Monday, March 27, 2017

Calm Before the Storm?

Calm Before the Storm?

I do believe that Trump's administration not being able to pass ACA reform last week casts a shadow of doubt on his ability to deliver on many of his promises.  Wall Street may be waking up to that shadow as well.  I suspect tax reform and infrastructure spending could easiliy not happen or be watered down - Trump's popularity is too low for him to bully lawmakers.

I may sell a few things today.

Speaking of selling and CALM, CALM reported earnings this morning and it looks like we are not eating enough eggs!  It sucks as I was going gto sell CALM this week (they are in my 4/1 tranche and are under water so would be sold short of a year).

Oh well. Not a huge position.

Saturday, March 25, 2017

Weekend Update 3/25/17

Weekend Update

Another week zips by. You have found your way to the MFI Diary.  This is my blog where I discuss many things related to "The Little Book That Beats the Market" by Joel Greenblatt.  I have been writing this blog since early 2006 and have tracked my performance with real money and tracking portfolios based on the official Magic Formula Investing (MFI) website.  I also have created an MFI Index, which is fifty MFI stocks and is reconstituted once a year.

At least I had a good laugh yesterday when I saw Trump blame the Democrats for the AHCA not passing the house yesterday

(President Trump Blames Lack of Democrat Support for Failure of AHCA).

You just can't make this stuff up.  Instead he should think about the line from Hamilton, "Winning is easy, Governing is hard."  I know it is sacrilegious, but we would do a lot better if the two major parties worked together and found compromises both don't like but could live with.  Someday...

Ok, back to MFI.

I should mention that I am just a guy with a spreadsheet.  Not a CFA, not an expert... just a guy.  So please use what I write for information, but do your own diligence in making stock decisions.

So welcome!

The Past Week

Well, we finally had a day where the market dopped more than 1%.  First time in like 4 months.  It definitely hurt as I lost well more than 1%.  But one really can't be surprised.  I continue to underperform the benchmarks so far in 2017... it is a bit frustrating, but I am not unhappy.  Here are how all the components are faring:


 Component   YTD 
 Overall  +2.97%
 Select  +4.53%
 Formula  +0.62%
 Miscellaneous  +3.98%
 Dividend  +3.37%
 R3K  +4.20%
 MFI Index  -2.83%


I say this caveat all the time, but keep in mind that these portfolios have a cash component (as I do plan on plowing in more money in 2017 should the market ever drop).  So the percentages here may not match what you see further on as I often show those returns assuming zero cash. (As I pointed out midweek in Falling (not so) Slowly - the MFI Index is really struggling in 2017. Down 2.8%.  My Select approach continues to be solid, while my Formula approach struggles (not helped by GME as we shall see).  My Miscellaeous took a hige tumble.  I had mentioned that this was a riskier approach and that showed in a bumpy week.  My BAC warrants are easily my single largest holding and they went from $12.61 to $10.79 in a week.  Ouch.

MFI Select

I have two groups of MFI stocks with real money.  The first (and oldest) is MFI Select. This is 4 baskets of 5 stocks that I buy and hold for a year.  I have been doing this since my reboot in August 2012.  

This approach has done very well for me.  Note I am trying to avoid stocks that are on the screen, but in my view are not a true Jake's Bubble Gum Shop (ie a one hit wonder).  To be fair,  I have also had several stocks that did very well..

Here is my month by month performance, assuming I put in $100,000 spread over the 4 baskets evenly:

 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 47.19%        209,503            162,313
2/1/2017 47.65%        212,330            164,675
3/1/2017 52.99%        222,583            169,589
Current 52.72%        220,666            167,941

It was a tough week.  Here are the individual stock movements:


 Stock   Last Week   Current   Dividend   Change 
 RHI              49.54                   48.19                       -   -2.7%
 ATHM              33.26                   31.90                       -   -4.1%
 CA              32.43                   31.86                       -   -1.8%
 AMGN            168.61                165.74                       -   -1.7%
 MPAA              27.98                   28.01                       -   0.1%
 AKRX              22.32                   22.75                       -   1.9%
 MSGN              23.05                   22.50                       -   -2.4%
 VLO              68.90                   65.78                       -   -4.5%
 BRCD              12.47                   12.52                       -   0.4%
 YY              51.01                   46.30                       -   -9.2%
 CSCO              34.23                   34.08                       -   -0.4%
 KLAC              94.69                   95.72                       -   1.1%
 RGR              53.55                   51.90                       -   -3.1%
 GILD              69.06                   67.51                       -   -2.2%
 CBI              29.76                   28.83                       -   -3.1%
 GNC                7.40                     7.00                       -   -5.4%
 WNC              21.14                   20.48                       -   -3.1%
 Average  -2.4%

You can see my two Chinese names, ATHM and YY got hit pretty hard.

