Saturday, September 30, 2017

Weekend Update 9/29/2017

Weekend Update

September was a very good (great?).  I am also officially closing my Oct 1st 2016 Formula tranche.  I will buy 5 new stocks on Monday.  Hopefully this weekend, I will write a post on the five new names (picked by formula/random number generator).

It will be a busy weekend. I am running a 5K in Providence RI.  I need to close out a MFI tracking portfolio and create a new one.

I also want to change the way I am tracking some of my portfolios.  I usually make that sort of change at year-end, but will do at end of Q3 as with my retirement (and the selling of some company stock), I now have a lot more invested in my active investing.

You have found your way to the MFI Diary, a blog where I let readers know my thoughts and performance on real life, real dollar Magic Formula Portfolios (based of course on "The Little Book The Beats The Market" by Joel Greenblatt.  I also spend some effort tracking hypothetical portfolios based on downloads from the official website going back to January 2006.

Of course, I have to have a disclaimer - I am just a guy with a spreadsheet and not a stock advisor.  You should do your own due diligence before acting on anything you read here.

Any opinions you read are my own unless they end up being really bad.

The Past Week

Last was pretty solid for me.  I did have one of my Misc names (BYBK) get bought for a 40%+ premium, so that certainly helped.  And the promise/perfume of tax reform keeps stocks going up like sailors drawn to the singing of harpies.  I do not  really care about individual taxes or estate taxes.  But I have very strong opinions about corporate tax rates as my belief is our high US tax rates hurts our competitiveness abroad.  They also cause business to either leave US (through inversions) or form in more tax friendly jurisdictions.  THIS HAPPENS ALL THE TIME.  I have sat on corporate boards, I have been through many merger and acquisition discussions, I have been around when new companies are formed; and being efficient in taxes is ALWAYS near the top of the list of discussion points.

Ok, I feel better. I have said my piece.  Here is where I stand ytd, through q3:


 Component   YTD 
 Overall  +13.51%
 MFI Select  +24.22%
 MFI Formula  +9.56%
 Miscellaneous  +7.00%
 Dividend  +13.83%
 R3K  +13.63%
 MFI Index  +4.28%

So my two MFI components are up 24.2% and 9.6% - that is with a cash component during the year.  In aggregate they are beating the R3K index of 13.6%, so that is excellent.  The MFI Index has rallied, now at 4.3%.  All-in-all I am at 13.5% - I am extremely pleased with that as I have added quite a bit this year to bond-type investments as I retired.

Once a quarter or so, I like to show how the MFI Index (recall this is my creation, a basket of 50 MFI stocks reconstituted once a year) has done year by year versus benchmark:


 Annual   Inception to Date 
 Year   Russell   MFI   Russell ITD   MFI ITD 
2006 11.40% 15.03% 11.40% 15.03%
2007 4.09% -6.69% 15.96% 7.34%
2008 -37.05% -37.97% -27.00% -33.42%
2009 32.51% 45.18% -3.27% -3.34%
2010 18.38% 22.77% 14.50% 18.67%
2011 -0.56% -10.47% 13.87% 6.25%
2012 16.43% 9.70% 32.57% 16.56%
2013 33.01% 51.70% 76.34% 76.82%
2014 12.26% 12.07% 97.95% 98.15%
2015 0.38% -8.95% 98.33% 89.37%
2016 12.50% 13.19% 110.62% 101.16%
2017 13.63% 4.28% 125.70% 105.49%

Clearly 2017 is not so hot.  Over all the years, MFI is trailing by about 20 percentage points.  That is all from the past three years, as inception to date, MFI was leading (ever so slightly) at the end of 2014.


MFI Select

This is my MFI portfolio that I rebooted in August 2012. I had actually "quit" MFI for about a year as my results had been subpar.  I went back and restudied all my data and have done much better since.  The "trick" to MFI (IMHO) is to avoid as many "stinker" stocks as you can (those that drop 30% or more in a year). Over the years, about 14% of stocks from the screens have been stinkers.  In most cases, a stinker is a stock where the earnings in the past 12 months is a poor indicator of future earnings.

In my MFI Select portfolio (4 tranches of 5 stocks apiece held for a year), I allow myself free form on what stocks I pick.  So some are from official screens, but others are from my own screen.

