MFI Weekend Update 12/15/17

MFI Weekend Update 12/15/17

Well, it looks like Tax Reform, like it or not, is a done deal.  The votes are there and the markets were very pleased on Friday.  Even the hard to please MFI stocks were up. My MFI stocks were up 1.04% on Friday and the MFI Index was up 1.25%.  Will this rally continue next week?  If I have a picture of Santa Claus next week instead of Buzz, the answer will have been yes.

You have found your way to the MFI Diary.  This is a blog following the investment approach described by Joel Greenblatt in The Little Book That Beats The Market.  I have been writing this blog and following his investment approach since early 2006.

I did create a guide recently for new readers to my blog that point you to some key/interesting posts. I encourage you to give it a whirl (Guide To New Readers).  (PS - let me know if this link does not work). 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

It was a solid week overall, though I continue to lose ground to the Russell 3000.  But it is really, really hard not to be happy with 15% for the year.  Here is a table showing my results for the year and for the quarter:

Component	YTD	4th Q
Overall	+15.05%	+1.36%
MFI Select	+35.82%	+9.34%
MFI Formula	+19.45%	+9.03%
Miscellaneous	+0.99%	-5.62%
Dividend	+13.01%	-0.72%
R3K	+20.53%	+6.07%
MFI Index	+5.34%	+1.02%
GARIX	+9.56%	+4.45%

The keen-eyed will see my MFI Select continues to be very satisfactory, now up almost 36% on the year.  My Misc continues to be my albatross, just up 1%.  My dividend portfolio, at 13% is strong when you consider I have some bond-like holdings and preferred stocks.  It is income first, capital appreciation 2nd.  But is was up 3% on the week. R3K shows you can just go with benchmark and do well.  Should I even be wasting my time?  GARIX is of course Gotham's MFI mutual fund and is a long/short fund.  It is actually my single largest holding, but I do not track it in my overall numbers.  Finally the 2nd worst number on the board is MFI Index at 5.3%. This is what you would have today if you'd bought the 50 stocks on the official list December 31st last year. Not. Very. Good.

MFI Select

As my readers know, I have two real money MFI portfolios.  MFI Select is the longest running.  I started it in August 2012.  It consists of 4 tranches, each tranche containing 5 stocks.  I give myself total free form on how to pick the stocks.  So usually they are from the official website screen, but I do run my own screen (which incidentally I am having trouble doing right now).  I actually have been investing in MFI stocks since Feb 2006, but I quit for a year in 2011 out of frustration at results,  My MFI Select reboot was born out of my studying what went wrong (too many really bad stocks as MFI stocks over time have tended to be more volatile).

Here are my 4 tranches and how they are doing against the Russell 3000 benchmark:

2/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
AKRX	$19.10	$32.36	$0.00	69.4%	18.4%
YY	$41.08	$108.54	$0.00	164.2%	18.4%
KLAC	$85.11	$105.63	$2.26	26.8%	18.4%
WNC	$17.65	$19.31	$0.18	10.4%	18.4%
RGR	$52.75	$52.50	$1.36	2.1%	18.4%
Totals				54.6%	18.4%
5/6/2017	Start	Current	Dividend	Pct Gain	R3K Gain
WSTC	$24.15	$23.50	$0.00	-2.7%	12.3%
TGNA	$25.75	$22.71	$0.21	-11.0%	12.3%
TIME	$15.05	$18.50	$0.08	23.5%	12.3%
MSGN	$23.55	$19.80	$0.00	-15.9%	12.3%
QCOM	$54.93	$64.76	$1.71	21.0%	12.3%
Totals				3.0%	12.3%
8/15/2017	Start	Current	Dividend	Pct Gain	R3K Gain
GHC	$591.10	$565.85	$1.27	-4.1%	9.3%
ICHR	$19.80	$25.18	$0.00	27.2%	9.3%
MD	$43.00	$51.10	$0.00	18.8%	9.3%
SIMO	$43.05	$52.96	$0.30	23.7%	9.3%
RHI	$44.15	$55.26	$0.48	26.3%	9.3%
Totals				18.4%	9.3%
11/15/2017	Start	Current	Dividend	Pct Gain	R3K Gain
MSGN	$16.67	$19.80	$0.00	18.8%	4.2%
CELG	$100.60	$109.41	$0.00	8.8%	4.2%
EVC	$5.78	$7.50	$0.05	30.6%	4.2%
SIMO	$46.88	$52.96	$0.00	13.0%	4.2%
VIAB	$24.41	$30.24	$0.20	24.7%	4.2%
Totals				19.2%	4.2%

