Well, two weeks into 2018! Most of my holdings/portfolios continue to go up. It is almost surreal. But I did write back in December that I do not see any reason for a crash... outside of a black swan. Tax reform will be very positive and even more importantly, people and businesses seem more confident. That is so critical as it can be self-fulfilling.
We are taking my son back to college this weekend and then my wife and I (empty nesters once again) will go down to Orlando for a little sunshine.
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, in the grievance section, 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.
Opinions here are my own, keep in mind I am an actuary by training. So I barely know a put from a call.
Onwards.
Last Week
Things just continue to be goldilocks. It was another great week, both for me and the markets in general. Value stocks do seem to be coming back into vogue and I strongly believe M&A and strong earnings for US-centric companies will fuel solid results. Here is my table summarizing the week:
| Component | YTD | Week Change |
| Overall | +3.6% | +1.5% |
| MFI Select | +2.9% | +0.8% |
| MFI Formula | +3.4% | +1.9% |
| MFI Combined | +3.2% | +1.3% |
| Miscellaneous | +4.0% | +1.2% |
| Dividend | +3.8% | +1.9% |
| Dividend Index | +0.3% | -0.2% |
| R3K Index | +4.0% | +1.7% |
| Blended Index | +2.8% | +1.1% |
| MFI Index | +5.5% | +2.3% |
| GARIX | +3.7% | +1.6% |
So looking at this table, one notices several items. First my MFI (combined) is trailing the R3K, 3.2% to 4.0%. A good chunk of that is my MFI has a cash component (almost 33%), so that will dampen things when markets are rising. Second, my dividend portfolio is really off to a good start - up 3.7%. That is much better than the benchmark (Barron's 40 dividend recommendations) which were actually down slightly during the week and up just 30 basis points on the year. I believe this will be a 2018 theme. If inflation is starting to pick up (my belief) and fed starts to look to raise rates, fixed income securities (such as treasuries and munis) are the last place you want to be. So my dividend portfolio puts less emphasis on securities that will be impacted by rising inflation/rates.
Then I think the final takeaway looking at the table is the strong start for the MFI Index. It is up a very snappy 5.5%. (Oh, and I am beating the blended index!).
The bad headline for me this week was today with GME (GameStop falls sharply after update). They announced a write-down of their "technology" business. That basically means they don't think it is worth very much. It is non-cash, so doesn't impact tangible book value - but it caused the stock to sell off 11%, even though GME had SSS of +11% y over y and will earning $3.20 per share or so. Yes, I think they are easily worth $18.
MFI Select
As my readers know, I have two real $ MFI portfolio (Select & Formula). I also have an MFI Index, which is not real money, but is like the Russell 3000 index in that I reconstitute the MFI Index with 50 stocks from official screen once a year.
MFI Select is a portfolio of 4 tranches, with each tranche having 5 stocks. I have been running this portfolio since August 2012. I had quit MFI for a year (back in July 2011) from frustration with subpar results. I licked my wounds, studied what worked and didn't work and came back with MFI Select. I hold stocks for a year, as recommended by Greenblatt's book. I do allow myself freeform in how I pick my stocks - so I use the official screen plus my own home built screener.
