Weekend Update -1/7/17

Weekend Update

Been fighting a cold/cough. Actually went to the doctor this week as we had just returned from Puerto Rico and my wife was thinking Zika. Just a cold.  Did get some codeine-laced cough syrup though. Stuff puts Nyquil to shame.

As my 20 regular readers know (thank you for reading BTW), I write this diary largely to track my personal performance with Magic Formula Investing stocks along with a great deal of tracking of the official lists.  So if you want to know if MFI works... you have come to the right place.

We turned the calendar to 2017. So I have reconstituted my MFI Index with the 50 stocks from the screen as of 12/31/16.  They had a very strong first week, up 2.23%.  My MFI investments will be tracked in two ways this year (sorry).  I am committing new money to the tranches throughout the year (thinking a 50% increase as I wind down my discretionary approach).  This makes determining my return during the year less straightforward.  So the first approach will be just assuming I did not add new funds (so the way I have always done it).  That will be my month by month tables.  The second approach will measure my personal change. So in essence, if my MFI investment was currently (across all tranches $100,000) at start of year, I will say I had $150,000 at start of year (so 50K cash and 100K MFI). At the end of year, I'll have 150K MFI, plus gains/losses.  As this approach has cash that will not be put to work for a chunk of the year, it will dampen the % gain/loss from the first approach. Ok, assuming no one really cared about that... onward.

Week 1

People say as goes the first week, so goes the year.  Here is my first week:

Component	YTD
Overall	+2.21%
Select	+2.17%
Formula	+1.16%
Miscellaneous	+5.21%
Dividend	+2.01%
R3K	+1.70%
MFI Index	+2.23%

Note this table are my results, so everything is dampened with a cash component (dividend portfolio too, I am starting about 25% cash).  Interestingly, Miscellaneous is the best, even though that is the one I am winding down.  BAC-WTA, Gold miners, SPCB and OGXI all shot up first week. I did sell out of OGXI as I stated my goal is to wind this investing component down.

MFI Select

As my readers know, I have two MFI portfolios - "Select" and "Formula". They are both self-descriptive and both are constituted of 4 tranches of 5 stocks. $ amounts between the portfolios is roughly equal.

It was a great first week for Select. You see the 2.17% above, but remember that is my personal dampened number. Without the dampening of cash, it was 3.1%!  You can see that in month by month table:

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
12/1/2016	45.92%	202,775	156,859
1/1/2017	50.56%	209,503	158,941
Current	51.04%	215,967	164,927

I did find a bit of a mistake in R3K, that is why it jumped more than 1.7% (my spreadsheets get complex).

2/1/2016	Start	Current	Dividend	Pct Gain	R3K Gain
VEC	$19.64	$23.62	$0.00	20.3%	21.3%
QCOM	$45.18	$65.53	$2.07	49.6%	21.3%
PERI	$2.45	$1.63	$0.00	-33.5%	21.3%
DEPO	$15.34	$19.17	$0.00	25.0%	21.3%
TDC	$24.02	$28.75	$0.00	19.7%	21.3%
Totals				16.2%	21.3%
5/6/2016	Start	Current	Dividend	Pct Gain	R3K Gain
BRCD	$7.97	$12.50	$0.17	58.9%	13.8%
CBI	$37.82	$33.16	$0.00	-12.3%	13.8%
HSII	$18.51	$23.25	$0.26	27.0%	13.8%
RHI	$38.51	$48.30	$0.66	27.1%	13.8%
UTHR	$107.99	$146.96	$0.00	36.1%	13.8%
Totals				27.4%	13.8%
8/15/2016	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$31.20	$30.23	$0.26	-2.3%	5.6%
GNC	$19.79	$11.04	$0.38	-42.3%	5.6%
VLO	$54.73	$66.66	$0.60	22.9%	5.6%
MSGN	$16.68	$22.95	$0.00	37.6%	5.6%
GILD	$79.33	$75.49	$0.94	-3.7%	5.6%
Totals				2.5%	5.6%
11/15/2016	Start	Current	Dividend	Pct Gain	R3K Gain
MPAA	$26.55	$27.91	$0.00	5.1%	5.5%
ATHM	$22.61	$27.41	$0.00	21.2%	5.5%
AMGN	$145.14	$156.78	$0.00	8.0%	5.5%
RHI	$43.23	$48.30	$0.22	12.2%	5.5%
CA	$31.11	$33.19	$0.00	6.7%	5.5%
Totals				10.7%	5.5%
Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	2.5%	10.7%	16.2%	27.4%	12.8%
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	89.0%	232.5%	92.6%	49.8%	116.0%
Current Balance	47,241	83,137	48,145	37,444	215,967
R3K Current Tranche	5.6%	5.5%	21.3%	13.8%	11.5%
R3K Overall Gain	76.5%	79.7%	61.6%	51.3%	64.9%
R3K Balance	41,779	44,934	40,402	37,813	164,927
Annualized IRR	15.6%	33.6%	18.1%	11.6%	19.7%

