Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of July 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 10 month losing streak, getting whooped 16.1% to 12.5% this month. This has been such a horrid stretch. The past 10 closed portfolios have been absolutely stomped, 18.0% to 9.0% on average. So I suppose we should feel good "just" losing by 3.6 points Ee-gads.
Guess what? August 2017 is leading by 8 points, perhaps the streak will finally end.. It has been rugged. Greenblatt warned there would be times people would want to quit and this would ensure in working down the road.
Things seem to be eroding again (I certainly saw that in my real results this past month). Last month, the 10 newest tracking portfolios were beating benchmark by an average of 5 points. Now just 5 of them are leading and overall average differential has dropped to just 60 basis points. Did I mention it has been rugged?
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 |
| USNA | 56.65 | 130.80 | 130.9% | 1,382 |
| MSB | 12.13 | 27.35 | 125.4% | 175 |
| SYNT | 19.73 | 40.67 | 106.1% | 1,658 |
| DIN | 38.55 | 71.81 | 86.3% | 755 |
| BPT | 16.56 | 27.50 | 66.1% | 437 |
| SCMP | 10.85 | 18.00 | 65.9% | 502 |
| EGRX | 50.48 | 80.45 | 59.4% | 863 |
| CPLA | 68.62 | 104.55 | 52.4% | 819 |
| BKE | 16.07 | 23.15 | 44.0% | 848 |
| FFIV | 121.72 | 174.23 | 43.1% | 7,630 |
| CSCO | 30.53 | 42.57 | 39.4% | 157,787 |
| GNTX | 16.74 | 22.64 | 35.3% | 4,972 |
| MCFT | 18.44 | 24.53 | 33.0% | 355 |
| NCMI | 6.46 | 8.25 | 27.7% | 453 |
| ESRX | 62.90 | 79.45 | 26.3% | 35,996 |
| HPQ | 18.69 | 23.23 | 24.3% | 32,337 |
| TRNC | 13.03 | 16.06 | 23.3% | 432 |
| MNKD | 1.32 | 1.54 | 16.7% | 123 |
| CARS | 24.29 | 28.33 | 16.6% | 1,728 |
| AMAG | 19.60 | 22.05 | 12.5% | 670 |
| IDCC | 73.60 | 81.40 | 10.6% | 2,638 |
| PDLI | 2.32 | 2.55 | 9.9% | 398 |
| NHTC | 22.20 | 23.35 | 5.2% | 283 |
| MSGN | 21.85 | 22.85 | 4.6% | 1,633 |
| AVID | 5.19 | 5.36 | 3.3% | 218 |
| UIS | 12.50 | 12.80 | 2.4% | 648 |
| MIK | 19.88 | 20.29 | 2.1% | 3,845 |
| EGOV | 15.77 | 16.05 | 1.8% | 1,059 |
| WNC | 18.77 | 19.10 | 1.8% | 1,185 |
| NSR | 33.30 | 33.50 | 0.6% | 1,844 |
| RGR | 55.84 | 54.25 | -2.8% | 1,002 |
| DISCA | 26.80 | 26.03 | -2.9% | 15,491 |
| GHC | 585.97 | 564.75 | -3.6% | 3,303 |
| UTHR | 128.35 | 122.98 | -4.2% | 5,828 |
| VEC | 34.61 | 31.47 | -9.1% | 372 |
| OMC | 76.44 | 68.98 | -9.8% | 18,219 |
| AMCX | 66.53 | 59.08 | -11.2% | 4,506 |
| HRB | 29.11 | 24.87 | -14.6% | 6,300 |
| DHX | 2.40 | 2.05 | -14.6% | 134 |
| VIAB | 34.70 | 29.35 | -15.4% | 14,247 |
| FRAN | 9.51 | 7.81 | -17.9% | 359 |
| MPAA | 27.73 | 21.53 | -22.4% | 542 |
| GME | 19.65 | 14.83 | -24.5% | 2,198 |
| TGNA | 15.00 | 10.79 | -28.1% | 3,290 |
| SQBG | 3.04 | 2.11 | -30.6% | 208 |
| AGX | 62.18 | 37.95 | -39.0% | 1,010 |
| PBI | 14.43 | 8.68 | -39.8% | 2,932 |
| VVUS | 1.16 | 0.69 | -40.5% | 121 |
| AOBC | 20.45 | 9.46 | -53.7% | 1,106 |
| CJREF | 9.29 | 3.10 | -66.6% | 2,243 |
Six stinkers - recall I said in previous post an overall 14% stinker rate... pretty close! If you could just find a way to avoid these, we'd jump from 12.5% to 20.4%. 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% | 25.7% | 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 | 12.5% | 16.1% | 0 |
| 8/25/2017 | 25.0% | 17.5% | 1 |
| 9/29/2017 | 13.4% | 13.3% | 1 |
| 10/27/2017 | 15.1% | 10.7% | 1 |
| 11/24/2017 | 12.3% | 9.4% | 1 |
| 12/29/2017 | 11.7% | 6.5% | 1 |
| 1/26/2018 | -0.5% | -0.4% | 0 |
| 2/23/2018 | 2.5% | 3.7% | 0 |
| 3/29/2018 | 6.1% | 7.3% | 0 |
| 4/27/2018 | 2.5% | 6.1% | 0 |
| 5/25/2018 | 0.7% | 3.6% | 0 |
| 6/29/2018 | -1.0% | 3.4% | 0 |
The 4.4 point drubbing of the June 29th portfolio is telling and shows again why I struggled in July.
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 25.6%. MUCH better than the 12.5% for all fifty MFI stocks I tracked.
Here are those winners:
| Stock | Initial Price | End Price | Percent Change | Mkt Cap | Yield |
| MSB | 12.13 | 27.35 | 125.4% | 175 | 7.8% |
| SYNT | 19.73 | 40.67 | 106.1% | 1,658 | 76.0% |
| DIN | 38.55 | 71.81 | 86.3% | 755 | 10.1% |
| BPT | 16.56 | 27.50 | 66.1% | 437 | 20.1% |
| BKE | 16.07 | 23.15 | 44.0% | 848 | 6.2% |
| CSCO | 30.53 | 42.57 | 39.4% | 157,787 | 3.8% |
| NCMI | 6.46 | 8.25 | 27.7% | 453 | 13.6% |
| HPQ | 18.69 | 23.23 | 24.3% | 32,337 | 2.8% |
| RGR | 55.84 | 54.25 | -2.8% | 1,002 | 3.4% |
| OMC | 76.44 | 68.98 | -9.8% | 18,219 | 2.9% |
| HRB | 29.11 | 24.87 | -14.6% | 6,300 | 3.3% |
| GME | 19.65 | 14.83 | -24.5% | 2,198 | 7.7% |
| PBI | 14.43 | 8.68 | -39.8% | 2,932 | 5.2% |
| CJREF | 9.29 | 3.10 | -66.6% | 2,243 | 9.4% |
You'll see SYNT, I do include special dividends.
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 | 229,797 |
| Total Russell 3K | 278,140 |
| Dividend | 520,897 |
Posts