Here are the 4 current open tranches:
| 2/1/2017 | Start | Current | Dividend | Pct Gain | R3K Gain |
| AKRX | $19.10 | $33.55 | $0.00 | 75.7% | 23.4% |
| YY | $41.08 | $135.23 | $0.00 | 229.2% | 23.4% |
| KLAC | $85.11 | $107.29 | $2.26 | 28.7% | 23.4% |
| WNC | $17.65 | $22.46 | $0.24 | 28.6% | 23.4% |
| RGR | $52.75 | $54.05 | $1.36 | 5.0% | 23.4% |
| Totals | 73.4% | 23.4% | |||
| 5/6/2017 | Start | Current | Dividend | Pct Gain | R3K Gain |
| WSTC | $24.15 | $23.50 | $0.00 | -2.7% | 17.0% |
| TGNA | $25.75 | $25.23 | $0.21 | -1.2% | 17.0% |
| TIME | $15.05 | $18.50 | $0.08 | 23.5% | 17.0% |
| MSGN | $23.55 | $21.60 | $0.00 | -8.3% | 17.0% |
| QCOM | $54.93 | $65.38 | $1.71 | 22.1% | 17.0% |
| Totals | 6.7% | 17.0% | |||
| 8/15/2017 | Start | Current | Dividend | Pct Gain | R3K Gain |
| GHC | $591.10 | $577.05 | $1.27 | -2.2% | 14.0% |
| ICHR | $19.80 | $24.74 | $0.00 | 24.9% | 14.0% |
| MD | $43.00 | $54.22 | $0.00 | 26.1% | 14.0% |
| SIMO | $43.05 | $50.70 | $0.30 | 18.5% | 14.0% |
| RHI | $44.15 | $56.36 | $0.48 | 28.7% | 14.0% |
| Totals | 19.2% | 14.0% | |||
| 11/15/2017 | Start | Current | Dividend | Pct Gain | R3K Gain |
| MSGN | $16.67 | $21.60 | $0.00 | 29.6% | 8.6% |
| CELG | $100.60 | $106.00 | $0.00 | 5.4% | 8.6% |
| EVC | $5.78 | $7.35 | $0.05 | 28.0% | 8.6% |
| SIMO | $46.88 | $50.70 | $0.00 | 8.1% | 8.6% |
| VIAB | $24.41 | $33.76 | $0.20 | 39.1% | 8.6% |
| Totals | 22.1% | 8.6% |
Just glancing through these tables, one can see things are going well. February's tranche is one of my best ever, now up 73%. You know, the discipline of MFI can help. If I had just been trading, I would have likely sold YY at $100. I mean who isn't happy with a 100% gain in under a year? But I do follow the rules and I have held it (and held my breathe as human nature hates to lose gains more than you enjoy gains). And I am now up 229%!
Now here is a table showing summaries of all tranches:
| Category/Tranche | August | November | February | May | Total |
| Initial Investment | 25,000 | 25,000 | 25,000 | 25,000 | 100,000 |
| Current Tranche | 19.2% | 22.1% | 73.4% | 6.7% | 28.3% |
| Previous Tranche | -0.1% | 42.6% | 10.7% | 19.1% | 23.6% |
| 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 | 119.7% | 423.2% | 218.3% | 49.5% | 202.7% |
| Current Balance | 54,934 | 130,796 | 79,568 | 37,365 | 302,663 |
| R3K Current Tranche | 14.0% | 8.6% | 23.4% | 17.0% | 15.7% |
| R3K Overall Gain | 118.2% | 122.7% | 99.5% | 86.7% | 106.8% |
| R3K Balance | 54,562 | 55,675 | 49,887 | 46,686 | 206,810 |
| Annualized IRR | 15.6% | 37.8% | 26.4% | 8.9% | 22.2% |
Reading across, you can see my 4 current tranches in aggregate are up 28.3%. This table is ever-evolving, so when I start my new February tranche next month, the 73.4% will drop to "previous tranche" and everything else will drop down one row.
Finally, here is a quarter by quarter evolution of MFI Select versus the benchmark R3K.
| Date | Differential | MFI Value | R3K Value |
| 1/1/2013 | -1.78% | 102,798 | 104,575 |
| 4/1/2013 | -0.43% | 106,804 | 107,234 |
| 7/1/2013 | 4.29% | 114,888 | 110,597 |
| 10/1/2013 | 19.67% | 138,655 | 118,990 |
| 1/1/2014 | 26.63% | 157,138 | 130,503 |
| 4/1/2014 | 30.38% | 162,991 | 132,616 |
| 7/1/2014 | 39.23% | 177,971 | 138,740 |
| 10/1/2014 | 29.38% | 168,321 | 138,944 |
| 1/1/2015 | 28.17% | 174,306 | 146,140 |
| 4/1/2015 | 29.95% | 178,565 | 148,612 |
| 7/1/2015 | 62.69% | 211,437 | 148,743 |
| 10/1/2015 | 43.12% | 181,175 | 138,052 |
| 1/1/2016 | 63.33% | 209,514 | 146,186 |
| 4/1/2016 | 47.34% | 195,770 | 148,430 |
| 7/1/2016 | 50.41% | 201,092 | 150,680 |
| 10/1/2016 | 42.98% | 198,563 | 155,582 |
| 1/1/2017 | 45.60% | 209,503 | 163,936 |
| 4/1/2017 | 55.70% | 229,473 | 173,735 |
| 7/1/2017 | 60.28% | 239,060 | 178,782 |
| 10/1/2017 | 75.60% | 262,489 | 186,886 |
| 1/1/2018 | 92.19% | 291,114 | 198,926 |
| Current | 95.85% | 302,663 | 206,810 |
This assumes I started with $100,000 spread over first 4 tranches and then just continuously rolled money over. So it is actually hypothetical as I have added money over time (in 2018 I plan to increase funding by 33%).
