Saturday, May 06, 2017

Weekend Update - 5/6/17

Weekend Update - Happy Derby Day!

If you have not been to the Derby... Go!  Louisville is a charming city.  And the Derby is an entire weekend of fun.  I have been twice, once as a kid just out of college in the infield and once for my 50th birthday in box seats.  Either way is an absolute hoot.

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

Kind of a funny week.  Overall I gave back some of the ground I had been gaining.  But it was virtually all in my Miscellaneous portfolio.  That seems to be where I always get in the most trouble as I tend to speculate and swing for the fences more there.  I guess that is ok, so long as I keep in moderation.  But it does suck when a stock or two crashes and burns.



Component          YTD
Overall +5.39%
Select +9.63%
Formula +7.61%
Miscellaneous -6.31%
Dividend +4.24%
R3K +7.35%
MFI Index +0.81%


What my year to date table shows is that my two MFI tranches are really starting to pick things up.  They are now both beating the Russell 3000 and that is with a decent cash component through part of the year (I will have put 50% of my starting cash to work starting next week with new tranche).

The table also shows how far miscellaneous has fallen, now at -6%. Recall just a month or so ago it was +11%. I know I need to "step away from the batter".  Then my dividend portfolio is solid, but continues to be 65% cash as I wait for the pullback that may never happen.  My big sales were AOD and CSQ - they are up almost 7% and 8% since I bailed.  Ouch.

MFI Select

I have two MFI portfolios - "Select" and "Formula", each consisting of 4 tranches of five stocks.  Select has been running since August 2012 when I performed my MFI reboot (after sitting out for a year).  It has been very successful.  It is pretty free form, I can pick whatever stocks I want, from the official screen or my homemade screen (which always seems to pick up a few names omitted from official screen).

Today my May 6th tranche hits a year.  I sold CBI yesterday and will sell the other 4 names on Monday. For record keeping, I will shut it down as of Friday's closing prices.  I have bought my five new stocks.  They will start as of Friday's closing prices for my record keeping. I will list the five new stocks in a separate post.

Here are my four tranches (May will end up losing slightly).


5/6/2016 Start Current Dividend Pct Gain R3K Gain
 BRCD  $7.97  $12.57  $0.17  59.8% 20.0%
 CBI  $37.82  $29.30  $0.28  -21.8% 20.0%
 HSII  $18.51  $21.65  $0.52  19.8% 20.0%
 RHI  $38.51  $46.91  $0.90  24.1% 20.0%
 UTHR  $107.99  $122.84  $0.00  13.8% 20.0%
Totals 19.1% 20.0%
8/15/2016 Start Current Dividend Pct Gain R3K Gain
 CSCO  $31.20  $34.39  $0.26  11.1% 11.5%
 GNC  $19.79  $7.19  $0.38  -61.7% 11.5%
 VLO  $54.73  $65.34  $1.30  21.8% 11.5%
 MSGN  $16.68  $23.55  $0.00  41.2% 11.5%
 GILD  $79.33  $67.80  $1.46  -12.7% 11.5%
Totals -0.1% 11.5%
11/15/2016 Start Current Dividend Pct Gain R3K Gain
 MPAA  $26.55  $30.03  $0.00  13.1% 11.3%
 ATHM  $22.61  $35.13  $0.00  55.4% 11.3%
 AMGN  $145.14  $163.81  $1.00  13.6% 11.3%
 RHI  $43.23  $46.91  $0.46  9.6% 11.3%
 CA  $31.11  $32.69  $0.26  5.9% 11.3%
Totals 19.5% 11.3%
2/1/2017 Start Current Dividend Pct Gain R3K Gain
 AKRX  $19.10  $33.08  $0.00  73.2% 5.4%
 YY  $41.08  $51.41  $0.00  25.1% 5.4%
 KLAC  $85.11  $100.94  $0.54  19.2% 5.4%
 WNC  $17.65  $22.09  $0.06  25.5% 5.4%
 RGR  $52.75  $60.00  $0.44  14.6% 5.4%
Totals 31.5% 5.4%

So you can see that May is about a push, August is struggling due to GNC and then November and February are both soundly thrashing benchmarks.

