MFI Monthly Tracking Portfolio - August 26th, 2016

MFI Monthly Tracking Portfolio - August 26th, 2016

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of June 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 lost to the benchmark by four points, marking the second straight losing month.  All 11 open portfolios are trailing the benchmark, in aggregate by an average of 7.5 percentage points per stock.  Not so Magical right now.

Here are the 50 stocks in descending performance order (from the portfolio that just hit a year):

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
MBUU	13.45	27.43	103.9%	12.91	241
ENTA	22.38	43.09	92.5%	21.52	426
ACHI	1.80	3.20	77.8%	1.47	193
STRA	49.93	79.36	58.9%	44.63	561
AAPL	105.09	159.86	52.1%	102.53	576,745
MCFT	11.99	17.66	47.3%	10.44	222
WNC	13.90	20.27	45.9%	10.74	901
LDOS	38.54	55.86	44.9%	39.51	2,887
TGNA	13.06	18.66	42.9%	11.46	4,477
MYGN	20.66	29.32	41.9%	15.15	1,428
NSR	23.78	33.50	40.9%	21.10	1,296
HPQ	13.93	19.31	38.6%	13.77	24,564
KFY	23.70	32.28	36.2%	19.94	1,381
BPT	15.00	19.50	30.0%	15.00	374
HRB	23.37	29.71	27.1%	19.85	5,350
BLBD	14.45	17.90	23.9%	12.87	310
AGX	48.06	59.15	23.1%	47.18	727
RHI	37.56	44.04	17.3%	34.42	4,989
MSGN	17.71	20.70	16.9%	17.14	1,327
GHC	503.11	582.95	15.9%	440.55	2,793
NATH	48.60	55.50	14.2%	44.46	203
CPLA	59.21	66.40	12.2%	56.88	702
AMCX	54.25	60.45	11.4%	46.17	3,899
UTHR	121.76	128.45	5.5%	110.90	5,713
PDLI	2.86	3.00	4.9%	1.93	470
SPOK	15.97	16.70	4.5%	15.85	342
BBSI	46.80	48.86	4.4%	41.99	343
CSCO	30.28	31.44	3.8%	29.12	156,938
SCMP	11.07	11.30	2.1%	9.30	474
IDCC	69.08	70.40	1.9%	67.55	2,398
DLX	67.56	67.92	0.5%	59.47	3,352
OUTR	51.87	52.00	0.3%	24.81	893
HSII	18.77	18.20	-3.1%	17.37	358
TDC	32.29	30.84	-4.5%	26.27	4,182
GILD	77.56	73.79	-4.9%	63.76	106,174
SSNI	13.95	12.54	-10.1%	9.68	715
WILN	1.55	1.34	-13.5%	1.26	189
KORS	49.59	42.29	-14.7%	32.38	8,583
RECN	14.61	12.30	-15.8%	12.05	546
VEC	33.18	27.43	-17.3%	12.50	356
UIS	10.18	8.10	-20.4%	6.90	510
CALM	44.08	34.60	-21.5%	33.40	2,140
VIAB	40.24	29.19	-27.5%	27.86	16,312
PBI	17.78	12.64	-28.9%	12.31	3,483
FPRX	44.64	30.67	-31.3%	25.97	1,265
NHTC	30.25	20.04	-33.8%	18.05	365
ICON	8.50	5.43	-36.1%	4.79	444
BKE	24.64	15.10	-38.7%	13.50	1,304
SYNT	29.96	18.06	-39.7%	15.82	3,883
AVID	9.31	4.57	-50.9%	3.99	371

Actually some really good stocks in there.  But 6 "stinkers", meaning stocks that lost 30% or more hurt. I know I almost bought AVID last August... so whew!

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	23.4%	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	13.7%	14.8%	0
5/27/2016	14.3%	15.6%	0
6/30/2016	23.2%	16.1%	1
7/29/2016	13.2%	16.0%	0
8/26/2016	10.6%	14.6%	0
9/30/2016	9.3%	14.2%	0
10/28/2016	9.1%	16.8%	0
11/25/2016	0.4%	11.0%	0
12/30/2016	-1.3%	9.6%	0
1/27/2017	-1.8%	7.0%	0
2/24/2017	-4.2%	3.6%	0
3/31/2017	-4.3%	3.7%	0
4/28/2017	-5.6%	2.7%	0
5/26/2017	-3.4%	1.5%	0
6/29/2017	-6.2%	0.9%	0
7/28/2017	-5.1%	-1.2%	0
Open 11	-1.2%	6.3%

Note the depressing string of zeros at end on right.  That means we have 13 straight portfolios that have either lost or are losing.  You can also see at the very bottom the open 11 tracking portfolios are down 1.2% v + 6.3% for benchmark.

Subsets

I also have historically 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 (3) 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%.

I am starting a new subset - stocks with momentum.

I am officially stopping the dogs and new subsets.  It takes time and they have never really shown any advantage.  The dividend approach has proven merit.  In this portfolio, the dividend subset struggled. (up 7.3%). (My new momentum approach was also up 7.3%).

Stock	Initial Price	End Price	Percent Change
MCFT	11.99	17.66	47.3%
LDOS	38.54	55.86	44.9%
TGNA	13.06	18.66	42.9%
HPQ	13.93	19.31	38.6%
BPT	15.00	19.50	30.0%
HRB	23.37	29.71	27.1%
CPLA	59.21	66.40	12.2%
SPOK	15.97	16.70	4.5%
CSCO	30.28	31.44	3.8%
OUTR	51.87	52.00	0.3%
HSII	18.77	18.20	-3.1%
RECN	14.61	12.30	-15.8%
CALM	44.08	34.60	-21.5%
VIAB	40.24	29.19	-27.5%
PBI	17.78	12.64	-28.9%
BKE	24.64	15.10	-38.7%

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	193,342
Total Russell 3K	236,811
Dividend	433,552