Here are how the open stocks fared during this past week:
| Stock | Last Week | Current | Dividend | Change |
| SIMO | 54.89 | 50.70 | - | -7.6% |
| MSGN | 20.75 | 21.60 | - | 4.1% |
| YY | 128.10 | 135.23 | - | 5.6% |
| CELG | 104.99 | 106.00 | - | 1.0% |
| EVC | 7.20 | 7.35 | - | 2.1% |
| ICHR | 27.50 | 24.74 | - | -10.0% |
| AKRX | 32.46 | 33.55 | - | 3.4% |
| VIAB | 29.10 | 33.76 | - | 16.0% |
| RHI | 56.31 | 56.36 | - | 0.1% |
| MD | 54.50 | 54.22 | - | -0.5% |
| QCOM | 66.47 | 65.38 | - | -1.6% |
| KLAC | 109.86 | 107.29 | - | -2.3% |
| TIME | 18.55 | 18.50 | - | -0.3% |
| GHC | 566.15 | 577.05 | - | 1.9% |
| WNC | 21.60 | 22.46 | - | 4.0% |
| RGR | 53.35 | 54.05 | - | 1.3% |
| TGNA | 24.92 | 25.23 | - | 1.2% |
You can see it was a bad week in the semi space. SIMO, ICHR, QCOM and KLAC all struggled. But broadcast/content companies are doing well - VIAB, EVC and MSGN.
MFI Formula
This is my other real $ MFI portfolio. I started it in October, 2014. It is kind of the opposite of Select. All my picks in this portfolio are by formula/filter of official screen and then random number generator. this does tend to cause the same stock to frequently get picked in multiple tranches. That has generally been favorable for me, but hurt this week as GME is in three tranches and sold of 11% today.
Same tables, less chatter.
| 4/1/2017 | Start | Current | Dividend | Pct Gain | R3K Gain |
| BKE | $18.45 | $20.95 | $2.75 | 28.5% | 18.9% |
| CSCO | $33.76 | $40.87 | $1.16 | 24.5% | 18.9% |
| GILD | $67.50 | $79.02 | $1.56 | 19.4% | 18.9% |
| OMC | $85.53 | $75.92 | $1.65 | -9.3% | 18.9% |
| SYNT | $16.76 | $23.50 | $0.00 | 40.2% | 18.9% |
| Totals | 20.6% | 18.9% | |||
| 7/1/2017 | Start | Current | Dividend | Pct Gain | R3K Gain |
| CSCO | $30.98 | $40.87 | $0.58 | 33.8% | 15.5% |
| GME | $20.95 | $17.76 | $0.76 | -11.6% | 15.5% |
| HPQ | $17.60 | $22.92 | $0.27 | 31.7% | 15.5% |
| RGR | $60.70 | $54.05 | $0.44 | -10.2% | 15.5% |
| SYNT | $16.21 | $23.50 | $0.00 | 45.0% | 15.5% |
| Totals | 17.7% | 15.5% | |||
| 10/1/2017 | Start | Current | Dividend | Pct Gain | R3K Gain |
| DIN | $43.14 | $53.42 | $0.97 | 26.1% | 10.6% |
| GILD | $82.85 | $79.02 | $0.52 | -4.0% | 10.6% |
| GME | $20.50 | $17.76 | $0.38 | -11.5% | 10.6% |
| HPQ | $20.22 | $22.92 | $0.13 | 14.0% | 10.6% |
| OMC | $74.80 | $75.92 | $0.55 | 2.2% | 10.6% |
| Totals | 5.4% | 10.6% | |||
| 1/2/2018 | Start | Current | Dividend | Pct Gain | R3K Gain |
| AMGN | $177.11 | $185.04 | $0.00 | 4.5% | 3.4% |
| GME | $18.06 | $17.76 | $0.00 | -1.6% | 3.4% |
| GILD | $71.64 | $79.02 | $0.00 | 10.3% | 3.4% |