You can see my current tranches are up 12.8% versus 11.5% for R3K.  That is underperforming MFI in total (I think roughly a 6 point lead).  Looking at my individual picks, you'll see PERI and GNC have hurt me.  BTW, it is time to start thinking about my new February tranche.  I did peruse the stock list and with recent run-up, I am not finding many names that seem super attractive.

Here are how the names did for the week:

Stock	Last Week	Current	Dividend	Change
RHI	48.78	48.30	-	-1.0%
ATHM	25.28	27.41	-	8.4%
CA	31.77	33.19	-	4.5%
AMGN	146.21	156.78	-	7.2%
MPAA	26.92	27.91	-	3.7%
QCOM	65.20	65.53	-	0.5%
MSGN	21.50	22.95	-	6.7%
VLO	68.32	66.66	-	-2.4%
BRCD	12.49	12.50	-	0.1%
DEPO	18.02	19.17	-	6.4%
CSCO	30.22	30.23	-	0.0%
VEC	23.85	23.62	-	-1.0%
TDC	27.17	28.75	-	5.8%
GILD	71.61	75.49	-	5.4%
CBI	31.75	33.16		4.4%
GNC	11.04	11.04		0.0%
PERI	1.42	1.63		14.8%
Average				3.7%

So PERI popped as did AMGN. Note this is a straight average, so the 3.7% does not consider my holdings are larger in some stocks than others.

MFI Formula

My not-so-secret formula is to only pick larger cap stocks that pay a dividend from the list.  This has worked great in back testing.  Since I started with real money in September 2014, it has out-performed the benchmark, but it has been a struggle.

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
12/1/2016	1.62%	110,705	109,088
1/1/2017	1.57%	113,406	111,832
Current	1.22%	114,935	113,720

So up by a mere 1.2%, but I suspect some hedge fund managers would be happy with that of late.

Here are tranches:

4/1/16 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
CALM	$51.27	$43.05	$0.44	-15.2%	13.7%
HPQ	$12.10	$15.00	$0.38	27.0%	13.7%
TIME	$15.24	$18.60	$0.57	25.8%	13.7%
ILG	$13.85	$17.86	$0.36	31.5%	13.7%
TSRA	$30.79	$44.95	$0.60	48.0%	13.7%
Totals				23.4%	13.7%
7/1/2016	Start	Current	Dividend	Pct Gain	R3K Gain
ILG	$16.76	$17.86	$0.24	8.0%	9.3%
VIAB	$44.00	$37.79	$0.40	-13.2%	9.3%
CPLA	$53.22	$86.00	$0.80	63.1%	9.3%
HRB	$23.62	$24.00	$0.44	3.5%	9.3%
PBI	$17.69	$16.18	$0.38	-6.4%	9.3%
Totals				11.0%	9.3%
10/3/2016	Start	Current	Dividend	Pct Gain	R3K Gain
CPLA	$58.15	$86.00	$0.41	48.6%	6.4%
LDOS	$43.01	$50.66	$0.00	17.8%	6.4%
GME	$27.70	$24.52	$0.37	-10.1%	6.4%
PBI	$18.15	$16.18	$0.19	-9.8%	6.4%
CSCO	$31.72	$30.23	$0.52	-3.1%	6.4%
Totals				8.7%	6.4%
12/30/2016	Start	Current	Dividend	Pct Gain	R3K Gain
GILD	$71.69	$75.49	$0.00	5.3%	1.6%
HPQ	$15.00	$15.00	$0.00	0.0%	1.6%
TGNA	$21.33	$21.50	$0.00	0.8%	1.6%
CA	$31.99	$33.19	$0.00	3.8%	1.6%
SYNT	$19.79	$20.39	$0.00	3.0%	1.6%
Totals				2.6%	1.6%

