%
GME $37.69 $28.04 $1.08 -22.7% -2.0%
KING $15.85 $17.65 $0.00 11.3% -2.0%
NSU $3.43 $2.71 $0.12 -17.5% -2.0%
PPC $22.65 $22.09 $0.00 -2.5% -2.0%
Totals -5.1% -2.0%

So that is pretty impressive,  while the index has dropped from -2% to -6.8%, these five names went from -5.1% to +1.7%.  Maybe the magic is back???

Finally,  here is the list of ten stocks that would be formula eligible as of today:

Number Ticker Market Cap Price Dividend Yield
1 BBY              10,546         32.45              0.92 2.8%
2 BKE                 1,540         31.75              1.00 3.1%
3 CALM                 2,543         52.44              3.00 5.7%
4 CSCO            133,423         26.41              1.04 3.9%
5 GME                 3,204         30.54              1.44 4.7%
6 HPQ              18,482         10.64              0.50 4.7%
7 PBI                 3,554         18.04              0.75 4.2%
8 TSRA                 1,473         28.98              0.80 2.8%
9 TIME                 1,453         13.67              0.76 5.6%
10 VIAB              14,351         36.23              1.60 4.4%

There are a bunch of others on the fringe:  CPLA, IQNT, BPT,  OUTR and RCN.  Of the ten above, I do not see an obvious candidate to axe, so I'd probably stand pat.  After the TPUB fiasco,  I am a bit gunshy of publishing stocks... so TIME is one I'd think long and hard about.

Saturday, February 27, 2016

2/27/15 Monthly Tracking Portfolio - Magic Formula Investing

Monthly Tracking Portfolio Update

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we near leap day 2016.  As my faithful readers know, I have been tracking the Magic Formula Stocks as described by Joel Greenblatt in The Little Book That Beats the Stock Market since January 2006.  Every month I take the top 50 stocks over $100m market cap from his website and track how that portfolio of stocks fares versus the Russell 3000 for the next 12 months.  It has been an uphill struggle as the tracking portfolios have under-performed, driven in part by Chinese reverse merger fiascos, for-profit education stocks and home health care stocks all being proverbial albatrosses.

Onward

 Fearless readers will recall we had a 29 month "losing streak"..  Then we had a 13 month winning streak. This month, MFI lost by about 11.7 points. That makes it 11 of the last twelve to close have lost. In addition, this was the fourth straight portfolio to lose $ (though sadly 9 of the 11 open ones are also in the red).  Here are the 50 stocks in descending performance order:

Stock  Initial Price   End Price  Percent Change 52 week low  Mkt Cap 
NHTC              12.99           33.17 155.3%        13.20            167
RGR              50.94           69.91 37.2%        47.38            974
ONE                3.30             4.12 24.8%          1.85            157
KING              14.85           18.00 21.2%  N/A          5,084
IQNT              14.28           17.23 20.7%        14.56            494
MSFT              42.69           51.30 20.2%        39.72     360,359
RTN            106.12         124.48 17.3%        95.32       33,425
USNA            100.01         116.32 16.3%        92.00         1,237
ANIK              39.92           46.40 16.2%        30.93            593
PETS              14.74           16.67 13.1%        14.53            312
AGX              31.79           32.02 0.7%        28.03            471
SPOK              17.93           17.61 -1.8%        15.26            403
IDCC              52.05           50.18 -3.6%        41.01         1,952
NSR              26.52           24.87 -6.2%        20.00         1,461
CA              31.37           29.38 -6.4%        25.16       14,254
REX              54.36           50.63 -6.9%        43.50            435
CSCO              28.61           26.41 -7.7%        22.46     150,708
DLX              65.21           57.41 -12.0%        49.46         3,320
PPC              27.43           23.71 -13.6%        17.39         7,104
GILD            102.31           88.10 -13.9%        81.89     155,192
GME              35.65           30.54 -14.3%        24.33         4,041
FLR              57.27           46.81 -18.3%        39.48         8,621
BRCD              12.19             9.93 -18.6%          7.40         5,249
PBI              22.33           18.04 -19.2%        16.24         4,657
ENTA              35.82           28.40 -20.7%        16.75            666
TZOO              10.08             7.80 -22.6%          6.63            148
ADMS              17.28           13.20 -23.6%        12.02            293
CLCT              21.05           15.86 -24.7%        11.66            202
TSRA              39.08           28.98 -25.8%        26.21         2,113
STRA              60.87           44.68 -26.6%        41.50            664
CPLA              62.99           45.73 -27.4%        39.06            794
WILN                2.48             1.80 -27.5%          0.93            317
RPXC              14.58             9.84 -32.5%          9.15            821
BKE              47.32           31.75 -32.9%        26.05         2,433
PSDV                4.40             2.77 -37.0%          2.65            129
VEC              31.81           19.21 -39.6%        17.25            334
GORO                3.33             1.94 -41.7%          1.14            187
TDC              44.52           25.11 -43.6%        21.98         6,553
VIAB              67.95           36.23 -46.7%        30.11       28,487
UIS              22.64           10.89 -51.9%          8.15         1,130
AVID              15.68             7.48 -52.3%          5.77            615
PDLI                6.23             2.93 -53.0%          2.58         1,125
LQDT                9.88             4.64 -53.0%          4.42            296
BCOR              14.82             6.21 -58.1%          5.82            593
ACHI                6.10             2.50 -59.0%          1.77            586
EGL              36.10           14.44 -60.0%        11.46            635
TPUB              20.22             7.58 -62.5%          5.45            547
APOL              27.65             8.11 -70.7%          6.31         2,996
MSB              17.15             4.35 -74.6%          3.00            229
SMT                1.27             0.25 -80.3%          0.19            155


Obviously when 22 of the 50 stocks are down 25% or more over a year - it is a struggle.

I have mentioned that a "Dogs of MFI" approach has shown some promise.  VEC and VIAB are still on the list.  It would take some courage to buy any of those - but I guess that is why they are called dogs. I did find another site that has been tracking since 2006 this week.  It uses a different approach, just 5 stocks picked randomly every quarter. They have had better results than me (TrackJGreenblatt's Stock Picks). I found it very interesting and would encourage people to take a looksee.

Here is a listing of every portfolio I have tracked:

