Magic Formula Investing - March 24th, 2016 Monthly Tracking Portfolio

March 24th, 2016 Monthly Tracking Portfolio

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of March 2017.  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.

Quips & Quotes

I found a fun book at a garage sale of 14,000 quips and quotes.  I am going to start including them in my blog from time to time.

"Dough is the wrong term for money. Dough sticks to your hands."

Onward

 Fearless readers will recall we had a 29 month "losing streak"..  Then we had a 13 month winning streak. This month, MFI (wait for it) won by 6.9 percentage points, our fourth straight win. Amazingly, this is the biggest win since the April 26th 2013 portfolio.  It had been a dry spell. 18 of the 19 had recently lost, but concurrent with the Trump rally, MFI stocks saw a resurgence these past 4+ months. But the rising tide seems to be receding.  Only 5 of 11 open portfolios are leading.  In aggregate we are now losing again, (by average of 1.3 points) giving up our 4 point lead from 2 months ago.  It is disappointing and I have certainly felt some of that pain in my personal account.  Here are the 50 stocks in descending performance order:

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
BBSI	27.21	54.62	100.7%	26.58	199
MEET	2.96	5.89	99.0%	2.71	140
AGX	33.54	66.15	97.3%	30.62	506
CLCT	14.57	26.10	79.1%	15.06	139
MCFT	9.57	16.17	68.9%	10.25	237
STRA	47.79	80.49	68.4%	43.50	529
CPLA	50.69	85.03	67.7%	48.80	614
BLBD	10.40	17.15	64.9%	9.53	218
IDCC	52.79	86.30	63.5%	51.97	1,897
BBY	30.36	49.15	61.9%	28.76	10,169
MED	28.39	44.37	56.3%	29.32	351
MBUU	14.54	22.45	54.4%	11.38	261
IQNT	14.93	22.90	53.4%	14.90	517
HPQ	11.66	17.88	53.3%	11.31	20,966
IILG	13.72	20.96	52.8%	10.61	801
NATH	42.03	62.65	49.1%	40.04	183
GD	126.42	187.20	48.1%	128.99	40,400
OUTR	36.49	52.00	42.5%	24.81	618
MSGN	16.74	23.35	39.5%	14.73	1,252
AAPL	103.48	143.66	38.8%	89.47	585,886
BPT	14.60	20.10	37.7%	11.29	349
SRDX	17.62	24.05	36.5%	17.61	229
TIME	14.46	19.35	33.8%	12.50	1,616
CSCO	27.00	33.80	25.2%	25.81	141,254
NSR	26.59	33.15	24.7%	21.10	1,423
UTHR	108.87	135.38	24.4%	97.52	5,212
BRCD	10.09	12.48	23.7%	7.60	4,146
DLX	58.81	72.17	22.7%	59.47	2,935
VIAB	38.68	46.62	20.5%	33.94	15,717
PETS	16.77	20.14	20.1%	17.24	354
TIVO	9.45	11.34	20.0%	15.06	928
SPOK	16.08	19.00	18.2%	16.04	350
ENTA	27.03	30.80	13.9%	20.79	508
TSRA	29.84	33.95	13.8%	28.57	1,544
RPXC	10.80	12.00	11.1%	8.60	609
AMAG	21.42	22.55	5.3%	17.92	744
VEC	21.75	22.35	2.8%	12.50	231
USNA	56.76	57.60	1.5%	54.03	1,418
FLR	53.28	52.62	-1.2%	44.05	7,524
NHTC	30.84	28.90	-6.3%	20.59	392
VDSI	14.91	13.50	-9.5%	12.40	598
WILN	2.08	1.83	-11.9%	1.27	256
GME	29.06	22.55	-22.4%	20.10	3,127
GILD	89.00	67.92	-23.7%	65.38	129,857
CALM	49.68	36.80	-25.9%	35.10	2,431
PDLI	3.07	2.27	-25.9%	1.93	511
KORS	55.53	38.11	-31.4%	34.92	10,149
PBI	19.93	13.11	-34.2%	12.31	4,117
BKE	30.85	18.60	-39.7%	16.50	1,608
FIT	14.58	5.92	-59.4%	5.31	3,132

Definitely a few trends here. It really stands out to me thata the top 8 stocks were all under $1b in market cap.  Only 12 of 50 lost money - that has to be best in a while. Three of the four stinkers (losing 30% or more) were associated with selling something (KORS, BKE and FIT).

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	-17.1%	-1.9%	0
4/24/2015	-15.4%	-0.8%	0
5/29/2015	-14.1%	0.1%	0
6/26/2015	-8.7%	0.4%	0
7/30/2015	3.96%	4.02%	0
8/28/2015	5.6%	10.2%	0
9/25/2015	6.5%	13.8%	0
10/30/2015	2.0%	4.0%	0
11/27/2015	8.9%	8.4%	1
12/31/2015	13.7%	12.6%	1
1/29/2016	22.6%	22.4%	1
2/26/2016	27.8%	25.4%	1
3/24/2016	26.5%	19.6%	1
4/22/2016	11.3%	15.7%	0
5/27/2016	16.7%	15.2%	1
6/30/2016	16.0%	14.9%	1
7/29/2016	11.6%	10.5%	1
8/26/2016	12.0%	10.4%	1
9/30/2016	11.1%	10.1%	1
10/28/2016	11.4%	12.6%	0
11/25/2016	1.8%	7.0%	0
12/30/2016	-0.4%	5.6%	0
1/27/2017	0.3%	3.1%	0
2/24/2017	-0.5%	-0.1%	0

Subsets

I also have tracked 3 subsets of the larger portfolios:  (1) dividend stocks (those with a yield per Yahoo of at least 2.6%),  (2) new stocks (those new to the tracking portfolios in past 12 months and 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 great, up about 31.6%.   The Dogs portfolio underperformed, up just 9.0%.  The New approach unbelievable for 2nd straight month, up 64% (was 49% last month).  Here were the "new" stocks:

Stock	Initial Price	End Price	Percent Change
MEET	2.96	5.89	99.0%
MED	28.39	44.37	56.3%
MBUU	14.54	22.45	54.4%
GD	126.42	187.20	48.1%

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. I think it is obvious why my formula approach is a function of dividend subset.

Category	Value
Total	198,755
Total Russell 3K	229,330
New	158,505
Dogs	238,155
Dividend	431,372

That is a wrap.  Have a great weekend.