Happy Easter Weekend everyone. Another week zips by. You have found your way to the MFI Diary. This is my blog where I discuss many things related to "The Little Book That Beats the Market" by Joel Greenblatt. I have been writing this blog since early 2006 and have tracked my performance with real money and tracking portfolios based on the official Magic Formula Investing (MFI) website. I also have created an MFI Index, which is fifty MFI stocks and is reconstituted once a year.
I should mention that I am just a guy with a spreadsheet. Not a CFA, not an expert... just a guy. So please use what I write for information, but do your own diligence in making stock decisions.
So welcome!
The Past Week
I think it was an ok week for me. But my memory is not always so good.
| Component | YTD |
| Overall | +3.17% |
| Select | +5.68% |
| Formula | +2.27% |
| Miscellaneous | -2.70% |
| Dividend | +4.14% |
| R3K | +4.05% |
| MFI Index | -3.53% |
I was right (on a relative basis). My portfolio was relatively flat during the week, but the R3k lost more than a percentage point. I think it is interesting how fast the Miscellaneous has fallen. Interesting from an analytical sense, not interesting when one considers that is real $ for me. But there is a reason the Misc component of my investing is the smallest. I know it is the riskiest. And at 57, I am not at the point in my life where it makes much sense to swing for the fences.
To me, the stunner is how poorly the MFI Index is faring. Down 3.5% in a market that is up 4%. Fortunately my Select and Formula tranches are both in the green.
Quote of the week: "It's better to look where you're going than to see where you've been"
MFI Select
I have two groups of MFI stocks with real money. The first (and oldest) is MFI Select. This is 4 baskets of 5 stocks that I buy and hold for a year. I have been doing this since my reboot in August 2012.
This approach has done very well for me. Note I am trying to avoid stocks that are on the screen, but in my view are not a true Jake's Bubble Gum Shop (ie a one hit wonder). To be fair, I have also had several stocks that did very well..
Here is my month by month performance, assuming I put in $100,000 spread over the 4 baskets evenly:
| 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 | 47.19% | 209,503 | 162,313 |
| 2/1/2017 | 47.65% | 212,330 | 164,675 |
| 3/1/2017 | 52.99% | 222,583 | 169,589 |
| 4/1/2017 | 54.43% | 224,094 | 169,663 |
| Current | 52.63% | 220,381 | 167,753 |
So definitely hanging in there. Here are how the stocks individually did in the past week:
| Stock | Last Week | Current | Dividend | Change |
| RHI | 45.24 | 44.49 | - | -1.7% |
| ATHM | 29.55 | 28.90 | - | -2.2% |
| CA | 31.88 | 31.65 | - | -0.7% |
| AMGN | 163.38 | 161.61 | - | -1.1% |
| MPAA | 28.44 | 28.49 | - | 0.2% |
| AKRX | 29.77 | 32.42 | - | 8.9% |
| MSGN | 24.20 | 24.30 | - | 0.4% |
| VLO | 65.57 | 64.68 | - | -1.4% |
| BRCD | 12.47 | 12.41 | - | -0.5% |
| YY | 45.97 | 43.99 | - | -4.3% |
| CSCO | 32.96 | 32.42 | - | -1.6% |
| KLAC | 96.54 | 95.33 | - | -1.3% |
| RGR | 56.00 | 56.85 | - | 1.5% |
| GILD | 66.58 | 66.51 | - | -0.1% |
| CBI | 30.36 | 28.94 | - | -4.7% |
| GNC | 6.65 | 7.30 | - | 9.8% |
| WNC | 20.30 | 19.74 | - | -2.8% |
| Average | -0.1% |
AKRX is looking like a super pick for me. Seems like GNC moves 8% every week - more often (sadly) down than up. WNC has been steadily melting down since a great pop post earnings in February.
