Weekend Update - 6/17/17

Weekend Update - Graduation Weekend

Big day here yesterday - my final child graduated from high school.  She was so excited! Tomorrow we head to Boston to two days of orientation at Northeastern University.

The speeches given were good. One funny, one sad (the Senior had had a parent die) and one challenging ("people think of the word Lazy when they think of our generation - go out and change their opinion!").  Finally it was cool and rainy, but still outdoors. I guess that will make it even more memorable.

Let me see if I have a good quote.

"A good education is important. It enables you to pick out the most important things to worry about."

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 comprised 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

This was not a great week, as this continues to be not a great year.  I did see a chart that explained very well why I am struggling in 2017 and why (frankly) MFI is struggling.

You should be able to click to enlarge.  This shows S&P Value (blue) versus S&P Growth (green) for 2017.  Growth is up over 13%.  Value is up 4.9%.  As MFI is inherently a value based approach, it seems clear we have some headwinds against the overall index.

Here is where I stand year to date:

Component	YTD
Overall	+4.58%
Select	+10.11%
Formula	+3.69%
Miscellaneous	-8.92%
Dividend	+5.91%
R3K	+9.06%
MFI Index	-0.12%

So I am up 4.6%.  Not a disaster, but not really blog worthy to be frank.  My Miscellaneous picks continue to be a drag, although I did take the cleaver to that portfolio this past week.  MFI Index continues in the red.  Nine of the fifty stocks have lost more than 20% of their value.  Of course 10 have gained more than 20%.  But that kind of illustrates that they are treading water - they key is to avoid the majority of the big losers.

MFI Select

As my fearless readers know, I have two MFI portfolios with real money.  The first is "MFI Select", which I rebooted in August 2012 (I had quit MFI in frustration for over a year and spent time thinking about it).  It consists of 4 tranches of 5 stocks each.  It is very free form.  I have my own screen that I use in conjunction with the official screen.  It has been very successful.  The real goal of both my MFI Select and MFI Formula approaches is to avoid the "stinker" stocks that are pretty regular in the screens.


Here is how my stocks did during the week:

Stock	Last Week	Current	Dividend	Change
MSGN	22.00	22.05	-	0.2%
ATHM	44.99	43.94	-	-2.3%
AKRX	33.24	33.48	-	0.7%
AMGN	164.06	162.42	-	-1.0%
MPAA	28.93	27.06	-	-6.5%
YY	58.85	54.91	-	-6.7%
RHI	47.25	47.75	-	1.1%
CA	31.71	31.67	-	-0.1%
WNC	21.10	20.87	-	-1.1%
RGR	68.00	67.75	-	-0.4%
KLAC	101.98	97.70	-	-4.2%
QCOM	57.05	56.82	-	-0.4%
WSTC	23.20	23.21	-	0.0%
TGNA	22.89	23.90	-	4.4%
TIME	13.85	13.55	-	-2.2%
VLO	65.26	65.80	-	0.8%
CSCO	31.37	31.63		0.8%
GILD	64.70	64.12		-0.9%
GNC	7.46	7.56		1.3%
Average				-0.9%

So you can see it was a tough week,  My two high flying Chinese stocks, YY and ATHM pulled back a bit. MPAA had what I thought were ok earnings (Motorcar Parts of America misses by $0.02, beats on revenue) but dropped.  And KLAC got swept by tech sell off.

Here is my month by month results - still beating benchmark nicely.

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	45.60%	209,503	163,936
2/1/2017	45.20%	212,330	167,146
3/1/2017	48.80%	222,583	173,829
4/1/2017	55.70%	229,473	173,735
5/1/2017	55.80%	231,497	175,712
6/1/2017	53.40%	230,599	177,203
Current	54.31%	233,621	179,312

Here are all the stocks:

