Saturday, June 30, 2018

MFI Monthly Tracking Portfolio, June 2017

MFI Monthly Tracking Portfolio, June 2017

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

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 9 month losing streak, getting whooped 14.7% to 11.1% this month. This has been such a horrid stretch.  The past 9 closed portfolios have been absolutely stomped, 17.8% to 9.2% on average. So I suppose we should feel good "just" losing by 3.6 points  Ee-gads.

Guess what?  July 2017 also trailing -  but by just a bit. 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 great news is that the 10 most recent are all leading, by an average of 5 percentage points apiece. Fingers crossed.  That is hopeful.

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 
MSB              12.21           24.55 101.0%            179
SYNT              16.88           32.09 90.1%         1,412
USNA              64.20         115.30 79.6%         1,574
FOXA              27.86           49.69 78.3%       52,176
DIN              42.15           74.80 77.4%            805
BPT              17.25           29.90 73.3%            454
SCMP              10.60           18.00 69.8%            493
BKE              17.03           26.90 57.9%            877
MCFT              19.54           28.95 48.2%            364
LEE                2.00             2.85 42.5%            113
CSCO              30.38           43.03 41.6%     156,987
TRNC              12.76           17.28 35.4%            419
TDC              29.86           40.15 34.5%         3,870
HPQ              17.13           22.69 32.4%       29,576
MNKD                1.45             1.90 31.0%            139
NCMI                6.59             8.40 27.4%            453
ESRX              63.89           77.21 20.8%       37,920
AMCX              53.26           62.20 16.8%         3,581
AMAG              18.25           19.50 6.8%            629
MSGN              22.55           23.95 6.2%         1,693
QCOM              53.01           56.12 5.9%       81,353
DISCA              26.00           27.50 5.8%       15,262
CARS              26.87           28.39 5.7%         1,924
MIK              18.35           19.17 4.5%         3,465
IDCC              77.84           80.90 3.9%         2,747
GILD              68.89           70.84 2.8%       92,614
UIS              12.75           12.90 1.2%            643
NHTC              24.88           25.02 0.5%            316
NSR              33.35           33.50 0.4%         1,844
GHC            585.41         586.10 0.1%         3,302
DLX              67.64           66.21 -2.1%         3,338
AVID                5.38             5.20 -3.3%            220
VEC              32.48           30.82 -5.1%            355
OMC              80.74           76.27 -5.5%       19,549
PDLI                2.58             2.34 -9.3%            421
VIAB              33.43           30.16 -9.8%       13,781
UTHR            131.32         113.15 -13.8%         5,979
WNC              21.67           18.66 -13.9%         1,323
ACIA              41.38           34.81 -15.9%         1,594
DHX                2.85             2.35 -17.5%            144
HRB              29.74           22.78 -23.4%         6,397
TGNA              14.22           10.85 -23.7%         3,121
GME              19.75           14.57 -26.2%         2,189
AGX              58.74           40.95 -30.3%            935
FRAN              11.18             7.55 -32.5%            416
MPAA              28.34           18.71 -34.0%            550
PBI              14.24             8.57 -39.8%         2,847
VVUS                1.21             0.71 -41.3%            128
SQBG                3.88             1.97 -49.2%            244
AOBC              23.94           12.03 -49.7%         1,350


Seven stinkers - recall I said in previous post a 14% stinker rate... there it is!  If you could just find a way to avoid these, we'd jump from 11.1% to 19.4%.  Here is a listing of every tracking portfolio back to 2006:


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% 21.7% 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 11.1% 14.7% 0
7/28/2017 12.2% 12.4% 0
8/25/2017 23.8% 13.7% 1
9/29/2017 13.1% 9.6% 1
10/27/2017 15.6% 7.1% 1
11/24/2017 12.8% 5.9% 1
12/29/2017 12.7% 3.0% 1
1/26/2018 0.0% -3.7% 1
2/23/2018 2.2% 0.4% 1
3/29/2018 4.8% 3.8% 1
4/27/2018 3.1% 2.6% 1
5/25/2018 2.3% 0.2% 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 29.6%.  MUCH better than the 11.1% for all fifty MFI stocks I tracked.

Here are those winners:

Stock  Initial Price   End Price  Percent Change
MSB              12.21           24.55 101.0%
SYNT              16.88           32.09 90.1%
DIN              42.15           74.80 77.4%
BPT              17.25           29.90 73.3%
BKE              17.03           26.90 57.9%
CSCO              30.38           43.03 41.6%
HPQ              17.13           22.69 32.4%
NCMI                6.59             8.40 27.4%
QCOM              53.01           56.12 5.9%
GILD              68.89           70.84 2.8%
OMC              80.74           76.27 -5.5%
HRB              29.74           22.78 -23.4%
GME              19.75           14.57 -26.2%
PBI              14.24             8.57 -39.8%


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      230,246
Total Russell 3K      268,369
Dividend      526,069