Saturday, February 24, 2018

MFI Monthly Tracking Portfolio 2/24/17

MFI Monthly Tracking Portfolio 2/24/17


Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of February 2018.  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


(you can also find this in Archives of October 2017)

People ask, does MFI not work anymore?  I am not sure. Perhaps 12 years isn't long enough. Perhaps it works better at a higher market cap cut off (I believe this to be true).  I think too many stocks make the screen over the years by "mistake"... that is they are not true value/cheap stocks. In 2011, we had a bunch of Chinese Reverse Merger stocks that hurt that year and were out and out frauds.  Then we have also had a number of stocks that have a one time spike in earnings that fools the formula.  Frankly, it might do better if instead of a trailing 12 month income look, it used a trailing 24 month look on income, to filter out the one time spikes.

But even with that being said, Value stocks have not exactly been in favor the past couple of years, although this appears to be changing.

Onward

 Fearless readers will recall we had a 29 month "losing streak"..  Then we had a 13 month winning streak.

The past two month/years (January and December) have been the worst relative losers to the benchmark of my 130+ month/years.

Guess what?  We are still struggling.  The 50 stocks on the screen got beaten by 9.8 percentage points.  At least that is better than 15.8 point shellacking posted last month. It has been rugged.  Greenblatt warned there would be times people would want to quit and this would ensure in working down the road. 

And 6 of the 11 open portfolios are trailing, by about  points on average (a 3 point improvement from last month),  So you can see why I am excited that both my real money MFI portfolios are beating benchmark.

Here are the 50 stocks in descending performance order (from the portfolio that just hit a year):


Stock  Initial Price   End Price  Percent Change  Mkt Cap 
ACHI                2.15             5.17 140.5%            230
KORS              37.30           64.72 73.5%         6,211
MCFT              14.94           25.50 70.7%            278
MBUU              20.84           33.59 61.2%            372
SCMP              11.75           18.00 53.2%            538
SYNT              17.98           26.98 50.1%         1,512
AKRX              21.28           30.12 41.5%         2,665
HRB              19.34           26.82 38.7%         4,240
TRNC              14.61           19.73 35.0%            532
CSCO              33.17           44.00 32.6%     171,840
USNA              58.95           77.40 31.3%         1,436
HPQ              17.15           22.13 29.0%       30,076
DIN              55.12           68.99 25.2%         1,083
BKE              17.58           22.00 25.1%            982
GIB              47.08           58.32 23.9%       14,166
RHI              47.02           57.85 23.0%         6,129
VEC              23.37           28.41 21.6%            251
HSII              21.01           25.50 21.4%            399
TDC              31.28           37.20 18.9%         4,070
BPT              18.07           20.80 15.1%            456
WNC              20.61           23.31 13.1%         1,307
MSGN              22.30           25.05 12.3%         1,674
CA              31.63           35.43 12.0%       13,485
PDLI                2.22             2.48 11.7%            368
BBSI              61.48           68.49 11.4%            451
CPLA              74.59           80.50 7.9%            875
ESRX              71.55           77.00 7.6%       44,247
BIIB            285.13         292.78 2.7%       61,588
RGR              48.63           49.90 2.6%            932
NSR              33.25           33.50 0.8%         1,871
PCO            648.01         634.50 -2.1%            177
PBI              13.23           12.64 -4.4%         2,612
LEE                2.65             2.50 -5.7%            150
OMC              83.71           77.31 -7.6%       20,222
TGNA              25.67           23.52 -8.4%         5,318
IDCC              84.98           75.70 -10.9%         2,840
AVID                5.85             4.83 -17.4%            238
UIS              14.15           11.45 -19.1%            709
UTHR            146.71         118.04 -19.5%         6,680
SPOK              18.35           14.35 -21.8%            388
MPAA              28.37           22.00 -22.5%            561
NLS              15.60           11.95 -23.4%            482
TZOO                9.40             7.20 -23.4%            130
GME              24.46           15.97 -34.7%         2,696
NHTC              26.97           16.87 -37.4%            309
AGX              68.86           39.25 -43.0%         1,068
AGTC                7.25             3.75 -48.3%            131
AOBC              19.45           10.00 -48.6%         1,095
DHX                4.95             1.65 -66.7%            245
CXRX                2.30             0.70 -69.6%            117


Pretty telling when the broader market is up 17%, but over 20% of the 50 stocks are down 20% or more (some much more... average of -40%).  That is a serious albatross to overcome. 8 of the 11 are under $600m market cap.. 78%.  But under $600m only made up 42% of the 50 stocks, but 78% of the stinkers.  This is a trend I see all the time.

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 15.1% 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% 19.2% 0
12/30/2016 4.7% 20.5% 0
1/27/2017 10.5% 21.2% 0
2/24/2017 7.6% 17.4% 0
3/31/2017 6.9% 17.5% 0
4/28/2017 2.0% 16.3% 0
5/26/2017 7.4% 15.0% 0
6/29/2017 7.3% 14.3% 0
7/28/2017 7.5% 12.0% 0
8/25/2017 14.2% 13.3% 1
9/29/2017 5.8% 9.2% 0
10/27/2017 10.3% 6.7% 1
11/24/2017 11.3% 5.5% 1
12/29/2017 9.2% 2.6% 1
1/26/2018 -1.7% -4.0% 1


Dividend Subset

My backtracking has shown that MFI stocks that pay a dividend seem to do better. I believe this is because a dividends infers that income flows are more likely to be sustainable.  This tends to extract stocks with large one time payments.  That was true again this month-year. My dividend MFI portfolio (which are stocks I track with a yield of 2.6% or greater) were up 16.6%.  MUCH better than the 7.6% for all fifty MFI stocks I tracked.

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      220,284
Total Russell 3K      267,318
Dividend      518,049

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