Here is a table that shows a summary of every tranche I have had as well as cumulative stats and annualized rate of return:


Category/Tranche August November February May Total
Initial Investment  25,000   25,000   25,000   25,000   100,000 
Current Tranche -0.1% 19.5% 31.5% 19.1% 18.7%
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 84.3% 259.1% 141.4% 40.1% 131.2%
Current Balance  46,070   89,780   60,340   35,024   231,215 
R3K Current Tranche 11.5% 11.3% 5.4% 20.0% 12.0%
R3K Overall Gain 86.3% 89.7% 70.6% 59.5% 71.7%
R3K Balance  41,779   47,417   42,645   39,886   171,727 
Annualized IRR 13.8% 33.1% 23.0% 8.8% 19.7%

So you can see my current tranches are up 18.7% versus 12.0% for benchmark. Next week the 19.1% for May will drop to "Previous tranche" and the newest tranche will replace it.  I always remind people that this table is a bit hypothetical as it assumes the initial investment of $100,000 (not true for me) and then assumes you never add more money to MFI (not true for me) and do not have a cash component.  In February I increased my average stock size by almost 30% and will be doing the same in May.

Here is a table that shows month by month moves of the portfolio versus R3K.  At the end you come to the balances from the green table above: 231,215 to 171,727.


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 
5/1/2017 60.53%  231,497   170,967 
Current 59.49%  231,215   171,727 

So you can see I gave back a bit in first week of May.

Then here are how stocks did in first week of May.


Stock Last Week Current Dividend Change
RHI  46.05   46.91   -    1.9%
ATHM  34.60   35.13   -    1.5%
AKRX  33.45   33.08   -    -1.1%
MPAA  30.32   30.03   -    -1.0%
AMGN  163.32   163.81   -    0.3%
CA  32.83   32.69   -    -0.4%
WNC  22.78   22.09   -    -3.0%
YY  48.97   51.41   -    5.0%
RGR  60.45   60.00   -    -0.7%
MSGN  24.95   23.55   -    -5.6%
KLAC  98.22   100.94   -    2.8%
BRCD  12.47   12.57   -    0.8%
VLO  64.61   65.34   -    1.1%
CSCO  34.07   34.39   -    0.9%
HSII  21.50   21.65   0.13  1.3%
UTHR  125.70   122.84   -    -2.3%
GILD  68.55   67.80  -1.1%
CBI  30.08   29.30  -2.6%
GNC  7.78   7.19  -7.6%
WNC  22.78   22.09   -    -3.0%
Average -0.6%

MFI Formula

This is my formula approach.  The formula is based on my backtesting of all the MFI stats I have kept since January 2006.  My finding (you should pay me for this!) is that stocks that pay a dividend (I used 2.6% yield in my backtesting) from the official screen do much better. And if you exclude the micro cap stocks from that screen (using about $600m market cap as breakpoint) you do even better.

I have done analysis and thought long and hard about why this improves things.  And the answer (I believe) is it removes some "fakes" from the official screen.  There are stocks on the screen just masquerading as Magic Formula/Jake's Bubble Gum Shop stocks.  But they do not have sustainable earnings... and payment of a dividend weeds many of the stinkers out.

That being said, moving to real money on this approach in October 2014 has not been a homerun.  It coincided with some retail names in that category really getting shellacked (like GME and BKE).  And the approach does require a little less spreading of risk and you can get same names multiple quarters.

Here are same series of tables:


7/1/2016 Start Current Dividend Pct Gain R3K Gain
 ILG  $16.76  $25.54  $0.39  54.7% 15.3%
 VIAB  $44.00  $36.82  $0.60  -15.0% 15.3%
 CPLA  $53.22  $94.40  $1.21  79.7% 15.3%
 HRB  $23.62  $25.27  $0.66  9.8% 15.3%
 PBI  $17.69  $15.49  $0.56  -9.3% 15.3%
Totals 24.0% 15.3%
10/3/2016 Start Current Dividend Pct Gain R3K Gain
 CPLA  $58.15  $94.40  $0.82  63.7% 12.2%
 LDOS  $43.01  $54.47  $0.64  28.1% 12.2%
 GME  $27.70  $24.00  $0.75  -10.6% 12.2%
 PBI  $18.15  $15.49  $0.38  -12.6% 12.2%
 CSCO  $31.72  $34.39  $0.81  11.0% 12.2%
Totals 15.9% 12.2%
12/30/2016 Start Current Dividend Pct Gain R3K Gain
 GILD  $71.69  $67.80  $0.52  -4.7% 7.2%
 HPQ  $15.00  $18.91  $0.13  27.0% 7.2%
 TGNA  $21.33  $25.75  $0.14  21.4% 7.2%
 CA  $31.99  $32.69  $0.26  3.0% 7.2%
 SYNT  $19.79  $18.62  $0.00  -5.9% 7.2%
Totals 8.1% 7.2%
4/1/2017 Start Current Dividend Pct Gain R3K Gain
 BKE  $18.45  $19.90  $0.25  9.2% 1.6%
 CSCO  $33.76  $34.39  $0.29  2.7% 1.6%
 GILD  $67.50  $67.80  $0.00  0.4% 1.6%
 OMC  $85.53  $83.69  $0.00  -2.2% 1.6%
 SYNT  $16.76  $18.62  $0.00  11.1% 1.6%
Totals 4.3% 1.6%

Wow, will you look at that!  All four of my open tranches are leading!!  Yes, that is satisfying. But has not always been that easy as summary table shows:


Category/Tranche October January April July Total
Initial Investment  249,820   249,939   250,180   249,728   999,667 
Current Tranche 15.9% 8.1% 4.3% 24.0% 11.1%
Previous Tranche 5.5% 9.3% 25.2% -12.5% 7.9%
Tranche -2 0.5% 11.0% -0.2%  -    2.8%
MFI Overall Gain 22.9% 31.2% 30.2% 8.5% 23.2%
Current Balance  306,940   327,849   325,688   271,018   1,231,494 
R3K Current Tranche 12.2% 7.2% 1.6% 15.3% 9.1%
R3K Overall Gain 26.7% 19.9% 18.6% 15.0% 20.0%
R3K Balance  316,633   299,563   296,702   287,112   1,200,010 
Annualized IRR 8.2% 12.2% 13.4% 4.5% 9.6%

Again, you will see current tranche is winning now by 2 points (11.1% to 9.1%).  And in total, I have broken out to a 3 point lead.  Again, a bit hypothetical as I have added along the way.  As part of my adding money to MFI in 2017, I increased January by 30% and April by 34% (recall at first I did not increase April as that was when I was moving a bit more to cash, but did so retroactively - at that time the April Portfolio was virtually unmoved in aggregate).

Here is the month by month table:


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 
5/1/2017 1.11%  120,403   119,296 
Current 3.15%  123,149   120,000 

Quite a move, going from 5% down on March 1st to 3% up today. But if you look back you'll see other swings, so do not get to comfortable with that lead yet.


Here are how the stocks did in past week:


Stock Last Week Current Dividend Change
CPLA  95.30   94.40   -    -0.9%
GILD  68.55   67.80   -    -1.1%
SYNT  17.61   18.62   -    5.7%
CSCO  34.07   34.39   -    0.9%
TGNA  25.48   25.75   -    1.1%
HPQ  18.82   18.91   -    0.5%
CA  32.83   32.69   -    -0.4%
PBI  13.29   15.49   -    16.6%
OMC  82.12   83.69   -    1.9%
BKE  18.70   19.90   -    6.4%
LDOS  52.66   54.47   -    3.4%
ILG  24.11   25.54   -    5.9%
VIAB  42.56   36.82   -    -13.5%
HRB  24.79   25.27   -    1.9%
GME  22.69   24.00  5.8%
Average 2.3%

A very good week. PBI was great and it is more important than VIAB as I have PBI in two tranches. I did see this week where TGNA will soon by spinning off Cars.com.  So I will have to make some adjustments as it will become a composite of two tickers.


Miscellaneous/Dividends

Gold has been grinding down my miscellaneous portfolio and then it had a biotech (NVIV) get sold off sharply on Friday.  I have sold off a few names in this portfolio of late - itis  clear it is just too speculative for me (that is why I do not list buys here, as I would feel 10x worse if readers lost money).  On the dividend side, I did buy my first new name in a long time: NRZ.  I am in at 16.67 and this is a mREIT that has about an 11% yield.  It is not the worlds safest play either, but had sold off a bit and this seemed like good entry.

Have a great derby day!

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