MFI Tracking Portfolio - 4/22/16

Magic Formula Investing - Tracking Portfolio 4/22/16

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

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) lost by 120 basis points, breaking a streak of four straight wins. 8 of 11 open portfolios are leading (up from 5 a month ago).  In aggregate we are now winning again, (by average of 2.0 points - quite a reversal from down 1.3 points a month ago {disclosure, I did find a "mistake", ACHI had changed names to RCM and I did not give credit for the movement of RCM post name change and it was pretty significant}).  I am also seeing the renewed vigor in my PA. Here are the 50 stocks in descending performance order:

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
AGX	33.16	66.85	101.6%	32.70	501
MSB	8.14	15.30	87.9%	7.95	117
CPLA	51.52	95.30	85.0%	48.80	621
IILG	13.28	24.11	81.6%	10.61	775
STRA	49.07	86.71	76.7%	43.50	543
MCFT	9.73	16.75	72.1%	10.25	241
BLBD	10.90	18.60	70.6%	9.53	229
BBY	32.23	51.81	60.7%	28.76	10,797
IDCC	56.88	89.90	58.0%	51.97	2,043
HPQ	12.19	18.82	54.4%	11.31	21,904
MSGN	17.25	24.95	44.6%	14.73	1,291
IQNT	15.87	22.90	44.3%	14.90	549
AAPL	103.49	143.65	38.8%	89.47	585,941
BPT	14.38	19.45	35.2%	12.68	358
NSR	25.01	33.20	32.7%	21.10	1,338
BRCD	9.49	12.57	32.5%	7.60	3,901
PETS	17.45	23.10	32.4%	17.70	369
CSCO	27.19	34.07	25.3%	25.81	142,214
OUTR	41.65	52.00	24.8%	24.81	709
TIVO	9.38	11.34	20.9%	15.06	921
DLX	60.77	71.91	18.3%	59.47	3,032
TSRA	29.05	33.60	15.6%	28.57	1,504
VEC	22.07	25.44	15.3%	12.50	234
RPXC	11.15	12.84	15.2%	8.60	628
SRDX	20.28	22.85	12.7%	19.86	264
SPOK	15.99	17.95	12.2%	16.05	348
TIME	14.33	15.20	6.0%	12.50	1,602
UTHR	119.61	125.70	5.1%	97.52	5,727
ENTA	31.78	31.75	-0.1%	20.79	597
VIAB	42.68	42.56	-0.3%	33.94	17,341
UNTD	11.10	11.00	-0.9%	9.50	165
FLR	53.43	51.32	-4.0%	44.05	7,546
USNA	61.29	56.85	-7.2%	52.55	1,531
WILN	2.17	2.01	-7.6%	1.27	268
AMAG	28.91	24.40	-15.6%	17.92	1,004
NHTC	34.62	28.68	-17.2%	20.59	436
SSNI	13.99	11.41	-18.4%	10.18	708
ICON	8.66	7.00	-19.2%	6.26	421
VDSI	17.22	13.50	-21.6%	12.05	691
CALM	50.22	37.75	-24.8%	35.10	2,459
GME	31.01	22.69	-26.8%	20.10	3,388
KORS	51.60	37.33	-27.7%	34.92	9,431
FPRX	49.76	34.86	-29.9%	31.79	1,300
INSY	16.12	11.25	-30.2%	8.70	1,221
GILD	99.34	68.55	-31.0%	65.38	144,945
PBI	20.50	13.29	-35.2%	12.31	4,234
BKE	28.95	18.70	-35.4%	16.00	1,517
SYNT	28.48	17.61	-38.2%	15.82	3,689
PDLI	3.76	2.25	-40.2%	1.93	628
FIT	17.58	5.72	-67.5%	5.31	3,776

TIME would have been much better just a day earlier (it dropped 12% on Friday as they announced not selling).

Definitely a few trends here. I note that some of the worst stocks would have qualified for dividend portfolio (GME, GILD, PBI, BKE and maybe PDLI (can't recall when they suspended dividend)).  For profit education was strong (CPLA and STRA) which does highlight my point that MFI stocks can have a cycle, so do not necessarily give up on them. Maybe BKE is now at that point of their life cycle.

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	13.6%	14.8%	0
5/27/2016	20.1%	14.3%	1
6/30/2016	20.3%	14.0%	1
7/29/2016	15.0%	9.7%	1
8/26/2016	14.2%	9.6%	1
9/30/2016	13.2%	9.3%	1
10/28/2016	13.4%	11.8%	1
11/25/2016	2.9%	6.2%	0
12/30/2016	0.5%	4.8%	0
1/27/2017	1.6%	2.3%	0
2/24/2017	1.7%	-0.9%	1
3/31/2017	0.2%	-0.8%	1

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 21% (I see PDLI did qualify).   The Dogs portfolio underperformed, up just 5%.  The New approach dreadful, down 30% after two straight great months (it is volatile)  Here were the "dividend" stocks:

Stock	Initial Price	End Price	Percent Change	Yield
BBY	32.23	51.81	60.7%	3.5%
BKE	28.95	18.70	-35.4%	3.5%
BPT	14.38	19.45	35.2%	19.8%
CALM	50.22	37.75	-24.8%	3.5%
CPLA	51.52	95.30	85.0%	3.0%
CSCO	27.19	34.07	25.3%	3.8%
GME	31.01	22.69	-26.8%	4.8%
HPQ	12.19	18.82	54.4%	4.1%
IILG	13.28	24.11	81.6%	3.6%
IQNT	15.87	22.90	44.3%	3.8%
MSB	8.14	15.30	87.9%	3.6%
OUTR	41.65	52.00	24.8%	5.8%
PBI	20.50	13.29	-35.2%	3.7%
PDLI	3.76	2.25	-40.2%	5.3%
PETS	17.45	23.10	32.4%	4.1%
SPOK	15.99	17.95	12.2%	3.1%
TIME	14.33	15.20	6.0%	5.3%
TSRA	29.05	33.60	15.6%	2.8%
VIAB	42.68	42.56	-0.3%	3.7%

Here are the Dogs:

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
BKE	28.95	18.70	-35.4%	16.00	1,517
MSB	8.14	15.30	87.9%	7.95	117
PDLI	3.76	2.25	-40.2%	1.93	628
RPXC	11.15	12.84	15.2%	8.60	628
VIAB	42.68	42.56	-0.3%	33.94	17,341

Here are the new stocks:

Stock	Initial Price	End Price	Percent Change
FPRX	49.76	34.86	-29.9%
INSY	16.12	11.25	-30.2%
SSNI	13.99	11.41	-18.4%
SYNT	28.48	17.61	-38.2%

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	202,557
Total Russell 3K	227,576
New	155,651
Dogs	237,980
Dividend	440,123