8/15/2016	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$31.20	$31.63	$0.26	2.2%	13.2%
GNC	$19.79	$7.56	$0.38	-59.9%	13.2%
VLO	$54.73	$65.80	$2.00	23.9%	13.2%
MSGN	$16.68	$22.05	$0.00	32.2%	13.2%
GILD	$79.33	$64.12	$1.98	-16.7%	13.2%
Totals				-3.7%	13.2%
11/15/2016	Start	Current	Dividend	Pct Gain	R3K Gain
MPAA	$26.55	$27.06	$0.00	1.9%	13.1%
ATHM	$22.61	$43.94	$0.00	94.3%	13.1%
AMGN	$145.14	$162.42	$2.00	13.3%	13.1%
RHI	$43.23	$47.75	$0.70	12.1%	13.1%
CA	$31.11	$31.67	$0.51	3.4%	13.1%
Totals				25.0%	13.1%
2/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
AKRX	$19.10	$33.48	$0.00	75.3%	7.1%
YY	$41.08	$54.91	$0.00	33.7%	7.1%
KLAC	$85.11	$97.70	$1.08	16.1%	7.1%
WNC	$17.65	$20.87	$0.06	18.6%	7.1%
RGR	$52.75	$67.75	$0.92	30.2%	7.1%
Totals				34.8%	7.1%
5/6/2017	Start	Current	Dividend	Pct Gain	R3K Gain
WSTC	$24.15	$23.21	$0.00	-3.9%	1.6%
TGNA	$25.75	$23.90	$0.07	-6.9%	1.6%
TIME	$15.05	$13.55	$0.04	-9.7%	1.6%
MSGN	$23.55	$22.05	$0.00	-6.4%	1.6%
QCOM	$54.93	$56.82	$0.57	4.5%	1.6%
Totals				-4.5%	1.6%

The May tranche is a mess.  Not sure what will save the day there.  I felt WSTC, TGNA, TIME and MSGN were all potential names to be bought out.  WSTC was, but sadly not at a premium.

Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	-3.7%	25.0%	34.8%	-4.5%	14.0%
Previous Tranche	2.8%	8.0%	10.7%	19.1%	8.3%
Tranche -2	11.2%	69.4%	-14.3%	-25.2%	10.3%
Tranche -3	41.4%	14.2%	8.5%	18.3%	20.6%
Tranche -4	14.1%	43.7%	78.3%	33.0%	42.3%
MFI Overall Gain	77.7%	275.7%	147.3%	33.8%	133.6%
Current Balance	44,426	93,920	61,820	33,455	233,621
R3K Current Tranche	13.2%	13.1%	7.1%	1.6%	8.7%
R3K Overall Gain	89.2%	92.7%	73.3%	62.1%	79.3%
R3K Balance	47,298	48,168	43,324	40,523	179,312
Annualized IRR	12.6%	33.4%	23.0%	7.3%	19.1%

Still clearing the 19% IRR hurdle.  That seems tougher and tougher to stay above.  But current tranches are up 14.0% (helped that Nov & May have become two largest quarters).

MFI Formula

Same series of charts.  Recall that MFI Formula has been going since October 2014.  It is entirely formula (quant) driven.  I take official 50 over 100m screen and then I throw out the 17 smallest market cap stocks.  I then take the subset of remaining stocks that have a dividend yield of at least 2.4%. Finally I allow myself optionality to pitch out one and then I use random number generator to pick my five.

While this approach through back testing has worked very well (it also tends to remove "stinkers") the results for me thus far have been a bit subpar.  Not a disaster, but not a home run.  I do have a tranche rolling over in 2 weeks.  I will continue my approach of adding to MFI here in 2017 - so I will increase my commitment per stock up about 50%.  That is one reason I sold some Misc stocks this past week.

Stock	Last Week	Current	Dividend	Change
CPLA	87.50	89.75	-	2.6%
GILD	64.70	64.12	-	-0.9%
SYNT	16.52	16.42	-	-0.6%
CSCO	31.37	31.63	-	0.8%
TGNA	22.89	23.90	-	4.4%
HPQ	17.67	17.35	-	-1.8%
CA	31.71	31.67	-	-0.1%
PBI	15.21	15.25	-	0.3%
OMC	80.95	83.31	-	2.9%
BKE	17.90	17.35	-	-3.1%
LDOS	55.37	53.98	-	-2.5%
ILG	26.05	27.71	-	6.4%
VIAB	35.40	35.07	-	-0.9%
HRB	26.19	29.92	-	14.2%
GME	22.01	20.59	-	-6.5%
			-
Average				1.0%

It was a decent week, HRB had good earnings (H&R Block +10% following strong earnings beat) and ILG continued an unbelievable year. Both these stocks are part of July 1st tranche about toe be sold - so fingers crossed they safely get across finish line.