Here is how MFI Select has done, month by month, assuming you started with $100,000 spread over the 4 tranches and just rolled over funds as each tranche hits one year anniversary date:


 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
7/1/2017 60.28%        239,060            178,782
8/1/2017 57.76%        239,924            182,163
9/1/2017 68.85%        251,265            182,419
Current 75.60%        262,489            186,886

Pretty much a rout as the LBTBTSM saw in their backtesting.  So this portfolio is doing very well, and has been en fuego since 8/1.  Really since 11/1/16 (up 34%), which suggests Trump has helped this portfolio.

Here are the 4 tranches:


11/15/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 MPAA  $26.55 $29.46 $0.00 11.0% 17.8%
 ATHM  $22.61 $60.08 $0.00 165.7% 17.8%
 AMGN  $145.14 $186.45 $3.15 30.6% 17.8%
 RHI  $43.23 $50.34 $0.94 18.6% 17.8%
 CA  $31.11 $33.38 $0.77 9.8% 17.8%
 Totals  47.1% 17.8%
2/1/2017  Start   Current   Dividend   Pct Gain   R3K Gain 
 AKRX  $19.10 $33.19 $0.00 73.8% 11.6%
 YY  $41.08 $86.78 $0.00 111.2% 11.6%
 KLAC  $85.11 $106.00 $1.67 26.5% 11.6%
 WNC  $17.65 $22.82 $0.06 29.6% 11.6%
 RGR  $52.75 $51.70 $1.15 0.2% 11.6%
 Totals  48.3% 11.6%
5/6/2017  Start   Current   Dividend   Pct Gain   R3K Gain 
 WSTC  $24.15 $23.47 $0.00 -2.8% 5.9%
 TGNA  $25.75 $22.20 $0.14 -13.2% 5.9%
 TIME  $15.05 $13.50 $0.04 -10.0% 5.9%
 MSGN  $23.55 $21.20 $0.00 -10.0% 5.9%
 QCOM  $54.93 $51.84 $1.14 -3.5% 5.9%
 Totals  -7.9% 5.9%
8/15/2017  Start   Current   Dividend   Pct Gain   R3K Gain 
 GHC  $591.10 $585.10 $0.00 -1.0% 3.0%
 ICHR  $19.80 $26.80 $0.00 35.4% 3.0%
 MD  $43.00 $43.12 $0.00 0.3% 3.0%
 SIMO  $43.05 $48.03 $0.00 11.6% 3.0%
 RHI  $44.15 $50.34 $0.24 14.6% 3.0%
 Totals  12.1% 3.0%


 Category/Tranche   August   November   February   May   Total 
 Initial Investment         25,000             25,000           25,000        25,000         100,000
 Current Tranche  12.1% 47.1% 48.3% -7.9% 24.7%
 Previous Tranche  -0.1% 8.0% 10.7% 19.1% 15.5%
 Tranche -2  2.8% 69.4% -14.3% -25.2% 8.2%
 Tranche -3  11.2% 14.2% 8.5% 18.3% 13.0%
 Tranche -4  41.4% 43.7% 78.3% 33.0% 49.1%
 Tranche -5  14.1% 0.0% 0.0% 0.0% 3.5%
 MFI Overall Gain  106.7% 342.2% 172.1% 29.0% 162.5%
 Current Balance         51,677           110,544           68,019        32,249         262,489
 R3K Current Tranche  3.0% 17.8% 11.6% 5.9% 9.6%
 R3K Overall Gain  97.3% 100.7% 80.6% 68.9% 86.9%
 R3K Balance         49,334             50,180           45,142        42,230         186,886
 Annualized IRR  15.2% 35.6% 23.9% 5.9% 20.2%


All of these except May 6th are doing very well.  Those were just 5 bad picks.  But note that of my 20 picks here, no stinkers (yet).  Also, my annualized IRR just topped 20!  woo-hoo. Here is how the stocks fared in past week:


 Stock   Last Week   Current   Dividend   Change 
 ATHM              64.17         60.08                       -   -6.4%
 RHI              48.60         50.34                       -   3.6%
 YY              80.52         86.78                       -   7.8%
 AKRX              33.06         33.19                       -   0.4%
 AMGN            185.76       186.45                       -   0.4%
 CA              32.68         33.38                       -   2.1%
 ICHR              24.69         26.80                       -   8.5%
 WNC              21.29         22.82                       -   7.2%
 SIMO              45.00         48.03                       -   6.7%
 MPAA              28.01         29.46                       -   5.2%
 MD              42.14         43.12                       -   2.3%
 GHC            567.55       585.10                       -   3.1%
 WSTC              23.51         23.47                       -   -0.2%
 QCOM              52.09         51.84                       -   -0.5%
 KLAC            100.59       106.00                       -   5.4%
 MSGN              20.80         21.20                       -   1.9%
 TGNA              21.60         22.20                       -   2.8%
 RGR              51.00         51.70 1.4%
 TIME              12.55         13.50 7.6%