Date MFI R3K Lead
1/6/2006 16.0% 10.9% 1
2/17/2006 21.2% 14.6% 1
3/29/2006 13.0% 9.6% 1
4/7/2006 10.3% 12.1% 0
5/12/2006 20.4% 18.6% 1
5/31/2006 29.2% 23.3% 1
6/30/2006 22.4% 20.0% 1
7/31/2006 19.7% 17.3% 1
8/31/2006 13.0% 13.3% 0
9/28/2006 12.7% 14.6% 0
10/27/2006 10.3% 12.0% 0
11/29/2006 -0.3% 4.8% 0
12/28/2006 -6.9% 3.4% 0
1/26/2007 -10.2% -6.6% 0
2/27/2007 -3.7% -1.0% 0
3/26/2007 -9.8% -5.5% 0
4/27/2007 -10.9% -5.0% 0
5/29/2007 -11.5% -6.3% 0
7/3/2007 -30.0% -15.6% 0
7/30/2007 -19.9% -11.5% 0
8/30/2007 -12.5% -8.7% 0
9/27/2007 -19.0% -18.2% 0
11/2/2007 -40.4% -34.3% 0
11/28/2007 -40.1% -38.3% 0
12/28/2007 -36.3% -40.0% 1
1/25/2008 -36.4% -35.9% 0
2/26/2008 -51.7% -41.5% 0
3/24/2008 -40.9% -36.8% 0
4/25/2008 -25.6% -31.0% 1
5/28/2008 -22.2% -33.6% 1
7/2/2008 -11.7% -25.3% 1
7/29/2008 -10.5% -20.9% 1
8/29/2008 -13.8% -17.9% 1
9/26/2008 -4.3% -10.0% 1
10/31/2008 18.7% 13.9% 1
11/26/2008 50.9% 27.7% 1
12/26/2008 48.9% 32.3% 1
1/23/2009 59.3% 36.4% 1
2/27/2009 92.8% 55.6% 1
3/27/2009 85.8% 48.1% 1
4/24/2009 69.7% 45.8% 1
5/29/2009 31.8% 22.8% 1
6/29/2009 21.3% 24.0% 0
7/29/2009 19.5% 15.9% 1
8/28/2009 7.4% 8.8% 0
9/25/2009 12.6% 12.4% 1
10/30/2009 22.7% 18.3% 1
11/27/2009 24.3% 13.6% 1
12/31/2009 23.7% 18.1% 1
1/22/2010 19.0% 20.6% 0
2/26/2010 18.6% 23.6% 0
3/25/2010 10.0% 15.4% 0
4/23/2010 7.1% 11.4% 0
5/28/2010 19.3% 25.4% 0
6/29/2010 16.7% 25.7% 0
7/29/2010 5.4% 20.1% 0
9/2/2010 7.3% 10.1% 0
9/24/2010 -4.3% 0.3% 0
10/29/2010 -2.9% 10.4% 0
11/26/2010 -8.5% 1.4% 0
1/3/2011 -11.4% 0.1% 0
1/28/2011 -7.6% 4.9% 0
2/25/2011 -5.5% 5.0% 0
3/24/2011 -4.4% 7.4% 0
4/21/2011 -16.0% 3.2% 0
5/27/2011 -12.0% -0.4% 0
6/24/2011 -9.5% 5.0% 0
7/29/2011 -4.3% 8.1% 0
8/26/2011 12.0% 21.6% 0
9/30/2011 23.5% 29.6% 0
10/28/2011 0.4% 11.5% 0
11/25/2011 13.9% 24.0% 0
12/29/2011 9.9% 15.9% 0
1/27/2012 7.4% 16.6% 0
2/24/2012 7.8% 13.3% 0
3/23/2012 9.1% 15.2% 0
4/27/2012 10.5% 15.3% 0
5/25/2012 26.5% 27.5% 0
6/22/2012 26.1% 24.6% 1
7/27/2012 30.4% 25.7% 1
8/24/2012 26.0% 19.8% 1
9/28/2012 39.3% 22.1% 1
10/26/2012 48.3% 28.9% 1
11/23/2012 45.7% 32.1% 1
12/31/2012 52.3% 33.0% 1
1/25/2013 39.5% 22.0% 1
2/22/2013 46.5% 26.4% 1
3/28/2013 40.1% 21.2% 1
4/26/2013 35.0% 20.5% 1
5/24/2013 20.4% 19.2% 1
6/28/2013 26.9% 24.1% 1
7/29/2013 17.8% 19.0% 0
8/30/2013 17.5% 24.6% 0
9/27/2013 12.9% 17.7% 0
10/25/2013 11.8% 15.4% 0
11/29/2013 12.3% 15.6% 0
12/31/2013 12.7% 11.9% 1
1/31/2014 14.2% 13.0% 1
2/28/2014 15.4% 13.9% 1
3/28/2014 6.1% 12.3% 0
4/25/2014 8.6% 15.8% 0
5/30/2014 5.9% 11.7% 0
6/27/2014 2.5% 9.2% 0
7/25/2014 3.3% 8.7% 0
8/29/2014 -2.2% 1.0% 0
9/26/2014 -0.6% -0.9% 1
10/31/2014 4.3% 4.4% 0
11/28/2014 -2.9% 2.9% 0
12/31/2014 -9.3% 0.3% 0
1/30/2015 -12.4% -2.8% 0
2/27/2015 -19.0% -7.3% 0
3/27/2015 -19.5% -5.9% 0
4/24/2015 -22.7% -8.4% 0
5/29/2015 -20.4% -8.0% 0
6/26/2015 -17.6% -8.1% 0
7/30/2015 -11.4% -8.1% 0
8/28/2015 -8.5% -2.8% 0
9/25/2015 -6.4% 0.1% 0
10/30/2015 -11.0% -6.5% 0
11/27/2015 -7.9% -7.4% 0
12/31/2015 -3.1% -5.0% 1
1/29/2016 3.3% 0.7% 1