Here are the 4 tranches:


5/6/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 BRCD  $7.97 $12.52 $0.17 59.2% 16.5%
 CBI  $37.82 $28.83 $0.00 -23.8% 16.5%
 HSII  $18.51 $25.50 $0.39 39.9% 16.5%
 RHI  $38.51 $48.19 $0.90 27.5% 16.5%
 UTHR  $107.99 $140.05 $0.00 29.7% 16.5%
 Totals  26.5% 16.5%
8/15/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 CSCO  $31.20 $34.08 $0.26 10.1% 8.2%
 GNC  $19.79 $7.00 $0.38 -62.7% 8.2%
 VLO  $54.73 $65.78 $1.30 22.6% 8.2%
 MSGN  $16.68 $22.50 $0.00 34.9% 8.2%
 GILD  $79.33 $67.51 $1.46 -13.1% 8.2%
 Totals  -1.6% 8.2%
11/15/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 MPAA  $26.55 $28.01 $0.00 5.5% 8.1%
 ATHM  $22.61 $31.90 $0.00 41.1% 8.1%
 AMGN  $145.14 $165.74 $1.00 14.9% 8.1%
 RHI  $43.23 $48.19 $0.46 12.5% 8.1%
 CA  $31.11 $31.86 $0.26 3.2% 8.1%
 Totals  15.4% 8.1%
2/1/2017  Start   Current   Dividend   Pct Gain   R3K Gain 
 AKRX  $19.10 $22.75 $0.00 19.1% 2.4%
 YY  $41.08 $46.30 $0.00 12.7% 2.4%
 KLAC  $85.11 $95.72 $0.54 13.1% 2.4%
 WNC  $17.65 $20.48 $0.00 16.0% 2.4%
 RGR  $52.75 $51.90 $0.44 -0.8% 2.4%
 Totals  12.0% 2.4%

All-in-all pretty darned good.  Even satisfactory as Greenblatt might say. Just that one stinker, GNC.


 Category/Tranche   August   November   February   May   Total 
 Initial Investment         25,000          25,000       25,000        25,000         100,000
 Current Tranche  -1.6% 15.4% 12.0% 26.5% 12.6%
 Previous Tranche  2.8% 8.0% 10.7% -25.2% -2.9%
 Tranche -2  11.2% 69.4% -14.3% 18.3% 21.2%
 Tranche -3  41.4% 14.2% 8.5% 33.0% 24.3%
 Tranche -4  14.1% 43.7% 78.3% 0.0% 34.0%
 MFI Overall Gain  81.4% 246.9% 105.6% 48.7% 120.7%
 Current Balance         45,350          86,734       51,397        37,185         220,666
 R3K Current Tranche  8.2% 8.1% 2.4% 16.5% 8.8%
 R3K Overall Gain  80.8% 84.1% 65.6% 54.9% 67.9%
 R3K Balance         41,779          46,035       41,396        38,732         167,941
 Annualized IRR  13.8% 33.0% 19.0% 10.7% 19.1%

Still clocking an annualized IRR of over 19%.  Current open tranches leading by almost 4 points.

MFI Formula

These are stocks picked by formula rather than my selecting. Formula is based on my backtesting - stocks have to have yield of 2.4% or greater and be in upper 2/3 in market cap.  I then randomly select 5 names.  I will be retiring a tranche in a weeks (4/1) and starting a new one.  I have been also planning to dedicate more $, but I am starting to re-think that.  Not so much that I do not believe in MFI Formula... rather the whole market seems extended.  

Same tables.

 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
Current -2.88%        113,624            116,503

 Stock   Last Week   Current   Dividend   Change 
 CPLA              82.25                   82.20                       -   -0.1%
 HPQ              17.56                   17.23                       -   -1.9%
 ILG              19.26                   19.37                       -   0.6%
 PBI              12.84                   12.54                       -   -2.3%
 GILD              69.06                   67.51                       -   -2.2%
 CA              32.43                   31.86                       -   -1.8%
 SYNT              17.64                   16.38                       -   -7.1%
 TGNA              26.07                   25.53                       -   -2.1%
 XPER              35.80                   37.25                       -   4.1%
 LDOS              53.95                   52.62                       -   -2.5%
 TIME              19.15                   19.35                       -   1.0%
 CSCO              34.23                   34.08                       -   -0.4%
 GME              24.64                   20.70                       -   -16.0%
 HRB              24.45                   22.42                       -   -8.3%
 CALM              38.50                   37.35 -3.0%
 VIAB              43.40                   43.06 -0.8%
 Average  -2.7%

You can see the GME implosion.  I am so fed up with retail, but am committed to following Formula on this part of my investing (check emotions at the door).  But here are my thoughts about retail recently (MFI Diary: Clearance Bin).


