Weekend Update 4/29/17

Weekend Update - Greetings From Pittsburgh!

In Pittsburgh this weekend as my son has a concert (with him having a solo) with his college orchestra.  I really enjoy Pittsburgh. Great vibe.

You have found your way to The MFI Diary, a blog I have been maintaining since 2006 (MFI being magic formula investing from The Little Book That Beats the Market by Joel Greenblatt). .In it I track performance of my own actual MFI investments along with detailed tracking of picking stocks from the MFI screen and my MFI Index (an index compromised of 50 stocks from screen and reconstituted once a year).

People need to know I am just a guy with a spreadsheet, no finance expertise.  So please use what I write for information/entertainment - but if you choose to buy some of the names I buy you should do your own due diligence.

Past Week

 It was a great week, except for Thursday.  I did/do have a speculative position in SNCR and it took a 50% beat down on Thursday as their CEO and CFO were let go.  Despite that crash and burn, I was still up over 1% on the week.   All the MFI approaches (SNCR was not part of an MFI approach) are starting to do well.  Here is where my portfolios stand year to date:

Component	YTD
Overall	+5.63%
Select	+9.63%
Formula	+5.71%
Miscellaneous	+0.03%
Dividend	+4.24%
R3K	+6.72%
MFI Index	+0.40%

So while in total I trail the R3K benchmark by 110 basis points, recall that I have a significant cash position (right at 20%).  That is defensive and I am ok with trailing a bit and having that hedge.

Select and Formula are my two MFI approaches (each have 20 stocks). Miscellaneous and Dividend are not associated with MFI and I generally do not discuss them in great detail.  Finally the MFI Index is the 50 stocks in the screen at the start of the year. It has struggled (as you can see) but at least is back in the black.  You will see later this weekend that the broader MFI universe is starting to do better (I have a tracking portfolio that hit one year anniversary).

MFI Select

This is as it sounds, MFI stocks that I select 4 times a year with five stocks in each tranche.  I hold them for a year and then rinse and repeat. I rebooted this approach in August 2012 after I quit MFI in frustration for a year.  It has been quite successful.  In part I believe this is luck, but in part I really try to avoid the MFI stinker stocks - those that really do not fit the mold of Jake's Bubble Gum Shops in the book.

Here are my 4 open tranches (just one week to go on May 2016 - and it did stumbled this week with HSII crashing).

5/6/2016	Start	Current	Dividend	Pct Gain	R3K Gain
BRCD	$7.97	$12.57	$0.17	59.8%	19.3%
CBI	$37.82	$30.08	$0.28	-19.7%	19.3%
HSII	$18.51	$21.50	$0.39	18.3%	19.3%
RHI	$38.51	$46.05	$0.90	21.9%	19.3%
UTHR	$107.99	$125.70	$0.00	16.4%	19.3%
Totals				19.3%	19.3%
8/15/2016	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$31.20	$34.07	$0.26	10.0%	10.8%
GNC	$19.79	$7.78	$0.38	-58.8%	10.8%
VLO	$54.73	$64.61	$1.30	20.4%	10.8%
MSGN	$16.68	$24.95	$0.00	49.6%	10.8%
GILD	$79.33	$68.55	$1.46	-11.7%	10.8%
Totals				1.9%	10.8%
11/15/2016	Start	Current	Dividend	Pct Gain	R3K Gain
MPAA	$26.55	$30.32	$0.00	14.2%	10.6%
ATHM	$22.61	$34.60	$0.00	53.0%	10.6%
AMGN	$145.14	$163.32	$1.00	13.2%	10.6%
RHI	$43.23	$46.05	$0.46	7.6%	10.6%
CA	$31.11	$32.83	$0.26	6.3%	10.6%
Totals				18.9%	10.6%
2/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
AKRX	$19.10	$33.45	$0.00	75.1%	4.8%
YY	$41.08	$48.97	$0.00	19.2%	4.8%
KLAC	$85.11	$98.22	$0.54	16.0%	4.8%
WNC	$17.65	$22.78	$0.06	29.4%	4.8%
RGR	$52.75	$60.45	$0.44	15.4%	4.8%
Totals				31.0%	4.8%

So you can see in my 20 stocks just one true stinker, GNC.  Then CBI is pretty poor. AKRX is being bought as is BRCD - those always help a ton.  You may note that I do allow myself to pick stocks not on the screen in MFI Select.  I have ATHM and YY, two Chinese stocks which to my knowledge have never been on the screens.  I run my own screen and sometimes pick from there.  Here are my overall results:

Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	1.9%	18.9%	31.0%	19.3%	18.8%
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	88.0%	257.2%	140.5%	40.3%	131.5%
Current Balance	46,989	89,310	60,116	35,081	231,497
R3K Current Tranche	10.8%	10.6%	4.8%	19.3%	11.4%
R3K Overall Gain	85.2%	88.6%	69.6%	58.6%	71.0%
R3K Balance	41,779	47,140	42,394	39,654	170,967
Annualized IRR	14.3%	33.1%	23.0%	8.9%	19.8%

So you can see my current tranches are up 18.8% versus R3K current at 11.4%. Boo-yah!  Overall I am 19.8% annualized IRR.  While these track my actual returns pretty well, there are difference as these are "hypothetical", assuming I started with $100,000 over the 4 tranches and just rolled everything forward and had no cash component.  In reality I have regularly allocated more $ to MFI. I will be increasing May allotment by 40%.

Here are how stocks did this past week (HSII was bad).

Stock	Last Week	Current	Dividend	Change
RHI	47.18	46.05	-	-2.4%
ATHM	32.40	34.60	-	6.8%
AKRX	32.91	33.45	-	1.6%
MPAA	29.47	30.32	-	2.9%
AMGN	160.41	163.32	-	1.8%
CA	31.93	32.83	-	2.8%
WNC	19.72	22.78	-	15.5%
YY	45.88	48.97	-	6.7%
RGR	56.30	60.45	-	7.4%
MSGN	24.40	24.95	-	2.3%
KLAC	98.37	98.22	-	-0.2%
BRCD	12.47	12.57	-	0.8%
VLO	65.23	64.61	-	-1.0%
CSCO	32.82	34.07	-	3.8%
HSII	26.15	21.50	-	-17.8%
UTHR	120.98	125.70	-	3.9%
GILD	65.93	68.55		4.0%
CBI	29.95	30.08		0.4%
GNC	8.24	7.78		-5.6%
WNC	19.72	22.78	-	15.5%
Average				2.5%

Finally,  here is a table that shows month by month the progression if you started with $100,000.  You will see there are certainly bumps along the road:

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	60.53%	231,497	170,967

April is over, you can see it was a very good month.  Here are how the stocks did in April:

Stock	Last Month	Current	Dividend	Change
RHI	48.83	46.05	-	-5.7%
ATHM	31.77	34.60	-	8.9%
AKRX	24.08	33.45	-	38.9%
MPAA	30.73	30.32	-	-1.3%
AMGN	164.07	163.32	-	-0.5%
CA	31.72	32.83	-	3.5%
WNC	20.69	22.78	-	10.1%
YY	46.11	48.97	-	6.2%
RGR	53.55	60.45	-	12.9%
MSGN	23.35	24.95	-	6.9%
KLAC	95.07	98.22	-	3.3%
BRCD	12.47	12.57	-	0.8%
VLO	66.29	64.61	-	-2.5%
CSCO	33.80	34.07	-	0.8%
HSII	26.35	21.50	-	-18.4%
UTHR	135.38	125.70	-	-7.2%
GILD	67.92	68.55		0.9%
CBI	30.75	30.08		-2.2%
GNC	7.36	7.78		5.7%
WNC	20.69	22.78	-	10.1%

MFI Formula

This is my other investing approach.  As the name suggests, it is formula driven based on my back testing of MFI results back to 2006. So I guess it is the magic formula of the magic formula.  My studies have shown that stocks that pay dividends from the screen do better (turns out this weeds out many of the stinkers).  So my formula takes the 50 stocks from >100m screen.  Then I take the 34 largest market caps from that screen and then only go with those with a yield of 2.4% or more.  Finally I randomly select 5 from that subset.

Since I started this approach in October 2014, it has been pretty much a push. A bit disappointing.  I would have been better off not to have thrown out the bottom 1/3 of market caps.  I will stay with it though.

Here are four tranches:

7/1/2016	Start	Current	Dividend	Pct Gain	R3K Gain
ILG	$16.76	$24.11	$0.39	46.2%	14.6%
VIAB	$44.00	$42.56	$0.60	-1.9%	14.6%
CPLA	$53.22	$95.30	$1.21	81.3%	14.6%
HRB	$23.62	$24.79	$0.66	7.7%	14.6%
PBI	$17.69	$13.29	$0.56	-21.7%	14.6%
Totals				22.3%	14.6%
10/3/2016	Start	Current	Dividend	Pct Gain	R3K Gain
CPLA	$58.15	$95.30	$0.82	65.3%	11.6%
LDOS	$43.01	$52.66	$0.00	22.4%	11.6%
GME	$27.70	$22.69	$0.75	-15.4%	11.6%
PBI	$18.15	$13.29	$0.38	-24.7%	11.6%
CSCO	$31.72	$34.07	$0.81	10.0%	11.6%
Totals				11.5%	11.6%
12/30/2016	Start	Current	Dividend	Pct Gain	R3K Gain
GILD	$71.69	$68.55	$0.52	-3.6%	6.6%
HPQ	$15.00	$18.82	$0.13	26.4%	6.6%
TGNA	$21.33	$25.48	$0.14	20.1%	6.6%
CA	$31.99	$32.83	$0.26	3.4%	6.6%
SYNT	$19.79	$17.61	$0.00	-11.0%	6.6%
Totals				7.0%	6.6%
4/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
BKE	$18.45	$18.70	$0.25	2.7%	1.0%
CSCO	$33.76	$34.07	$0.29	1.8%	1.0%
GILD	$67.50	$68.55	$0.00	1.6%	1.0%
OMC	$85.53	$82.12	$0.00	-4.0%	1.0%
SYNT	$16.76	$17.61	$0.00	5.1%	1.0%
Totals				1.4%	1.0%

The observant reader will see that these are improving. Methinks the formula is starting to work better.

Category/Tranche	October	January	April	July	Total
Initial Investment	249,820	249,939	250,180	249,728	999,667
Current Tranche	11.5%	7.0%	1.4%	22.3%	8.7%
Previous Tranche	5.5%	9.3%	25.2%	-12.5%	7.8%
Tranche -2	0.5%	11.0%	-0.2%	-	2.8%
MFI Overall Gain	18.2%	29.8%	26.6%	7.1%	20.4%
Current Balance	295,285	324,523	316,815	267,405	1,204,029
R3K Current Tranche	11.6%	6.6%	1.0%	14.6%	8.5%
R3K Overall Gain	26.0%	19.1%	17.9%	14.3%	19.3%
R3K Balance	314,778	297,800	294,949	285,436	1,192,964
Annualized IRR	6.7%	11.9%	12.0%	3.8%	8.6%

So kind of a push everywhere. Current is 8.7% vs 8.5%. Overall is 20.4% vs 19.3%. You might look and think "I thought current is better than 8.7% as four tranches at 11.5%, 7.0%, 1.4% and 22.3%.  Those average 10.6%." But the best one in July (22.3%) and it has the lowest balance (267,405) and thus gets lowest weight.

Here is month by month progression:

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	1.11%	120,403	119,296

Hoo-zah! Back in the lead with two straight solid months.  Here is how stocks did past week:

Stock	Last Week	Current	Dividend	Change
CPLA	85.03	95.30	-	12.1%
GILD	67.92	68.55	-	0.9%
SYNT	16.83	17.61	-	4.6%
CSCO	33.80	34.07	-	0.8%
TGNA	25.62	25.48	-	-0.5%
HPQ	17.88	18.82	-	5.3%
CA	31.72	32.83	-	3.5%
PBI	13.11	13.29	-	1.4%
OMC	86.24	82.12	-	-4.8%
BKE	18.25	18.70	-	2.5%
LDOS	51.14	52.66	-	3.0%
ILG	20.96	24.11	-	15.0%
VIAB	46.62	42.56	-	-8.7%
HRB	23.25	24.79	-	6.6%
GME	22.55	22.69		0.6%
Average				2.8%

Here is how they did in April:

Stock	Last Month	Current	Dividend	Change
CPLA	83.00	95.30	-	14.8%
GILD	67.10	68.55	-	2.2%
SYNT	16.58	17.61	-	6.2%
CSCO	33.58	34.07	-	1.5%
TGNA	25.56	25.48	-	-0.3%
HPQ	17.59	18.82	-	7.0%
CA	31.59	32.83	-	3.9%
PBI	12.84	13.29	-	3.5%
OMC	85.70	82.12	-	-4.2%
BKE	17.55	18.70	-	6.6%
LDOS	50.55	52.66	-	4.2%
ILG	20.57	24.11	-	17.2%
VIAB	45.71	42.56	-	-6.9%
HRB	23.18	24.79	-	6.9%
GME	22.00	22.69		3.1%
Average				4.4%

The keen-eyed with see only 15 stocks, and think "but he has 4 tranches of 5 stocks, which should be 20".  In my use of the formula, I do allow stocks to get picked in multiple tranches.  And it is not uncommon.

Dividends and Miscellaneous

I do not talk much about these portfolios as this is the MFI Diary.  My Miscellaneous approach is pretty high risk.  It was great first two months (up about 13%) but has fallen on rough times.  As I mentioned SNCR really hurt it this week.