That is an unbelievable week!  Up about 2.5%.  My semi names, ICHR, KLAC and SIMO were all boosted by a great ER by MU.  ATHM was the one downer as key management left.

MFI Formula

I started this approach 3 years ago in October 2014.  It was based on my observation that dividend-paying MFI stocks have done much better that non dividend paying MFI stocks.  So this approach picks 5 stocks with a 2.4% yield or better randomly from official screen 4 times a year and holds for a year.

While it worked great in back testing, my real money results have been lukewarm.  Actually making a bit of a comeback, but I still have work to do.  Today is actually the last Day for my October 2016 tranche. Here is month by month:


 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
7/1/2017 -2.40%        119,144            121,545
8/1/2017 -1.96%        121,873            123,828
9/1/2017 -6.09%        117,879            123,973
Current -2.56%        124,448            127,007

I am trailing by 2.5 percentage points.  But remember that my MFI Index since end of 2014 has lost over 20 percentage points versus benchmark.  So that makes me feel a little better.

Here are the four tranches:


10/3/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 CPLA  $58.15 $70.15 $1.64 23.5% 18.8%
 LDOS  $43.01 $59.22 $1.28 40.7% 18.8%
 GME  $27.70 $20.66 $1.51 -20.0% 18.8%
 PBI  $18.15 $14.01 $0.75 -18.7% 18.8%
 CSCO  $31.72 $33.63 $1.10 9.5% 18.8%
 Totals  7.0% 18.8%
12/30/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 GILD  $71.69 $81.02 $1.56 15.2% 13.5%
 HPQ  $15.00 $19.96 $0.53 36.6% 13.5%
 TGNA  $21.33 $22.20 $0.28 5.4% 13.5%
 CA  $31.99 $33.38 $0.77 6.7% 13.5%
 SYNT  $19.79 $19.65 $0.00 -0.7% 13.5%
 Totals  12.6% 13.5%
4/1/2017  Start   Current   Dividend   Pct Gain   R3K Gain 
 BKE  $18.45 $16.85 $0.50 -6.0% 7.6%
 CSCO  $33.76 $33.63 $0.58 1.3% 7.6%
 GILD  $67.50 $81.02 $1.04 21.6% 7.6%
 OMC  $85.53 $74.07 $1.10 -12.1% 7.6%
 SYNT  $16.76 $19.65 $0.00 17.2% 7.6%
 Totals  4.4% 7.6%
7/1/2017  Start   Current   Dividend   Pct Gain   R3K Gain 
 CSCO  $30.98 $33.63 $0.00 8.6% 4.5%
 GME  $20.95 $20.66 $0.38 0.4% 4.5%
 HPQ  $17.60 $19.96 $0.13 14.2% 4.5%
 RGR  $60.70 $51.70 $0.23 -14.4% 4.5%
 SYNT  $16.21 $19.65 $0.00 21.2% 4.5%
 Totals  6.0% 4.5%
 Category/Tranche   October   January   April   July   Total 
 Initial Investment      249,820        249,939     250,180      249,728         999,667
 Current Tranche  7.0% 12.6% 4.4% 6.0% 7.5%
 Previous Tranche  5.5% 9.3% 25.2% 26.7% 16.1%
 Tranche -2  0.5% 11.0% -0.2% -12.5% -0.3%
 MFI Overall Gain  13.4% 36.6% 30.4% 17.5% 24.5%
 Current Balance      283,298        341,499     326,151      293,528      1,244,476
 R3K Current Tranche  18.8% 13.5% 7.6% 4.5% 11.1%
 R3K Overall Gain  34.1% 26.9% 25.6% 21.6% 27.0%
 R3K Balance      335,080        317,098     314,139      303,742      1,270,059
 Annualized IRR  4.3% 12.0% 11.2% 7.4% 8.7%