 4/1/16 Stocks  Start Current Dividend Pct Gain R3K Gain
 CALM  $51.27 $37.35 $0.44 -26.3% 16.4%
 HPQ  $12.10 $17.23 $0.51 46.5% 16.4%
 TIME  $15.24 $19.35 $0.76 31.9% 16.4%
 ILG  $13.85 $19.37 $0.51 43.5% 16.4%
 XPER  $30.79 $37.25 $0.80 23.6% 16.4%
 Totals  23.9% 16.4%
7/1/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 ILG  $16.76 $19.37 $0.39 17.9% 11.9%
 VIAB  $44.00 $43.06 $0.60 -0.8% 11.9%
 CPLA  $53.22 $82.20 $1.21 56.7% 11.9%
 HRB  $23.62 $22.42 $0.66 -2.3% 11.9%
 PBI  $17.69 $12.54 $0.56 -25.9% 11.9%
 Totals  9.1% 11.9%
10/3/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 CPLA  $58.15 $82.20 $0.82 42.8% 9.0%
 LDOS  $43.01 $52.62 $0.00 22.3% 9.0%
 GME  $27.70 $20.70 $0.75 -22.6% 9.0%
 PBI  $18.15 $12.54 $0.38 -28.8% 9.0%
 CSCO  $31.72 $34.08 $0.52 9.1% 9.0%
 Totals  4.6% 9.0%
12/30/2016  Start   Current   Dividend   Pct Gain   R3K Gain 
 GILD  $71.69 $67.51 $0.52 -5.1% 4.1%
 HPQ  $15.00 $17.23 $0.13 15.8% 4.1%
 TGNA  $21.33 $25.53 $0.14 20.3% 4.1%
 CA  $31.99 $31.86 $0.26 0.4% 4.1%
 SYNT  $19.79 $16.38 $0.00 -17.2% 4.1%
 Totals  2.8% 4.1%

As mentioned, just a week left on the 4/1 tranche - which looks like a nice winner (only one of the 4 leading).  Some logistics.  I will sell CALM this week.  The other four I will sell April 3rd.  I will buy 5 new names April 3rd.  In my tables (below), the April 2016 tranche will move from Current to "Previous".  And the April 2017 tranche will become current.  It is actually a fair amount of effort switching over.


 Category/Tranche   October   January   April   July   Total 
 Initial Investment      249,820        249,939     250,180      249,728         999,667
 Current Tranche  4.6% 2.8% 23.9% 9.1% 9.1%
 Previous Tranche  5.5% 9.3% -0.2% -12.5% 1.3%
 Tranche -2  0.5% 11.0%               -                  -   2.9%
 MFI Overall Gain  10.8% 24.7% 23.6% -4.5% 13.7%
 Current Balance      276,846        311,751     309,110      238,537      1,136,244
 R3K Current Tranche  9.0% 4.1% 16.4% 11.9% 10.3%
 R3K Overall Gain  23.0% 16.3% 15.1% 11.6% 16.5%
 R3K Balance      307,401        290,787     288,061      278,768      1,165,017
 Annualized IRR  4.2% 10.4% 11.2% -2.6% 5.8%

Dividend Portfolio

Those who only care about MFI can stop here.  I do have a dividend portfolio as I approach retirement and want to create an income stream for my "golden" years.  So not sexy, but real investing.  Most dividends get plowed back in.  I have sold a couple names this year - I am nervous about impact of interest rate hikes here and want to keep some proverbial dry powder.


 Dividend Stocks  Start  Current   Divvy   Overall Pct Gain   Weekly Pct Gain   1/1/17 Price   % Chg Since 1/1/17 
 CSQ      9.14       10.96      2.42 46.4% -1.4%         10.27 8.6%
 AOD      7.64         8.15      1.83 30.6% -1.5%           7.58 9.4%
 SBRA    22.46       25.74      0.41 16.4% 0.0%         24.42 5.4%
 PSXP    47.04       50.23      1.08 9.1% -1.3%         48.64 4.4%
 TGONF    10.24       12.33      2.02 40.2% 0.1%         12.14 3.0%
 JQC      7.85         8.75      0.79 21.5% -1.4%           8.85 0.5%
 PSX    80.00       78.90      3.51 3.0% 0.0%         86.41 -8.0%
 DSL    18.45       19.78      1.45 15.0% 0.1%         18.99 6.4%
 GLDI    10.63         9.40      0.86 -3.5% 0.0%           8.94 6.7%
 PEO    20.49       18.98      0.10 -6.9% -1.7%         20.17 -5.4%
 O    24.55       59.46    19.71 222.5% -0.7%         57.48 3.9%
 DHF      3.19         3.36      0.09 8.0% 0.3%           3.36 1.8%
 OIBAX      5.08         5.75      2.34 59.4% 0.5%           5.61 3.3%
 Totals  25.0% 3.4%

I am thrilled with the 3.4% gain so far.  Again, this is a steady eddy type of portfolio.


Miscellaneous

This continues to be a volatile (and smallest) component.  It dropped a lot this week - mostly due to BAC warrants dropping like 20%.  But those are a very long term investment (I have since 2012) and I may use this dip as a buying opportunity.  I do have some options in here and have been buying a bit of biotech (a basket approach) and some M&A arbitrage.  Again, I do not go into detail as I am not comfortable if people follow me.

Have a great weekend.