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
6/1/2017	-2.65%	117,824	120,472
Current	-3.90%	118,008	121,906

So you can see the struggle of 2017: from $113,406 to $118,008.  But Value will have its day.  Never fear.  Amazon and Tesla can not go up indefinitely.

7/1/2016	Start	Current	Dividend	Pct Gain	R3K Gain
ILG	$16.76	$27.71	$0.54	68.6%	17.1%
VIAB	$44.00	$35.07	$0.80	-18.5%	17.1%
CPLA	$53.22	$89.75	$1.62	71.7%	17.1%
HRB	$23.62	$29.92	$0.66	29.5%	17.1%
PBI	$17.69	$15.25	$0.75	-9.6%	17.1%
Totals				28.3%	17.1%
10/3/2016	Start	Current	Dividend	Pct Gain	R3K Gain
CPLA	$58.15	$89.75	$1.23	56.5%	14.0%
LDOS	$43.01	$53.98	$0.64	27.0%	14.0%
GME	$27.70	$20.59	$1.13	-21.6%	14.0%
PBI	$18.15	$15.25	$0.56	-12.9%	14.0%
CSCO	$31.72	$31.63	$0.81	2.3%	14.0%
Totals				10.3%	14.0%
12/30/2016	Start	Current	Dividend	Pct Gain	R3K Gain
GILD	$71.69	$64.12	$1.04	-9.1%	8.9%
HPQ	$15.00	$17.35	$0.40	18.3%	8.9%
TGNA	$21.33	$23.90	$0.21	13.0%	8.9%
CA	$31.99	$31.67	$0.51	0.6%	8.9%
SYNT	$19.79	$16.42	$0.00	-17.0%	8.9%
Totals				1.2%	8.9%
4/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
BKE	$18.45	$17.35	$0.25	-4.6%	3.2%
CSCO	$33.76	$31.63	$0.29	-5.4%	3.2%
GILD	$67.50	$64.12	$0.52	-4.2%	3.2%
OMC	$85.53	$83.31	$0.55	-2.0%	3.2%
SYNT	$16.76	$16.42	$0.00	-2.0%	3.2%
Totals				-3.7%	3.2%

You can see how good the July tranche has been - up 28%.  When it rolls over from current to historical though, my current tranches are going to look not so good as the other three are losing.

Category/Tranche	October	January	April	July	Total
Initial Investment	249,820	249,939	250,180	249,728	999,667
Current Tranche	10.3%	1.2%	-3.7%	28.3%	5.9%
Previous Tranche	5.5%	9.3%	25.2%	-12.5%	8.4%
Tranche -2	0.5%	11.0%	-0.2%	-	2.8%
MFI Overall Gain	16.9%	22.7%	20.3%	12.3%	18.0%
Current Balance	291,921	306,691	300,945	280,523	1,180,081
R3K Current Tranche	14.0%	8.9%	3.2%	17.1%	10.8%
R3K Overall Gain	28.8%	21.8%	20.5%	16.8%	21.9%
R3K Balance	321,644	304,327	301,439	291,642	1,219,051
Annualized IRR	5.9%	8.7%	8.7%	6.1%	7.3%

Dividends and Misc

Not going to spend much time here.  My dividend portfolio did gain a bit, despite a Fed Hike and what I felt was overly hawkish rhetoric from Yellen.

Stock	Initial	Current	Div/Sh	Gain/Loss
TGONF	10.47	12.56	1.97	39%
FDEU	18.21	19.27	0.12	7%
NRZ	16.51	16.73	-	1%
JQC	7.87	8.60	0.93	21%
SBRA	24.01	23.67	0.43	0%
PSXP	48.92	46.68	-	-5%
DSL	18.49	20.66	1.71	21%
RILY	13.85	16.90	-	22%
DHF	3.19	3.52	0.14	15%
O	24.91	56.67	20.12	208%
OIBAX	5.09	5.87	2.38	62%

RILY has been remarkable since I bought a month ago, up 22%.  This was an asset manager that I identified from my top 200 MFI screen.

Miscellaneous was probably hurt the most for me by gold, which took a tumble due to Fed remarks.

Have a great weekend.