Someone once asked me why I didn't just buy all the MFI stocks. The answer (at the time) was frictional costs. But as my tranches grow in size (such as current plan to add 50%), that is suddenly becoming less of an issue.
I have done a lot of work lately about whether MFI is really working (the answer for me is yes). The "problem" with MFI has been that the list is usually littered with stink bombs. If (and it is a big if) you can find a way to go from 14% stink bombs to 6% stink bombs, you can then do quite "satisfactory".
So how would that work? Well, here is today's list:
| Company | Ticker | Market Cap |
| Accretive Health Inc | ACHI | 244.61 |
| AMC Networks Inc | AMCX | 3,909.36 |
| American Outdoor Brands Corporation | AOBC | 1,181.80 |
| Apple Inc | AAPL | 629,187.40 |
| Applied Genetic Technologies Corp | AGTC | 170.6 |
| Argan Inc | AGX | 1,120.02 |
| Avid Technology Inc. | AVID | 184.84 |
| Aware Inc. | AWRE | 139.17 |
| Barrett Business Services Inc | BBSI | 448.04 |
| Block (H&R) Inc | HRB | 5,075.83 |
| Buckle Inc. (The) | BKE | 1,069.71 |
| CA Inc | CA | 13,712.45 |
| Cisco Systems Inc | CSCO | 151,875.50 |
| Concordia International Corp | CXRX | 113.26 |
| Deluxe Corp | DLX | 3,431.14 |
| DHI Group Inc | DHX | 300.86 |
| Express Scripts Holding Co | ESRX | 44,535.78 |
| Five Prime Therapeutics Inc | FPRX | 1,471.31 |
| GameStop Corp. | GME | 2,515.75 |
| Gilead Sciences Inc | GILD | 99,797.77 |
| Graham Holdings Co | GHC | 2,966.47 |
| HP Inc | HPQ | 25,680.00 |
| Iconix Brand Group Inc | ICON | 526.46 |
| InterDigital Inc | IDCC | 3,051.10 |
| iRadimed Corp | IRMD | 129.08 |
| Malibu Boats Inc | MBUU | 332.21 |
| MCBC Holdings Inc | MCFT | 272.57 |
| McKesson Corp | MCK | 33,203.92 |
| MDC Partners Inc | MDCA | 369.1 |
| Motorcar Parts of America Inc | MPAA | 551.22 |
| MSG Networks Inc | MSGN | 1,722.88 |
| Myriad Genetics Inc | MYGN | 1,217.52 |
| Natural Health Trends Corp | NHTC | 284.66 |
| NeuStar Inc | NSR | 1,822.74 |
| PDL BioPharma Inc | PDLI | 374.12 |
| Pendrell Corp | PCO | 172.59 |
| Pitney Bowes Inc. | PBI | 3,003.61 |
| RPX Corp | RPXC | 541.17 |
| Silver Spring Networks Inc | SSNI | 679.08 |
| Sturm Ruger & Co Inc. | RGR | 1,027.33 |
| Sucampo Pharmaceuticals Inc | SCMP | 616.4 |
| Syntel Inc | SYNT | 1,714.82 |
| TEGNA Inc | TGNA | 4,609.97 |
| Teradata Corp | TDC | 3,728.88 |
| tronc inc | TRNC | 492.14 |
| Unisys Corp | UIS | 736.22 |
| United Therapeutics Corp | UTHR | 6,680.66 |
| USANA Health Sciences Inc | USNA | 1,529.31 |
| Vectrus Inc | VEC | 253.58 |
| Viacom Inc | VIAB | 14,995.53 |
Now I have said toss out companies that have very irregular earnings or those that are subject to drop (royalties and trusts).
| Company | Ticker | Market Cap |
| Accretive Health Inc | ACHI | 244.61 |
| Applied Genetic Technologies Corp | AGTC | 170.6 |
| Avid Technology Inc. | AVID | 184.84 |
| Five Prime Therapeutics Inc | FPRX | 1,471.31 |
| NeuStar Inc | NSR | 1,822.74 |
| PDL BioPharma Inc | PDLI | 374.12 |
| Pendrell Corp | PCO | 172.59 |
Also throw out 10 smallest
| Company | Ticker | Market Cap |
| Concordia International Corp | CXRX | 113.26 |
| iRadimed Corp | IRMD | 129.08 |
| Aware Inc. | AWRE | 139.17 |
| Applied Genetic Technologies Corp | AGTC | 170.60 |
| Pendrell Corp | PCO | 172.59 |
| Avid Technology Inc. | AVID | 184.84 |
| Accretive Health Inc | ACHI | 244.61 |
| Vectrus Inc | VEC | 253.58 |
| MCBC Holdings Inc | MCFT | 272.57 |
| Natural Health Trends Corp | NHTC | 284.66 |
So we're left with 37 companies.
I cannot prove 100% that this would improve things. But I do know the stinkers have been in these two buckets much more (although perhaps you are also giving up some of the huge winners). Not sure, I am going to think about it.
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1 comment:
It seems like the frictional cost could practically be eliminated by moving your MFI account(s) to Interactive Brokers. I'm personally with Schwab and their commissions and fees suit me. I think that when I started with MFI that my commission was about 0.5% each way. Based on the expected MFI return this was acceptable to me. Due to increasing the amount invested in each tranche and reductions in commissions over the years I now pay about 0.1% per trade.
I think you've mentioned stop-loss in the past. Have you looked at this recently in order to eliminate the 'stink bombs'? Some limit like 25% to get rid of the chance that it turns into a 60 or 70% loss? Just looking through my stocks it seems like if a stock dropped more that 25% if was much more likely to continue dropping than it was to increase in price.
Also, if you are throwing out the stocks with the lowest market cap, why not just increase the screening size?
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