I'm running my first ever 1/2 marathon in October, so a running track seems appropriate (Hartford). Just want to finish and run the whole way before they start closing things down.
Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of September 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 our second straight win (after a 10 month losing streak), winning 20.0% to 17.3% this month. It feels always good to win one. MFI does tend to be streaky.
Guess what? The next 3 portfolios are all leading as well (although most recent 8 are trailing). I am happy about that, even if my personal results have been struggling lately.
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 | 3.71 | 10.16 | 173.9% | 389 |
| USNA | 57.70 | 120.55 | 108.9% | 1,421 |
| SYNT | 19.65 | 40.98 | 108.5% | 1,644 |
| DIN | 41.11 | 81.32 | 97.8% | 773 |
| BPT | 18.13 | 34.50 | 90.3% | 480 |
| FOXA | 26.15 | 46.33 | 77.2% | 48,831 |
| MCFT | 20.38 | 35.88 | 76.1% | 380 |
| NCMI | 6.25 | 10.59 | 69.4% | 423 |
| FFIV | 120.56 | 199.42 | 65.4% | 7,661 |
| SCMP | 11.80 | 18.00 | 52.5% | 547 |
| CPLA | 69.09 | 104.00 | 50.5% | 819 |
| DISCA | 21.29 | 32.00 | 50.3% | 12,306 |
| ESRX | 63.32 | 95.01 | 50.0% | 36,570 |
| CSCO | 32.58 | 48.65 | 49.3% | 167,578 |
| TIME | 13.47 | 18.50 | 37.3% | 1,344 |
| HPQ | 19.49 | 25.77 | 32.2% | 33,333 |
| AVID | 4.54 | 5.93 | 30.6% | 187 |
| MSB | 20.90 | 26.70 | 27.7% | 302 |
| VIAB | 27.11 | 33.76 | 24.5% | 11,203 |
| MSGN | 21.20 | 25.85 | 21.9% | 1,592 |
| LEE | 2.20 | 2.67 | 21.6% | 125 |
| BOJA | 13.50 | 15.70 | 16.3% | 498 |
| EGRX | 59.64 | 69.33 | 16.2% | 967 |
| IPG | 20.05 | 22.87 | 14.1% | 8,176 |
| AMCX | 58.47 | 66.34 | 13.5% | 3,771 |
| ABC | 81.32 | 92.23 | 13.4% | 18,617 |
| TRNC | 14.53 | 16.33 | 12.4% | 478 |
| IDCC | 72.47 | 80.00 | 10.4% | 2,560 |
| UTHR | 117.19 | 127.88 | 9.1% | 5,460 |
| AMAG | 18.45 | 20.00 | 8.4% | 651 |
| MD | 43.12 | 46.66 | 8.2% | 4,031 |
| NHTC | 23.02 | 23.28 | 1.1% | 271 |
| HRB | 25.49 | 25.76 | 1.1% | 5,536 |
| VEC | 30.84 | 31.16 | 1.0% | 342 |
| GHC | 579.82 | 581.30 | 0.3% | 3,272 |
| GILD | 78.65 | 77.21 | -1.8% | 105,812 |
| OMC | 71.67 | 67.97 | -5.2% | 17,110 |
| TGNA | 13.02 | 11.97 | -8.1% | 2,858 |
| MNKD | 2.17 | 1.83 | -15.7% | 227 |
| NLS | 16.90 | 13.93 | -17.6% | 520 |
| GME | 18.82 | 15.27 | -18.9% | 2,093 |
| MPAA | 29.46 | 23.45 | -20.4% | 571 |
| DLX | 71.65 | 56.92 | -20.6% | 3,528 |
| DHX | 2.60 | 2.05 | -21.2% | 131 |
| PDLI | 3.39 | 2.63 | -22.4% | 522 |
| AGX | 64.99 | 42.95 | -33.9% | 1,045 |
| SQBG | 2.99 | 1.67 | -44.1% | 189 |
| VVUS | 9.90 | 4.41 | -55.5% | 105 |
| CJREF | 8.68 | 3.27 | -62.3% | 2,121 |
| ICON | 5.69 | 0.31 | -94.5% | 325 |
Three stocks over 100% really helps. And only 5 stinkers losing 30% or more (although ICON was one of all-time worst). Recall long term stinker rate is 14% or so. 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% | 30.3% | 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 | 28.8% | 21.5% | 1 |
| 9/29/2017 | 20.0% | 17.3% | 1 |
| 10/27/2017 | 20.9% | 14.6% | 1 |
| 11/24/2017 | 16.2% | 13.3% | 1 |
| 12/29/2017 | 14.9% | 10.3% | 1 |
| 1/26/2018 | 3.0% | 3.1% | 0 |
| 2/23/2018 | 6.5% | 7.4% | 0 |
| 3/29/2018 | 8.6% | 11.1% | 0 |
| 4/27/2018 | 4.4% | 9.9% | 0 |
| 5/25/2018 | 4.1% | 7.3% | 0 |
| 6/29/2018 | 0.7% | 7.1% | 0 |
| 7/27/2018 | 2.5% | 3.6% | 0 |
| 8/31/2018 | -1.2% | 0.2% | 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 24.5%.
Here are those winners:
| Stock | Initial Price | End Price | Percent Change |
| DIN | 41.11 | 81.32 | 97.8% |
| BPT | 18.13 | 34.50 | 90.3% |
| NCMI | 6.25 | 10.59 | 69.4% |
| CSCO | 32.58 | 48.65 | 49.3% |
| HPQ | 19.49 | 25.77 | 32.2% |
| MSB | 20.90 | 26.70 | 27.7% |
| VIAB | 27.11 | 33.76 | 24.5% |
| IPG | 20.05 | 22.87 | 14.1% |
| HRB | 25.49 | 25.76 | 1.1% |
| GILD | 78.65 | 77.21 | -1.8% |
| OMC | 71.67 | 67.97 | -5.2% |
| GME | 18.82 | 15.27 | -18.9% |
| CJREF | 8.68 | 3.27 | -62.3% |
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 | 237,276 |
| Total Russell 3K | 288,975 |
| Dividend | 557,213 |
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