MFI Tracking Portfolio, October 28th, 2016

MFI Tracking Portfolio Results - October 28th, 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.

I also encourage new readers to read Guide To New Readers

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 almost 6 percentage points.

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	14.57	31.69	117.5%	14.28	258
ENTA	23.93	49.65	107.5%	22.17	456
MCFT	11.20	22.97	105.1%	10.84	208
WNC	10.97	22.42	104.5%	10.74	706
VEC	16.54	31.97	93.3%	16.39	177
MYGN	19.66	34.86	77.3%	15.15	1,359
ACHI	2.35	3.89	65.5%	1.47	252
HPQ	13.67	21.50	57.3%	13.94	24,052
LDOS	40.42	62.36	54.3%	41.16	3,022
NSR	22.91	33.50	46.2%	21.10	1,249
HSII	17.10	24.75	44.8%	17.37	326
BLBD	14.85	21.40	44.1%	13.85	319
TGNA	12.23	17.29	41.4%	12.01	4,214
BBSI	44.33	61.27	38.2%	43.00	325
IRMD	9.60	12.70	32.3%	7.85	102
AGX	54.63	68.50	25.4%	54.00	834
TDC	26.95	33.51	24.3%	26.27	3,495
WILN	1.43	1.76	23.1%	1.26	174
GHC	468.97	575.20	22.7%	440.55	2,603
HRB	21.91	26.27	19.9%	19.85	4,980
CSCO	29.53	34.43	16.6%	29.12	153,837
SSNI	14.07	16.12	14.6%	9.68	721
SYNT	20.19	22.82	13.0%	15.82	1,696
CSGS	36.96	41.70	12.8%	35.48	1,222
MPAA	26.10	29.07	11.4%	21.75	486
CA	29.77	32.87	10.4%	30.01	12,730
MCK	123.14	135.62	10.1%	114.53	28,049
SPOK	16.61	17.90	7.8%	14.45	355
AMCX	48.91	52.55	7.4%	46.17	3,515
GILD	71.82	77.07	7.3%	63.76	98,334
IDCC	68.65	72.50	5.6%	67.55	2,381
UTHR	118.14	120.05	1.6%	112.01	5,371
MSGN	19.40	19.70	1.5%	18.50	1,454
BPT	18.92	18.95	0.1%	15.00	471
KORS	50.12	49.02	-2.2%	32.38	8,675
ESRX	65.09	62.19	-4.5%	55.80	40,973
CPLA	69.07	65.50	-5.2%	65.15	811
FPRX	48.68	45.94	-5.6%	25.97	1,380
PDLI	3.29	3.05	-7.3%	1.93	541
BKE	19.18	17.25	-10.0%	13.50	1,019
GME	22.35	19.34	-13.5%	18.47	2,486
NHTC	22.27	19.08	-14.3%	18.05	269
UIS	10.50	8.60	-18.1%	6.90	526
PBI	17.14	13.86	-19.1%	12.31	3,357
AVID	6.59	4.46	-32.3%	3.99	262
VIAB	36.74	24.66	-32.9%	23.45	14,920
ICON	7.84	4.91	-37.4%	4.76	409
SWHC	25.71	14.52	-43.5%	7.46	1,444
INSY	10.76	5.74	-46.7%	5.18	815
DHX	5.35	2.40	-55.1%	1.75	269

DHX and the scummy INSY were the big losers.  B4 stocks (including boat companies MBUU and MCFT) were up over 100%. 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	13.9%	16.0%	0
8/26/2016	10.6%	14.6%	0
9/30/2016	18.6%	18.5%	1
10/28/2016	18.3%	24.1%	0
11/25/2016	7.4%	17.9%	0
12/30/2016	4.2%	16.4%	0
1/27/2017	4.1%	13.6%	0
2/24/2017	1.2%	10.1%	0
3/31/2017	2.5%	10.2%	0
4/28/2017	-3.1%	9.1%	0
5/26/2017	1.7%	7.8%	0
6/29/2017	-0.7%	7.2%	0
7/28/2017	0.4%	5.0%	0
8/25/2017	6.7%	6.2%	1
9/29/2017	-2.6%	2.4%	0

You can see that the 9/29/17 tracking portfolio is off to a very poor start, down 2.6% versus 2.4% for the benchmark.  That kind of mirrors what I wrote about for my own real $ MFI portfolios in my MFI weekend update yesterday (MFI Weekend Update 10/28/17).

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 did better than standard MFI. (up 22.6%). (My new momentum approach was up 13.6%).

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	204,974
Total Russell 3K	251,540
Dividend	468,153