So while it has "struggled" all four open tranches are leading.  They lead by 5 points, which is pretty consistent with MFI in general.

Category/Tranche	October	January	April	July	Total
Initial Investment	249,820	249,939	250,180	249,728	999,667
Current Tranche	8.7%	2.6%	23.4%	11.0%	12.9%
Previous Tranche	5.5%	9.3%	-0.2%	-12.5%	-1.0%
Tranche -2	0.5%	11.0%	-	-	2.9%
MFI Overall Gain	15.2%	24.4%	23.1%	-2.9%	15.0%
Current Balance	287,742	310,981	308,017	242,606	1,149,346
R3K Current Tranche	6.4%	1.6%	13.7%	9.3%	7.7%
R3K Overall Gain	20.1%	13.5%	12.4%	9.0%	13.8%
R3K Balance	300,049	283,799	281,227	272,124	1,137,200
Annualized IRR	6.4%	11.4%	12.4%	-1.9%	7.1%

Note the January tranche was my first "boost" of the 50% investment in real money.  You don't see it here as I assume I stated with $1,000,000 and then no additional investments. But I keep my own (secret) tables with my funds.  Good to see my newest one off to decent start. Woo-hoo!

Here are how the stocks did week 1:

Stock	Last Week	Current	Dividend	Change
CPLA	87.80	86.00	-	-2.1%
HPQ	14.84	15.00	-	1.1%
ILG	18.17	17.86	-	-1.7%
PBI	15.19	16.18	-	6.5%
GILD	71.61	75.49	-	5.4%
CA	31.77	33.19	-	4.5%
SYNT	19.79	20.39	-	3.0%
TGNA	21.39	21.50	-	0.5%
TSRA	44.20	44.95	-	1.7%
LDOS	51.14	50.66	-	-0.9%
TIME	17.85	18.60	-	4.2%
CSCO	30.22	30.23	0.26	0.9%
GME	25.26	24.52	-	-2.9%
HRB	22.99	24.00	-	4.4%
CALM	44.18	43.05		-2.5%
VIAB	35.10	37.79		7.7%
Average				1.9%

Dividend Portfolio

While not MFI, I do briefly mention my dividend portfolio. It is really third leg of my investing stool (it also has about same funds as each MFI portfolio).  Here I am building out income stream for retirement (I turn 58 this year).  So many of the names here I have held for many years and I often just reinvest dividends.  I have stocks and closed end funds.  I am going to try and go a bit more bondish during the next couple of years (hopefully after rates move up a bit).  I do have some (JQC and DHF for instance).  So this portfolio is not meant to be sexy.

Dividend Stocks	Start	Current	Dividends	Overall Pct Gain	Weekly Pct Gain
CSQ	9.11	10.68	2.29	42.4%	4.0%
AOD	7.64	7.84	1.69	24.8%	3.4%
SBRA	22.46	25.39	0.41	14.9%	4.0%
PSXP	46.95	51.37	0.53	10.5%	5.6%
TGONF	10.24	12.20	1.85	37.3%	0.5%
JQC	7.84	8.77	0.64	20.0%	-0.9%
PSX	80.00	85.40	2.88	10.4%	-1.2%
DSL	18.43	19.09	1.02	9.1%	0.5%
GLDI	10.65	9.15	0.73	-7.3%	2.3%
PEO	20.49	20.54	-	0.3%	1.8%
O	24.18	59.84	19.49	228.1%	4.1%
DHF	3.19	3.37	0.04	6.6%	0.3%
OIBAX	5.07	5.63	2.32	56.7%	0.4%
Totals				23.0%

The important part is dividends.  Here is my dividend growth by year (including 2017 projection). Note the Y axis are not real numbers, but trajectory is.

