Saturday, May 26, 2018

sometimes i sit and think, and sometimes i just sit

sometimes i sit and think, and sometimes i just sit

If you get a chance, give Courtney Barnett a listen (shown on left).  When it comes to investing, are we sitting and thinking?  Or are we just sitting?

I am bothered by the performance of my portfolio.  Not just this year.  Let's be honest, outside of MFI, it has been somewhat short of stellar.  I can rationalize that I am a value investor and value is just out of vogue. But deep down I know I have never had the stomach to be a true value investor.

I seem to do best with buying (with some thought/process) and then walking away and not obsessing.  It is the obsessing and regular second-guessing/meddling that really hampers my portfolio performance.  I have actually done best with the smaller baskets - gold/miners or small banks.

If you have been reading my blog for a while and this sounds familiar... that is because I have had this internal debate before.

My Thoughts

In an ironic way, I don't think this blog helps.  It makes my attention span too short as I am writing about what goes on every week.  I think I might pare it back to just an update once a month.

Then I look at my MFI tracking and the dividend approach just seems to work so well.  Why am I screwing around using other approaches, when I have at my fingertips an approach that works great?

Right now I am about 45% in dividend portfolio and 35% MFI (20% Misc).  I think that is backwards. 


  • Pare back my dividend stocks to a core group of 10.  35% of total investment.
  • Change my Misc approach to baskets: shipping, bio-pharma, energy, small banks and other.  Each basket has 10 holdings so I can go with higher risk holdings, but not spaz out everytime I hit an air cushion.  Then I can only change baskets once a year.
  • Expand MFI Formula (with extra funds from dividend paring) to simply be the universe of MFI stocks at 2.4%+ yield.  So remove random number generator.

I think there is a good chance I'll make these moves.  And then stop hyperventilating so much.

More sitting, and then thinking,  to follow.

MFI Monthly Tracking Portfolio 5/26/17

MFI Monthly Tracking Portfolio 5/26/17

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of May 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 (although painstakingly slowly).

Onward

 Fearless readers will recall we had a 29 month "losing streak"..  Then we had a 13 month winning streak. Now we have an 8 month losing streak, getting whooped 15.1% to 11.1% this month. This has been such a horrid stretch.  The past 8 closed portfolios have been absolutely stomped, 18.9% to 9.0% on average. So I suppose we should feel good "just" losing by 4 points  Ee-gads.

Guess what?  We are still struggling.  June and July 2017 are also trailing -  by a lot. It has been rugged.  Greenblatt warned there would be times people would want to quit and this would ensure in working down the road.

The good news is that 7 of the most recent 9 portfolios are leading, by an average of 3 percentage points apiece. Fingers crossed.

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 
RCM                3.47             8.04 131.7%            370
KORS              36.76           68.64 86.7%         6,121
MBUU              23.52           42.78 81.9%            422
SCMP              10.25           18.00 75.6%            445
USNA              64.35         112.60 75.0%         1,578
BPT              16.44           28.50 73.4%            432
SYNT              18.16           31.46 73.2%         1,519
MCFT              18.65           30.06 61.2%            348
BKE              15.94           25.25 58.4%            821
TIME              12.04           18.50 53.7%         1,202
FOXA              26.72           39.02 46.1%       50,029
TRNC              11.39           16.33 43.4%            374
CSCO              30.47           43.26 42.0%     157,500
TDC              28.60           38.77 35.6%         3,707
ESRX              59.76           77.08 29.0%       35,469
MNKD                1.52             1.93 27.0%            145
AMAG              18.80           23.70 26.1%            648
HPQ              17.98           21.91 21.8%       31,030
AMGN            150.62         178.24 18.3%     114,103
PDLI                2.39             2.81 17.6%            390
AMCX              53.04           59.35 11.9%         3,566
VEC              29.62           32.26 8.9%            323
GILD              62.71           67.38 7.4%       84,302
GHC            588.83         598.20 1.6%         3,321
NSR              33.05           33.50 1.4%         1,828
DLX              66.94           66.93 0.0%         3,303
UIS              12.05           11.95 -0.8%            607
IDCC              81.18           79.75 -1.8%         2,864
AVID                5.36             5.22 -2.6%            218
MIK              19.77           18.94 -4.2%         3,822
MSGN              21.45           19.95 -7.0%         1,610
QTHR                1.40             1.29 -7.9%            167
OMC              80.77           71.96 -10.9%       19,533
UTHR            119.08         103.60 -13.0%         5,422
DISCA              25.87           22.34 -13.6%       15,186
NLS              18.10           15.50 -14.4%            556
NHTC              24.99           21.26 -14.9%            317
VVUS                1.13             0.91 -19.5%            119
VIAB              34.24           27.50 -19.7%       14,094
TGNA              24.21           18.67 -22.9%         5,163
MPAA              29.41           21.30 -27.6%            582
MEET                4.66             3.34 -28.3%            321
NTIP                4.21             2.90 -31.1%            103
AGX              59.13           39.15 -33.8%            940
DHX                2.80             1.85 -33.9%            142
SQBG                3.22             2.08 -35.4%            203
PBI              13.91             8.76 -37.0%         2,782
GME              20.50           12.67 -38.2%         2,251
AOBC              22.84           12.53 -45.1%         1,287
ICON                6.18             0.66 -89.3%            352


Eight stinkers, down 30% or more.  Two of them would be in my MFI Formula bucket - GME and PBI... so it is more than just biotechs this time.

Here is every tracking portfolio in aggregate:

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 17.1% 16.0% 1
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% 21.4% 0
2/24/2017 7.6% 17.4% 0
3/31/2017 6.4% 13.6% 0
4/28/2017 5.8% 13.8% 0
5/26/2017 11.1% 15.1% 0
6/29/2017 7.4% 14.5% 0
7/28/2017 9.6% 12.1% 0
8/25/2017 20.3% 13.5% 1
9/29/2017 9.8% 9.4% 1
10/27/2017 11.9% 6.8% 1
11/24/2017 8.9% 5.6% 1
12/29/2017 11.5% 2.8% 1
1/26/2018 -0.5% -3.9% 1
2/23/2018 1.5% 0.1% 1
3/29/2018 2.7% 3.6% 0
4/27/2018 1.4% 2.4% 0

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 21.8%.  MUCH better than the 11.1% 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      225,264
Total Russell 3K      267,707
Dividend      516,297