 
Not great, but not horrible either.  Here is how each stock did in past week:


 Stock   Last Week   Current   Dividend   Change 
 SYNT              19.06         19.65                       -   3.1%
 CSCO              33.37         33.63                       -   0.8%
 HPQ              19.94         19.96                       -   0.1%
 GILD              83.27         81.02                       -   -2.7%
 GME              20.01         20.66                       -   3.2%
 CA              32.68         33.38                       -   2.1%
 TGNA              21.60         22.20                       -   2.8%
 OMC              75.00         74.07                       -   -1.2%
 CPLA              67.35         70.15                       -   4.2%
 BKE              15.95         16.85                       -   5.6%
 RGR              51.00         51.70                       -   1.4%
 LDOS              58.83         59.22                       -   0.7%
 PBI              13.58         14.01                       -   3.2%

SYNT is quietly becoming a very good pick.


Dividend and Misc Portfolios

While these are not "MFI", I do include a few words about my other legs of my investing table.  My miscellaneous approach, which has struggled in 2017, had a nice pop this week - primarily as BYBK got bought at a 50% premium.  This is a microcap bank that was frankly difficult to buy (I started accumulating in March). Of course now I wish I had bought more!  I will hold through the merger as I do not want to pay ST CG taxes.

I had to laugh as 2 days after merger was announced, one of the robot news story writers wrote about BYBK (Is Bay Bancorp, Inc. (NASDAQ:BYBK) Overbought?
First News 24-14 hours ago).

So hopefully my Misc portfolio starts to hum a bit more.  I did have some biotech names (NVIV for example) that really hurt me earlier this year.  My hurricane reconstruction plays, FIX and BLDR have been doing nicely.  BAC warrants have popped 14% in September. Some of my more recent buys are in the Energy and Shipping spaces.

On the dividend side, I did some more adding this week.  I added to TGONF, ISBC and SBRA.  TGONF is just cheap, under $13 with NAV over $20 and a 5.5% yield.
ISBC is another regional bank (like BYBK), with a yield over 2%, P to BV of 1.40 and should benefit from yield curve boosts.
SBRA had a secondary offering that drove stock down about 6%.  Seemed like a good time to add on the cheap.


 Stock   Initial   Current   Div/Sh   Gain/Loss   Yield 
 FDEU          18.40          19.42            0.48 8.2% 7.5%
 EVG          14.46          14.24            0.10 -0.8% 6.4%
 PSXP          47.39          52.56            0.38 11.7% 4.7%
 KCLI          49.31          49.75            0.22 1.3% 2.4%
 LADR          13.01          13.78            0.30 8.3% 8.7%
 ISBC          13.25          13.64            0.06 3.4% 2.3%
 NS          41.04          40.59                 -   -1.1% 10.8%
 RLJ-PA          28.45          27.82                 -   -2.2% 7.0%
 JQC             8.20             8.49            1.07 16.6% 6.7%
 TK             5.24             8.93            0.06 71.3% 2.5%
 DSL          19.47          21.25            1.35 16.1% 8.5%
 OIBAX             5.85             5.95            0.40 8.5% 4.0%
 FSFR             8.68             8.80            0.19 3.6% 8.6%
 RILY          15.58          17.05            0.13 10.3% 1.5%
 SBRA          23.13          21.94            0.52 -2.9% 6.6%
 TGONF          11.04          12.80            1.61 30.6% 5.5%
 VTIBX          10.92          10.89            0.01 -0.2% 1.1%
 GLDI             9.29             9.07            0.10 -1.2% 9.1%
 CPLP             3.57             3.50                 -   -2.0% 9.1%
 NRZ          16.22          16.73            0.88 8.6% 12.0%
 DHF             3.34             3.53            0.12 9.1% 8.0%
 BKE          14.15          16.85                 -   19.1% 5.9%
 O          25.26          57.19         20.74 208.5% 4.4%

Note these are listed in descending size.  Over rest of year, I will likely look to increase stakes in smaller ones - but I am not really looking for new names.

Let me also share my dividend graph.  This shows my growth in dividend income since 2010.  It assumes I had $100,000 of annual dividend income in 2010 (I wish) and how it has grown.  Part of growth is from reinvested dividends, but larger component is a greater focus on income as I retired.

Of my total net worth, I still am about 35% cash - so over time I will continue to grow this out.




Off to the Ocean State!  Have a great weekend everybody.