| HRB | $26.34 | $26.36 | $0.00 | 0.1% | 3.4% |
| OMC | $72.81 | $75.92 | $0.00 | 4.3% | 3.4% |
| Totals | 3.5% | 3.4% |
| Category/Tranche | October | January | April | July | Total |
| Initial Investment | 249,820 | 249,939 | 250,180 | 249,728 | 999,667 |
| Current Tranche | 5.4% | 3.5% | 20.6% | 17.7% | 10.9% |
| Previous Tranche | 7.0% | 16.5% | 25.2% | 26.7% | 19.2% |
| Tranche -2 | 5.5% | 9.3% | -0.2% | -12.5% | 0.5% |
| Tranche -3 | 0.5% | 11.0% | 0.0% | 0.0% | 2.9% |
| MFI Overall Gain | 19.5% | 46.3% | 50.6% | 30.6% | 36.7% |
| Current Balance | 298,489 | 365,577 | 376,857 | 326,072 | 1,366,996 |
| R3K Current Tranche | 10.6% | 3.4% | 18.9% | 15.5% | 12.1% |
| R3K Overall Gain | 48.4% | 39.5% | 38.8% | 34.5% | 40.3% |
| R3K Balance | 370,733 | 348,743 | 347,286 | 335,929 | 1,402,692 |
| Annualized IRR | 5.6% | 13.3% | 15.8% | 11.1% | 11.4% |
So hard to be unhappy with 11.4%, but the good guys are trailing benchmarks by a bit. Not a disaster, but we always want to better. I am still a strong believer in MFI formula (3+ years not enough to judge) and continue to allocate more $ into this approach as well.
Here are stocks for the week, see if you can spot the biggest loser!
| Stock | Last Week | Current | Dividend | Change |
| GILD | 74.52 | 79.02 | - | 6.0% |
| OMC | 72.17 | 75.92 | - | 5.2% |
| GME | 18.68 | 17.76 | - | -4.9% |
| SYNT | 23.67 | 23.50 | - | -0.7% |
| CSCO | 39.53 | 40.87 | - | 3.4% |
| HPQ | 21.75 | 22.92 | - | 5.4% |
| AMGN | 180.65 | 185.04 | - | 2.4% |
| HRB | 26.79 | 26.36 | - | -1.6% |
| BKE | 21.65 | 20.95 | 2.00 | 6.0% |
| DIN | 51.46 | 53.42 | - | 3.8% |
| RGR | 53.35 | 54.05 | - | 1.3% |
So GME was "only" down 4.9% for the week, even with 11% sell off today. BKE had a special dividend and had a strong week. GILD is my biggest holding, so thrilled with the 6% gain.
Here is how the hypothetical $100,000 has grown, quarter by quarter:
| Date | Differential | Value | R3K Value |
| 10/1/2014 | 0.00% | 100,000 | 100,000 |
| 1/1/2015 | -0.33% | 100,664 | 100,995 |
| 4/1/2015 | 5.09% | 106,781 | 101,695 |
| 7/1/2015 | 4.82% | 106,423 | 101,604 |
| 10/1/2015 | 6.39% | 100,703 | 94,312 |
| 1/1/2016 | -3.36% | 96,830 | 100,012 |
| 4/1/2016 | 0.34% | 102,371 | 101,548 |
| 7/1/2016 | -0.19% | 103,022 | 103,216 |
| 10/1/2016 | -0.85% | 106,377 | 107,230 |
| 1/1/2017 | 1.57% | 113,406 | 111,832 |
| 4/1/2017 | -1.86% | 116,227 | 118,091 |
| 7/1/2017 | -2.40% | 119,144 | 121,545 |
| 10/1/2017 | -2.56% | 124,448 | 127,007 |
| 1/1/2018 | -3.63% | 131,460 | 135,086 |
| Current | -3.57% | 136,700 | 140,270 |
Not "ideal", but hanging in there much better than MFI in total since 2014.