Pretty solid, n'est pas? 3 of the 4 tranches are leading R3K.  And only 2 of my 20 stocks are down more than 10% (jinxing them for sure).  Here is a table showing results all the way back:

Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	18.4%	19.2%	54.6%	3.0%	22.5%
Previous Tranche	-0.1%	42.6%	10.7%	19.1%	23.7%
Tranche -2	2.8%	8.0%	-14.3%	-25.2%	-7.2%
Tranche -3	11.2%	69.4%	8.5%	18.3%	26.8%
Tranche -4	41.4%	14.2%	78.3%	33.0%	41.7%
Tranche -5	14.1%	43.7%	0.0%	0.0%	14.5%
MFI Overall Gain	118.2%	410.8%	183.7%	44.3%	189.2%
Current Balance	54,550	127,707	70,918	36,064	289,239
R3K Current Tranche	9.3%	4.2%	18.4%	12.3%	11.1%
R3K Overall Gain	109.4%	113.6%	91.5%	79.2%	98.4%
R3K Balance	52,352	53,412	47,881	44,803	198,448
Annualized IRR	15.7%	37.8%	23.9%	8.3%	21.4%

So you can see the results of every single tranche in the interior of table (the first, August 2012 is August Tranche -5 and is 14.1%).  The table shows how a hypothetical $25,000 invested in each of the four tranches would have grown to right now (so for August the $25,000 would be $54,550). It also shows how $25,000 in the benchmark would have done (for August it would be $52,352). Finally, you can see my annualized IRR for each tranche and in total, so 15.7% for August and 21.4% in total.

This next table shows month by month how that hypothetical $100,000 from the above table has grown vs benchmark (note I say hypothetical, not because I have not had real gains, but I did not start with $100,000 and I have added additional funds along the way. But for simplification I do not show that here).

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
10/1/2017	75.60%	262,489	186,886
11/1/2017	68.17%	259,061	190,888
12/1/2017	84.17%	280,887	196,716
Current	90.79%	289,239	198,448

So beating benchmark solidly $289,239 to $198,448.  You can see up more than 10% since 11/1 (259,061 to 289,239).

Here are how my stocks have done since 11/1:

Stock	Since 11/1	Current	Dividend	Change
SIMO	48.46	52.96	-	9.3%
MSGN	17.00	19.80	-	16.5%
YY	89.24	108.54	-	21.6%
CELG	100.60	109.41	-	8.8%
EVC	5.78	7.50	-	29.8%
ICHR	28.58	25.18	-	-11.9%
AKRX	32.54	32.36	-	-0.6%
VIAB	24.41	30.24	-	23.9%
RHI	51.55	55.26	-	7.2%
MD	41.35	51.10	-	23.6%
QCOM	53.46	64.76	-	21.1%
KLAC	105.15	105.63	-	0.5%
TIME	11.20	18.50	-	65.2%
GHC	554.85	565.85	-	2.0%
WNC	21.30	19.31	-	-9.3%
RGR	51.50	52.50	-	1.9%
TGNA	20.17	22.71	-	12.6%
Average				13.1%

You will note WTSC is not on here. That is because they no longer exist, they were bought.  And for simplicity (ok laziness) I did not add in dividends.

MFI Formula

This is my second MFI approach.  I started it in October 2014 and it also has 4 tranches with 5 stocks apiece.  It is the opposite of "select", all my stocks are picked by formula and a random number generator (yes, it took courage).  The formula approach is here (One Day To Next Formula Tranche).  Same tables.