So you can see the -19.0% to -7.3% loss in 2/27/15. Sadly, as my gentle readers have noted, MFI isn't doing so well of late.  And 9 of the other 11 open portfolios are trailing - several by a wide margin. Just 1 win/lead in past 21.  Ouch.

Subsets

I also have tracked 2 subsets of the larger portfolios:  (1) dividend stocks (those with a yield per Yahoo of at least 2.6%) and (2) new stocks (those new to the tracking portfolios in past 12 months.  I have added a third one , which I call "dogs".  It is like the dogs of the Dow in that you take the worst five performing stocks from the prior year that renew or all those that dropped more that 29%. The dividend portfolio was terrible, down about 15%. (PDLI, MSB, TPUB etc)  The new portfolio was worse, down 28% (mostly SMT & PSDV).  The Dogs approach was also bad, down 29% (that approach is admittedly exciting).  I think we can safely say that nothing besides 100% NHTC was working. Finally, I like to track cash as it is more "honest" than percentages as if you go up by 25% and then down by 25%, that is a different result than up by 5% then down by 5%.  So I track what you would have today if you had spread $100,000 over the first twelve portfolios evenly.


Category Value
Total      158,542
Total Russell 3K      183,000
New      153,630
Dogs      217,151
Dividend      340,163


That is a sobering table.  It strongly indicates (assuming a guy with a spreadsheet hasn't made too many errors) that for the $100m + bucket that it hasn't worked very well since 2006.  

Newest Tracking Portfolio

I did pull in the newest 50 stocks.  Here are how they split into my subsets:

New

Date Stock Initial Price Mkt Cap New
2/26/2016 WNC              11.78       777.41 1
2/26/2016 TIME              13.67    1,453.12 1
2/26/2016 SRDX              19.46       252.90 1
2/26/2016 RHI              39.58    5,191.16 1
2/26/2016 RECN              14.14       525.05 1
2/26/2016 MKSI              32.91    1,751.37 1
2/26/2016 LEA            101.78    7,578.95 1
2/26/2016 FFIV              97.12    6,677.10 1
Dividend

Date Stock  Initial Price   Mkt Cap  Yield
2/26/2016 VIAB              36.23       14,351 4.4%
2/26/2016 TIME              13.67         1,453 5.6%
2/26/2016 TSRA              28.98         1,473 2.8%
2/26/2016 RECN              14.14            525 2.8%
2/26/2016 PBI              18.04         3,554 4.2%
2/26/2016 PETS              16.67            339 4.3%
2/26/2016 OUTR              31.55            524 3.8%
2/26/2016 IQNT              17.23            584 3.5%
2/26/2016 HPQ              10.64       18,482 4.7%
2/26/2016 GME              30.54         3,204 4.7%
2/26/2016 CSCO              26.41     133,423 3.9%
2/26/2016 CPLA              45.73            541 3.4%
2/26/2016 CALM              52.44         2,543 5.7%
2/26/2016 BKE              31.75         1,540 3.1%
2/26/2016 BPT              25.30            541 9.5%
2/26/2016 BBY              32.45       10,546 2.8%
Dogs

Stock Initial Price 52 week low  Mkt Cap 
WILN                1.80                 0.93       217.52
VIAB              36.23               30.11  14,350.70
VEC              19.21               17.25       202.86
FLR              46.81               39.48    6,507.43
BKE              31.75               26.05    1,540.26