Dividend Portfolio
For those who read this for the MFI portion - I am done. Now I am going to chat briefly about the other two legs of my investing stool (MFI, Dividend and Misc). As I am now retired (and yes, I love being retired), I have plowed a lot of my funds that I got from selling company stock and 401K into dividend/income securities. As I mentioned at outset, I have focused more on variable income securities than fixed income as I worry about inflation. I am not an expert, but articles in magazines such as Barron's have also said that holdings like EVG and NRZ are not as rate sensitive as some income securities... I always pay attention on those points... hope they're right!
Here is my portfolio and movements during the week:
| Dividend Stocks | Start | Current | Divvy | Overall Pct Gain | Weekly Pct Gain | 12/30/17 Price | Yield |
| OIBAX | 5.91 | 6.01 | 0.19 | 4.9% | 0.0% | 5.96 | 4.0% |
| KCLI | 48.89 | 45.05 | 0.33 | -7.2% | -0.7% | 45.25 | 2.4% |
| TK | 6.20 | 10.54 | 0.08 | 71.5% | 4.9% | 9.32 | 2.1% |
| KNOP | 21.30 | 22.00 | - | 3.3% | 0.9% | 20.75 | 9.5% |
| CPLP | 3.54 | 3.57 | 0.08 | 3.2% | 1.7% | 3.36 | 9.0% |
| JQC | 8.18 | 8.18 | 0.67 | 8.2% | -1.2% | 8.22 | 7.0% |
| TGP | 17.89 | 21.25 | - | 18.8% | 3.7% | 20.15 | 2.6% |
| EVG | 14.46 | 14.24 | 0.41 | 1.3% | 0.1% | 14.35 | 6.4% |
| PSXP | 47.39 | 55.15 | 1.03 | 18.5% | 3.7% | 52.35 | 4.7% |
| ISBC | 13.25 | 14.36 | 0.15 | 9.6% | 4.5% | 13.88 | 2.5% |
| FDEU | 18.40 | 19.70 | 0.94 | 12.2% | 2.0% | 18.83 | 7.4% |
| LADR | 13.01 | 13.59 | 0.62 | 9.2% | 0.3% | 13.63 | 9.3% |
| NS | 37.98 | 34.22 | 0.82 | -7.7% | 9.3% | 29.95 | 12.8% |
| RLJ-PA | 28.45 | 26.57 | 0.98 | -3.2% | -0.9% | 27.01 | 7.4% |
| NRZ | 16.56 | 17.74 | 1.17 | 14.1% | 0.2% | 17.88 | 11.3% |
| SBRA | 22.28 | 17.83 | 0.91 | -15.9% | -3.6% | 18.77 | 10.1% |
| RILY | 15.58 | 18.95 | 0.21 | 23.0% | 4.4% | 18.10 | 2.5% |
| OCSI | 8.68 | 8.45 | 0.38 | 1.8% | -1.2% | 8.40 | 9.0% |
| DSL | 19.47 | 20.81 | 1.84 | 16.4% | 0.6% | 20.19 | 8.6% |
| TGONF | 11.04 | 13.90 | 1.79 | 42.1% | 0.7% | 13.30 | 5.0% |
| AMID | 13.25 | 14.30 | - | 7.9% | 2.5% | 13.35 | 11.5% |
| TOO | 2.25 | 2.82 | - | 25.3% | 8.5% | 2.36 | 1.4% |
| O | 25.72 | 52.72 | 21.06 | 186.8% | -4.5% | 57.02 | 4.8% |
| Totals | 9.9% | 1.7% | 6.4% |
The keen-eyed reader will note that I fixed the 12/31/17 column from last week (it was out and out wrong) and I also fixed RILY (which had the wrong yield). The super keen-eyed reader might notice that the weekly gain here is 1.7% and it was 1.9% in my table at the top. There are a couple reasons for the differences, I do not have everything here, such as my small bank portfolio (which would be 2nd largest position) and these weekly changes are simplified and exclude dividends during the week. (yes, I occasionally cut corners).