12/30/2016	Start	Current	Dividend	Pct Gain	R3K Gain
GILD	$71.69	$75.57	$2.08	8.3%	20.4%
HPQ	$15.00	$20.92	$0.53	43.0%	20.4%
TGNA	$21.33	$22.71	$0.35	8.1%	20.4%
CA	$31.99	$33.71	$1.02	8.6%	20.4%
SYNT	$19.79	$25.57	$0.00	29.2%	20.4%
Totals				19.4%	20.4%
4/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
BKE	$18.45	$22.70	$0.75	27.1%	14.1%
CSCO	$33.76	$38.19	$0.87	15.7%	14.1%
GILD	$67.50	$75.57	$1.56	14.3%	14.1%
OMC	$85.53	$74.41	$1.10	-11.7%	14.1%
SYNT	$16.76	$25.57	$0.00	52.6%	14.1%
Totals				19.6%	14.1%
7/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$30.98	$38.19	$0.29	24.2%	10.8%
GME	$20.95	$18.34	$0.76	-8.8%	10.8%
HPQ	$17.60	$20.92	$0.27	20.4%	10.8%
RGR	$60.70	$52.50	$0.44	-12.8%	10.8%
SYNT	$16.21	$25.57	$0.00	57.7%	10.8%
Totals				16.1%	10.8%
10/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
DIN	$43.14	$49.13	$0.97	16.1%	6.1%
GILD	$82.85	$75.57	$0.52	-8.2%	6.1%
GME	$20.50	$18.34	$0.38	-8.7%	6.1%
HPQ	$20.22	$20.92	$0.13	4.1%	6.1%
OMC	$74.80	$74.41	$0.00	-0.5%	6.1%
Totals				0.6%	6.1%

You can see that this approach is more even with the benchmark than my Select approach.

Category/Tranche	October	January	April	July	Total
Initial Investment	249,820	249,939	250,180	249,728	999,667
Current Tranche	0.6%	19.4%	19.6%	16.1%	14.0%
Previous Tranche	7.0%	9.3%	25.2%	26.7%	16.5%
Tranche -2	5.5%	11.0%	-0.2%	-12.5%	1.0%
Tranche -3	0.5%	0.0%	0.0%	0.0%	0.1%
MFI Overall Gain	14.1%	44.9%	49.3%	28.8%	34.3%
Current Balance	284,934	362,095	373,532	321,660	1,342,221
R3K Current Tranche	6.1%	20.4%	14.1%	10.8%	12.9%
R3K Overall Gain	42.4%	34.6%	33.2%	29.1%	34.8%
R3K Balance	355,663	336,341	333,275	322,324	1,347,603
Annualized IRR	4.2%	13.3%	15.9%	10.8%	11.1%

Annualized IRR of 11.1% is not chicken feed, but not as good as Select.  But I do believe in my Formula approach and it is WAY out performing my MFI Index (my tracking of all MFI stocks).  So there is a definite improvement here.

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
10/1/2017	-2.56%	124,448	127,007
11/1/2017	-3.85%	125,890	129,739
12/1/2017	-0.97%	132,616	133,585
Current	-0.54%	134,222	134,760

month by month you can see the back and forth.  Right now a dead heat with the benchmark (which frankly many, many hedge funds would be happy with).  Then here is how stocks have done since 11/1 (I added in dividends this time):

Stock	Since 11/1	Current	Dividend	Change
SYNT	23.25	25.57	-	10.0%
HPQ	21.47	20.92	0.13	-1.9%
GILD	74.84	75.57	0.51	1.7%
CSCO	34.62	38.19	-	10.3%
OMC	67.63	74.41	-	10.0%
GME	18.60	18.34	0.38	0.6%
CA	32.93	33.71	0.34	3.4%
DIN	47.51	49.13	0.97	5.5%
TGNA	20.17	22.71	0.07	12.9%
BKE	16.60	22.70	-	36.7%
RGR	51.50	52.50	0.24	2.4%
			-
Average				8.3%

Been a good run.  Tax reform is definitely good for stocks (short term at least).

Dividends and Miscellaneous

It was a strong week for my dividend stocks.  They have been having a tough quarter, so perhaps a bit of reversion to the mean.