Now this is all dividends, including dividends from MFI portfolios. The 2017 projection is based on current holdings, so it should grow as I move cash into securities throughout 2017. Long story short, this compound growth should continue upwards as I commit new money AND reinvest dividends.  I hear people compare investing to a casino. But there is nothing like compound growth to make it real.  Check out my CSQ reinvested dividends over time (uses a factor to mask):

Date Purchased	Cost	Value	Dividends	Gain
08/23/11	25,110	32,040	14,714	21,644
09/15/11	158	202	92	136
09/22/11	5,003	6,664	3,028	4,689
09/26/11	5,000	6,675	3,033	4,708
10/04/11	5,003	7,188	3,012	5,197
10/14/11	259	335	151	227
11/15/11	261	322	143	204
12/15/11	263	339	148	224
01/03/12	264	333	143	212
02/15/12	355	399	171	215
03/14/12	357	388	163	194
04/16/12	360	403	167	210
05/14/12	362	401	164	203
06/14/12	365	423	170	228
07/13/12	368	414	164	210
08/15/12	370	393	153	175
09/13/12	373	394	151	172
10/15/12	376	395	149	168
11/15/12	378	431	159	212
01/03/13	381	407	145	171
02/07/13	384	392	137	145
03/14/13	386	394	135	144
04/08/13	389	395	133	139
05/14/13	391	385	127	120
06/13/13	394	413	133	152
07/15/13	397	411	130	144
08/13/13	399	419	130	150
09/13/13	402	429	130	157
10/08/13	405	430	128	153
10/08/13	7,502	8,127	2,414	3,039
11/14/13	461	474	138	150
12/13/13	464	474	135	145
01/03/14	467	459	127	119
02/14/14	470	460	125	115
03/14/14	473	457	102	86
04/14/14	561	550	141	130
05/13/14	566	528	131	94
06/16/14	570	516	124	70
07/15/14	574	511	119	57
08/15/14	578	529	119	71
09/15/14	582	523	114	55
10/15/14	586	551	116	81
10/16/14	16,692	17,248	3,619	4,175
11/14/14	725	651	132	57
12/15/14	728	677	132	80
01/06/15	734	685	128	80
02/13/15	739	693	124	78
03/16/15	744	706	121	82
04/15/15	750	708	116	74
05/15/15	755	708	110	62
06/15/15	761	715	106	60
07/15/15	766	742	104	80
08/15/15	772	795	105	128
08/25/15	19,380	21,360	2,822	4,802
09/15/15	943	1,044	130	230
09/28/15	18,640	21,360	2,656	5,376
10/15/15	1,116	1,202	140	227
11/16/15	1,125	1,194	130	199
12/15/15	1,135	1,260	127	253
01/07/16	1,144	1,266	118	240
01/15/16	17,325	21,360	1,992	6,027
01/20/16	23,859	32,040	2,988	11,169
02/16/16	1,567	2,077	178	688
03/15/16	1,583	1,837	143	397
04/15/16	1,597	1,782	125	310
05/15/16	1,611	1,768	110	267
06/15/16	1,624	1,755	95	226
07/15/16	1,638	1,709	80	151
08/15/16	1,651	1,675	65	89
09/15/16	1,664	1,742	54	132
10/15/16	1,677	1,769	41	133
11/15/16	1,691	1,829	28	167
12/15/16	1,705	1,767	14	75
01/07/17	1,719	1,766	-	47

You can see the large purchases (such as 1/15/16 with the 17,325 add and those have generally been at opportune times), but you can also see the steady growth of reinvested dividends and even more fun, the dividends on the reinvested dividends.  Again, this is not sexy stuff.  But it is building.  Even if I bought no more CSQ, if we assume they hold dividend steady, my monthly stream at age 60 will grow from $1,719 today to $2,245.  If you buy a stock and they are increasing dividend every year, it can bee even better.