Here are all 4 open tranches:
| 5/6/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| BRCD | $7.97 | $12.41 | $0.17 | 57.8% | 16.4% |
| CBI | $37.82 | $28.94 | $0.00 | -23.5% | 16.4% |
| HSII | $18.51 | $25.35 | $0.39 | 39.1% | 16.4% |
| RHI | $38.51 | $44.49 | $0.90 | 17.9% | 16.4% |
| UTHR | $107.99 | $121.53 | $0.00 | 12.5% | 16.4% |
| Totals | 20.8% | 16.4% | |||
| 8/15/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| CSCO | $31.20 | $32.42 | $0.26 | 4.7% | 8.1% |
| GNC | $19.79 | $7.30 | $0.38 | -61.2% | 8.1% |
| VLO | $54.73 | $64.68 | $1.30 | 20.6% | 8.1% |
| MSGN | $16.68 | $24.30 | $0.00 | 45.7% | 8.1% |
| GILD | $79.33 | $66.51 | $1.46 | -14.3% | 8.1% |
| Totals | -0.9% | 8.1% | |||
| 11/15/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| MPAA | $26.55 | $28.49 | $0.00 | 7.3% | 7.9% |
| ATHM | $22.61 | $28.90 | $0.00 | 27.8% | 7.9% |
| AMGN | $145.14 | $161.61 | $1.00 | 12.0% | 7.9% |
| RHI | $43.23 | $44.49 | $0.46 | 4.0% | 7.9% |
| CA | $31.11 | $31.65 | $0.26 | 2.6% | 7.9% |
| Totals | 10.7% | 7.9% | |||
| 2/1/2017 | Start | Current | Dividend | Pct Gain | R3K Gain |
| AKRX | $19.10 | $32.42 | $0.00 | 69.7% | 2.2% |
| YY | $41.08 | $43.99 | $0.00 | 7.1% | 2.2% |
| KLAC | $85.11 | $95.33 | $0.54 | 12.6% | 2.2% |
| WNC | $17.65 | $19.74 | $0.06 | 12.2% | 2.2% |
| RGR | $52.75 | $56.85 | $0.44 | 8.6% | 2.2% |
| Totals | 22.1% | 2.2% |
August is a mess, but other 3 tranches look strong. February - yowza!
| Category/Tranche | August | November | February | May | Total |
| Initial Investment | 25,000 | 25,000 | 25,000 | 25,000 | 100,000 |
| Current Tranche | -0.9% | 10.7% | 22.1% | 20.8% | 13.1% |
| Previous Tranche | 2.8% | 8.0% | 10.7% | -25.2% | -3.4% |
| Tranche -2 | 11.2% | 69.4% | -14.3% | 18.3% | 21.2% |
| Tranche -3 | 41.4% | 14.2% | 8.5% | 33.0% | 24.3% |
| Tranche -4 | 14.1% | 43.7% | 78.3% | 0.0% | 34.0% |
| MFI Overall Gain | 82.8% | 232.8% | 124.0% | 42.0% | 120.4% |
| Current Balance | 45,693 | 83,197 | 55,991 | 35,500 | 220,381 |
| R3K Current Tranche | 8.1% | 7.9% | 2.2% | 16.4% | 8.6% |
| R3K Overall Gain | 80.6% | 83.9% | 65.3% | 54.7% | 67.8% |
| R3K Balance | 41,779 | 45,966 | 41,334 | 38,675 | 167,753 |
| Annualized IRR | 13.8% | 31.3% | 21.2% | 9.3% | 18.9% |
Annualized IRR has now dropped under 19%. That is hard to sustain. Again, look at current balances... November is so much better than others. But recall, this assumes $25K at the start and no adds. I have been adding, so my real portfolio is not as skewed.
MFI Formula
These are stocks picked by formula rather than my selecting. Formula is based on my backtesting - stocks have to have yield of 2.4% or greater and be in upper 2/3 in market cap. I then randomly select 5 names. I did start a new tranche on April 1st. While the first week was a bit shaky, it was pretty solid last week.
Same tables.
| 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 |
| 2/1/2017 | 1.32% | 114,809 | 113,486 |
| 3/1/2017 | -5.09% | 112,930 | 118,024 |
| 4/1/2017 | -1.86% | 116,227 | 118,091 |
| Current | -0.90% | 115,417 | 116,319 |
That is actually a pretty strong move since March 1st. I was trailing by 5 points then, now under a point.
Here are the stocks during the week:
| Stock | Last Week | Current | Dividend | Change |
| CPLA | 84.75 | 84.85 | - | 0.1% |
| GILD | 66.58 | 66.51 | - | -0.1% |
| SYNT | 16.89 | 17.37 | - | 2.8% |
| CSCO | 32.96 | 32.42 | - | -1.6% |
| TGNA | 25.29 | 25.21 | - | -0.3% |
| HPQ | 17.37 | 18.20 | - | 4.8% |
| CA | 31.88 | 31.65 | - | -0.7% |
| PBI | 12.99 | 12.91 | - | -0.6% |
| OMC | 85.72 | 84.46 | - | -1.5% |
| BKE | 17.50 | 17.90 | 0.25 | 3.7% |
| LDOS | 50.63 | 50.64 | - | 0.0% |
| ILG | 21.19 | 21.32 | - | 0.6% |
| VIAB | 45.27 | 43.77 | - | -3.3% |
| HRB | 23.40 | 23.50 | - | 0.4% |
| GME | 21.66 | 22.38 | 3.3% | |
| Average | 0.5% |
You can see HPQ has just been great. Computer sales seem to be picking up again. SYNT also finally may be starting to percolate.