Dividend Stocks	Start	Current	Divvy	Overall Pct Gain	Weekly Pct Gain	9/30/17 Price	Yield
OIBAX	5.91	5.92	0.17	3.0%	-0.5%	5.95	4.1%
KCLI	48.89	45.60	0.33	-6.0%	-3.6%	49.75	2.4%
KNOP	21.30	20.25	-	-4.9%	1.0%	21.44	10.3%
TK	6.20	9.14	0.08	48.9%	9.9%	8.93	2.4%
CPLP	3.54	3.36	0.08	-2.8%	6.7%	3.50	9.5%
JQC	8.18	8.16	0.62	7.4%	-0.5%	8.49	7.0%
ISBC	13.25	14.13	0.15	7.8%	-0.9%	13.64	2.5%
EVG	14.46	14.00	0.26	-1.4%	2.3%	14.24	6.6%
LADR	13.01	13.72	0.62	10.2%	1.1%	13.78	9.2%
FDEU	18.40	18.76	0.82	6.4%	0.9%	19.42	7.7%
NS	37.98	30.54	0.82	-17.4%	1.2%	40.59	14.3%
TGP	17.89	19.30	-	7.9%	7.2%	17.85	2.9%
RLJ-PA	28.45	27.40	0.49	-2.0%	-1.0%	27.82	7.2%
PSXP	47.39	49.87	1.03	7.4%	3.4%	52.56	5.2%
NRZ	16.56	18.29	0.67	14.4%	3.1%	16.73	10.9%
SBRA	22.28	19.90	0.91	-6.6%	2.7%	21.94	9.0%
RILY	15.58	19.20	0.21	24.6%	7.3%	17.05	0.8%
DSL	19.47	20.12	1.80	12.6%	-0.2%	21.25	8.9%
OCSI	8.68	8.51	0.38	2.5%	-1.3%	8.80	8.9%
TGONF	11.04	13.18	1.79	35.6%	-0.2%	12.80	5.3%
GLDI	9.29	8.76	0.24	-3.1%	-2.0%	9.07	3.6%
DHF	3.34	3.31	0.19	4.6%	-1.2%	3.53	8.5%
MAC	65.01	65.48	-	0.7%	2.0%	65.01	4.5%
O	25.50	57.40	21.01	207.5%	3.3%	57.19	4.4%
Totals				5.6%	1.7%		6.4%

You can see TK, TGP and CPLP had strong weeks along with RILY.  But this portfolio is about the income. It does have a stretch yield of 6.4%, so there is some riskiness here.  KCLI has been a bit frustrating, it is a life insurer, way below book and should benefit greatly from tax reform. Yet a big zero.  I will be very patient, it is a large holding for me.

On the Misc front, not exactly knocking it out of the park.  I did continue my downsizing as I sold SN.  It is still a high risk portfolio, which thus far has yielded subpar returns.  I do have my "basket" portfolios of small banks and miners,  I plan to hold both of these longer term as I think inflation may become an issue and small banks should benefit a lot from lower taxes.

Bank	Start	Current	Dividends	Change	Yield
ACBI	16.99	17.10	-	0.6%	0.0%
ASB	25.69	25.35	-	-1.3%	2.2%
FBIZ	23.69	22.70	-	-4.2%	2.3%
FULT	18.81	18.15	-	-3.5%	2.4%
FNB	14.47	13.88	-	-4.1%	3.5%
MSBI	32.96	31.89	-	-3.2%	2.6%
NRIM	37.47	35.25	0.21	-5.4%	2.6%
PACW	48.30	48.27	-	-0.1%	4.2%
SONA	17.13	16.11	-	-5.9%	2.0%
WNEB	10.88	10.75	-	-1.2%	1.1%
Total				-2.8%	2.3%

Banks not off to a great start, though popped over 2% yesterday.

Miner	Start	Current	Change
TORXF	9.90	9.34	-5.7%
SAND	4.48	4.58	2.2%
NSU	2.38	2.20	-7.6%
KLDX	2.41	2.44	1.2%
KL	14.49	13.27	-8.4%
GSS	0.87	0.84	-2.9%
FSM	4.24	4.79	13.0%
EXK	2.14	2.36	10.3%
BTG	2.61	2.82	8.0%
EGO	1.18	1.29	9.3%
Total			2.0%

Miners off to a decent start, really had a good good week.

Have a great week - we're excited here, kids back home from colleges.