Best Performing Segment Of MFI Recently

Best Performing Segment Of MFI Recently

As my readers know, I keep a detailed database of how stocks from the official magic formula investing website have fared over time - assuming you buy the top 50 stocks > $100m and hold them for a year.

One can (and I have) take subsets of those lists and see what subset have been most successful (or at times least successful).  While they say history doesn't repeat itself, it at least rhymes.

I have found that the best indicator of out-performance for MFI stocks is whether the stocks pays a dividend.  And I have used 2.6% yield and above as my cutoff point.  To be clear, that can be either a regular quarterly dividend or a special dividend.

Over time, I have also seen that market cap is a decent predictor of out performance.  So it just made sense to me that if I combined these two factors: (1) dividend payers and (2) larger market caps and filtered official list that results would be good.  And historically, that is true. And thus was born my MFI Formula Portfolio.

The "problem" though is that in 2016 that pattern did not hold.  Dividend stocks from official list still did well.  But instead of larger market caps outperforming, it was smaller market cap stocks.

So for stocks on the list at end in each month of 2016 that had (1) a dividend yield of at least 2.6% AND (2) a market cap under $600m, their average gain so far has been 29%!  That is right, an eye-popping 29%.  The average MFI stocks bought in 2016 is up 16% and the Russell 3000 average (assuming bought 12 times, once at end of each month) is up 18.5% in 2016.

So very nicely done.  I think it was a good year for smaller cap stocks as the perfume of tax reform has a bigger impact on small caps as they are more likely to have majority of income from USA.  Here is the list of stocks:

Date	Stock	Initial Price	End Price	Percent Change	Mkt Cap	Yield
10/28/2016	MCFT	11.20	22.97	105%	208	38.4%
3/24/2016	BBSI	27.21	54.62	101%	199	3.3%
1/29/2016	CPLA	42.78	85.40	100%	526	3.6%
4/22/2016	MSB	8.14	15.30	88%	117	3.6%
3/24/2016	CLCT	14.57	26.10	79%	139	9.6%
9/30/2016	MCFT	11.40	20.38	79%	212	37.7%
6/30/2016	MCFT	11.05	19.55	77%	207	38.9%
2/26/2016	OUTR	30.49	52.00	71%	524	3.9%
2/26/2016	CPLA	44.55	75.80	70%	541	3.5%
5/27/2016	BPT	12.06	20.20	68%	300	20.3%
11/25/2016	MCFT	13.50	22.07	63%	252	31.9%
6/30/2016	BPT	13.41	21.60	61%	389	21.2%
7/29/2016	MCFT	11.48	18.44	61%	213	37.5%
1/29/2016	OUTR	32.66	52.00	59%	583	3.7%
3/24/2016	MED	28.39	44.37	56%	351	3.5%
3/24/2016	IQNT	14.93	22.90	53%	517	4.3%
12/30/2016	MCFT	14.58	22.07	51%	272	29.5%
8/26/2016	MCFT	11.99	17.66	47%	222	35.9%
1/29/2016	CLCT	14.39	20.90	45%	135	9.7%
7/29/2016	BPT	14.14	20.50	45%	352	14.6%
10/28/2016	HSII	17.10	24.75	45%	326	3.0%
4/22/2016	IQNT	15.87	22.90	44%	549	3.8%
9/30/2016	IQNT	16.14	22.90	42%	552	4.0%
9/30/2016	BPT	16.02	22.45	40%	399	12.9%
5/27/2016	IQNT	16.48	22.90	39%	567	3.9%
3/24/2016	BPT	14.60	20.10	38%	349	27.3%
1/29/2016	IQNT	16.69	22.90	37%	580	3.6%
1/29/2016	BPT	23.98	32.80	37%	573	10.0%
6/30/2016	HSII	16.02	21.75	36%	316	3.2%
2/26/2016	IQNT	16.88	22.90	36%	584	3.6%
4/22/2016	BPT	14.38	19.45	35%	358	19.8%
2/26/2016	PETS	16.04	21.33	33%	339	4.5%
4/22/2016	PETS	17.45	23.10	32%	369	4.1%
8/26/2016	BPT	15.00	19.50	30%	374	13.7%
2/26/2016	RECN	13.76	17.00	24%	525	2.9%
10/28/2016	WILN	1.43	1.76	23%	174	2.8%
1/29/2016	PETS	17.31	21.00	21%	366	4.2%
5/27/2016	HSII	18.38	22.25	21%	350	2.8%
3/24/2016	PETS	16.77	20.14	20%	354	4.5%
3/24/2016	SPOK	16.08	19.00	18%	350	3.1%
9/30/2016	HSII	18.07	21.15	17%	345	2.9%
4/22/2016	SPOK	15.99	17.95	12%	348	3.1%
11/25/2016	BPT	18.36	19.85	8%	457	14.8%
10/28/2016	SPOK	16.61	17.90	8%	355	3.0%
5/27/2016	SPOK	16.40	17.25	5%	352	2.9%
8/26/2016	SPOK	15.97	16.70	5%	342	3.1%
10/28/2016	BPT	18.92	18.95	0%	471	14.4%
11/25/2016	SPOK	17.51	17.10	-2%	375	2.9%
7/29/2016	HSII	18.96	18.45	-3%	362	2.7%
12/30/2016	BPT	20.43	19.85	-3%	508	13.3%
8/26/2016	HSII	18.77	18.20	-3%	358	2.8%
9/30/2016	RECN	14.48	13.90	-4%	541	3.0%
2/26/2016	BPT	22.66	21.30	-6%	541	10.6%
7/29/2016	SPOK	17.74	16.35	-8%	381	2.8%
9/30/2016	SPOK	17.11	15.35	-10%	366	2.9%
9/30/2016	WILN	1.51	1.32	-13%	183	2.6%
8/26/2016	RECN	14.61	12.30	-16%	546	3.0%
6/30/2016	PDLI	3.14	2.47	-21%	529	6.4%
3/24/2016	PDLI	3.07	2.27	-26%	511	6.5%
1/29/2016	PDLI	3.05	2.25	-26%	514	19.7%
5/27/2016	PDLI	3.29	2.39	-27%	549	6.0%
7/29/2016	PDLI	3.52	2.32	-34%	578	5.7%
5/27/2016	PMTS	3.94	1.90	-52%	232	4.4%

This outperformance has carried into 2017.  This group of stocks is up an average of 13%.  The overall MFI grouping is actually slightly negative, so much much better in this subset and the Russell 3000 is up 7.2%.