One interesting stock during the week was NS. It went up over 9% on no news. This is where markets are really inefficient and i wish I had played this up more. With the tax law changes and 2017 being a good year, "bad" stocks for 2017 really got oversold down the stretch for tax loss purposes. NS was a classic example. As soon as calendar turned, it has regained a large portion of the losses from December. I knew this was likely to happen, I added to NS 11/20 and it is up 20%. I also bought the AMID 12/20 as it was beaten down with tax selling and it is up 8% for me. (of course on the Misc side, I added to SYGP and SELB for and that isn't working so well so far)
One interesting stock during the week was NS. It went up over 9% on no news. This is where markets are really inefficient and i wish I had played this up more. With the tax law changes and 2017 being a good year, "bad" stocks for 2017 really got oversold down the stretch for tax loss purposes. NS was a classic example. As soon as calendar turned, it has regained a large portion of the losses from December. I knew this was likely to happen, I added to NS 11/20 and it is up 20%. I also bought the AMID 12/20 as it was beaten down with tax selling and it is up 8% for me. (of course on the Misc side, I added to SYGP and SELB for and that isn't working so well so far)
Here are the small banks, they had a very strong week (up over 3%)!
| Bank | Start | Current | Dividends | Change | Yield |
| ACBI | 16.99 | 18.05 | - | 6.2% | 0.0% |
| ASB | 25.69 | 26.55 | - | 3.4% | 2.1% |
| FBIZ | 23.69 | 23.23 | - | -1.9% | 2.3% |
| FULT | 18.81 | 18.80 | 0.11 | 0.6% | 2.4% |
| FNB | 14.47 | 14.49 | - | 0.1% | 3.4% |
| MSBI | 32.96 | 33.97 | - | 3.1% | 2.4% |
| NRIM | 37.47 | 35.10 | 0.21 | -5.8% | 2.6% |
| PACW | 48.30 | 53.01 | - | 9.8% | 3.8% |
| SONA | 17.13 | 16.73 | - | -2.3% | 2.0% |
| WNEB | 10.88 | 11.05 | - | 1.6% | 1.1% |
| Total | 1.5% | 2.2% |
Miscellaneous
Overall a decent week for my miscellaneous portfolio. Typically be thrilled with +1.2%, but Russell 3000 was up 1.7%. EXXI was huge for me, up 17%. This is a play highly leveraged to oil prices, so could drop back just as quickly. But SELB was down 20% (yes, I have riskier plays in Misc). Not sure why, perhaps CELG buying another biotech was disappointing to some shareholders. Then GCAP was down 13%... so this is a position I should have sold at start of week,,, but I am maintaining my discipline and sitting on my hands until February.
Oh and SLSDF was up 21%... this is a micro, microcap fracking sand play. I do think it has serious upside, but there is a strong bear case as well as the stock has fallen from above $1 just last summer to 29 cents (yikes) just a few weeks ago. Now all the way back to 42 cents. I guess it is almost a penny stock.
Here's my gold/miners basket:
| Miner | Start | Current | Change |
| TORXF | 9.90 | 9.35 | -5.6% |
| SAND | 4.48 | 5.17 | 15.4% |
| NSU | 2.38 | 2.39 | 0.4% |
| KLDX | 2.41 | 2.13 | -11.6% |
| KL | 14.49 | 16.12 | 11.2% |
| GSS | 0.87 | 0.87 | 0.8% |
| FSM | 4.24 | 5.27 | 24.3% |
| EXK | 2.14 | 2.63 | 22.9% |
| BTG | 2.61 | 3.07 | 17.6% |
| EGO | 1.18 | 1.29 | 9.3% |
| Total | 8.5% |
KLDX had a tough week as they announced they're closing a mine. It is telling that FSM and EXK are the top two and they are much more silver plays.
Ok, that is a wrap. Have a great long three day weekend. I'll let people know how Orlando was.
Actually looking forward to Epcot with no kids in tow.
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