| 7/1/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| ILG | $16.76 | $21.32 | $0.39 | 29.5% | 11.8% |
| VIAB | $44.00 | $43.77 | $0.60 | 0.8% | 11.8% |
| CPLA | $53.22 | $84.85 | $1.21 | 61.7% | 11.8% |
| HRB | $23.62 | $23.50 | $0.66 | 2.3% | 11.8% |
| PBI | $17.69 | $12.91 | $0.56 | -23.8% | 11.8% |
| Totals | 14.1% | 11.8% | |||
| 10/3/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| CPLA | $58.15 | $84.85 | $0.82 | 47.3% | 8.8% |
| LDOS | $43.01 | $50.64 | $0.00 | 17.7% | 8.8% |
| GME | $27.70 | $22.38 | $0.75 | -16.5% | 8.8% |
| PBI | $18.15 | $12.91 | $0.38 | -26.8% | 8.8% |
| CSCO | $31.72 | $32.42 | $0.81 | 4.8% | 8.8% |
| Totals | 5.3% | 8.8% | |||
| 12/30/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| GILD | $71.69 | $66.51 | $0.52 | -6.5% | 3.9% |
| HPQ | $15.00 | $18.20 | $0.13 | 22.2% | 3.9% |
| TGNA | $21.33 | $25.21 | $0.14 | 18.8% | 3.9% |
| CA | $31.99 | $31.65 | $0.26 | -0.3% | 3.9% |
| SYNT | $19.79 | $17.37 | $0.00 | -12.2% | 3.9% |
| Totals | 4.4% | 3.9% | |||
| 4/1/2017 | Start | Current | Dividend | Pct Gain | R3K Gain |
| BKE | $18.25 | $17.90 | $0.25 | -0.6% | -1.5% |
| CSCO | $33.91 | $32.42 | $0.29 | -3.5% | -1.5% |
| GILD | $67.87 | $66.51 | $0.00 | -2.0% | -1.5% |
| OMC | $86.24 | $84.46 | $0.00 | -2.1% | -1.5% |
| SYNT | $16.80 | $17.37 | $0.00 | 3.4% | -1.5% |
| Totals | -1.0% | -1.5% |
So a bit hopeful. 3 of 4 tranches are ahead. Not a stomp, but perhaps some green shoots.
| Category/Tranche | October | January | April | July | Total |
| Initial Investment | 249,820 | 249,939 | 250,180 | 249,728 | 999,667 |
| Current Tranche | 5.3% | 4.4% | -1.0% | 14.1% | 4.9% |
| Previous Tranche | 5.5% | 9.3% | 25.2% | -12.5% | 7.0% |
| Tranche -2 | 0.5% | 11.0% | -0.2% | - | 2.8% |
| MFI Overall Gain | 11.6% | 26.7% | 23.7% | -0.1% | 15.5% |
| Current Balance | 278,825 | 316,552 | 309,378 | 249,419 | 1,154,175 |
| R3K Current Tranche | 8.8% | 3.9% | -1.5% | 11.8% | 5.7% |
| R3K Overall Gain | 22.9% | 16.2% | 14.9% | 11.5% | 16.4% |
| R3K Balance | 306,941 | 290,351 | 287,541 | 278,353 | 1,163,186 |
| Annualized IRR | 4.4% | 10.9% | 10.9% | -0.1% | 6.5% |
Dividends/Miscellaneous
My dividend portfolio is hanging in there. Part of that is the markets have been flat/slightly down and I sold a big chunk of my dividend portfolio (though in hindsight, I'd be better off today if I had not sold).
Since selling:
PEO: +3.4%
PSXP: +4.5%
AOD: +2.0%
CSQ: +2.7%
Oh well.
My miscellaneous portfolio is struggling of late. My largest holding, BAC warrants were down 7% last week. It may be time to add to this position, selling seems overdone. Then a few of my riskier biotech stocks did not do well last week. It is not a sprint. I am not worried.
I continue to hold the largest cash position of my life. So while down markets would not "feel" good, it would be ok for me as long as it was not a permanent down. I do believe income tax reform will be a struggle. That may act as a downdraft.
Have a great weekend.
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