Sunday, September 02, 2018

MFI Tracking Portfolio 8/25/2017

MFI Tracking Portfolio 8/25/2017

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of August 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 ended an 10 month losing streak, winning 28.8% to 21.5% this month. It feels good to win one.  MFI does tend to be streaky.

Guess what?  The next 6 portfolios are all leading as well.  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                3.20             9.97 211.6%            336
HSII              17.90           44.20 146.9%            342
SYNT              18.06           40.74 125.6%         1,511
USNA              59.45         131.95 122.0%         1,464
BPT              15.75           30.85 95.9%            417
NCMI                4.99             9.10 82.5%            338
RHI              43.29           78.18 80.6%         5,557
NATH              52.02           88.70 70.5%            232
FFIV            117.60         189.12 60.8%         7,473
SCMP              11.30           18.00 59.3%            523
CPLA              65.40         104.00 59.0%            775
CSCO              30.46           47.77 56.9%     155,942
MCFT              17.66           27.57 56.1%            329
BBSI              48.23           75.03 55.6%            355
TIME              12.53           18.50 47.6%         1,255
AMAG              16.80           24.40 45.2%            593
ESRX              60.79           88.02 44.8%       35,109
NHTC              19.30           26.47 37.2%            227
LEE                2.15             2.85 32.6%            122
KLAC              88.27         116.21 31.7%       14,191
AVID                4.57             5.92 29.5%            188
EGRX              55.14           69.13 25.4%            894
DISCA              22.66           27.83 22.8%       13,097
IPG              19.31           23.35 20.9%         7,944
VEC              27.43           32.82 19.7%            304
IDCC              69.18           82.60 19.4%         2,444
CSVI              44.00           52.50 19.3%            636
TRNC              13.92           16.50 18.5%            457
MSGN              20.70           24.30 17.4%         1,554
ABC              76.75           89.97 17.2%       17,571
DHX                2.00             2.15 7.5%            101
MD              44.22           47.35 7.1%         4,134
GILD              71.74           75.73 5.6%       96,370
AMCX              60.45           62.81 3.9%         3,898
VIAB              28.41           29.28 3.1%       11,746
MPAA              26.09           26.54 1.7%            506
OMC              70.85           69.32 -2.2%       16,893
UTHR            128.45         122.99 -4.3%         5,984
HRB              28.61           27.06 -5.4%         6,155
TGNA              12.39           11.64 -6.1%         2,719
DLX              66.70           59.22 -11.2%         3,284
PDLI                3.00             2.42 -19.3%            462
FRAN                8.03             6.28 -21.8%            298
AOBC              18.08           14.03 -22.4%            974
GME              17.73           13.27 -25.1%         1,965
MNKD                1.55             1.10 -29.0%            162
AGX              57.16           39.80 -30.4%            916
SQBG                2.82             1.80 -36.2%            178
PBI              11.68             7.26 -37.8%         2,355
CJREF                9.05             2.85 -68.5%         2,247


Four stocks over 100% really helps.  And only 4 stinkers losing 30% or more. 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% 30.0% 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 17.4% 17.2% 1
10/27/2017 18.9% 14.4% 1
11/24/2017 16.1% 13.2% 1
12/29/2017 16.9% 10.1% 1
1/26/2018 4.0% 2.9% 1
2/23/2018 8.3% 7.3% 1
3/29/2018 9.6% 10.9% 0
4/27/2018 6.0% 9.7% 0
5/25/2018 4.2% 7.1% 0
6/29/2018 3.0% 6.9% 0
7/27/2018 4.7% 3.4% 1

So you can see some of the more recent open portfolios are doing better.

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 29.9%. 

Here are those winners:

Stock  Initial Price   End Price  Percent Change
HSII              17.90           44.20 146.9%
SYNT              18.06           40.74 125.6%
BPT              15.75           30.85 95.9%
NCMI                4.99             9.10 82.5%
CSCO              30.46           47.77 56.9%
KLAC              88.27         116.21 31.7%
IPG              19.31           23.35 20.9%
CSVI              44.00           52.50 19.3%
GILD              71.74           75.73 5.6%
VIAB              28.41           29.28 3.1%
OMC              70.85           69.32 -2.2%
HRB              28.61           27.06 -5.4%
GME              17.73           13.27 -25.1%
PBI              11.68             7.26 -37.8%
CJREF                9.05             2.85 -68.5%

Interesting that NCMI did so well and CJREF so poorly, even though both in same industry.

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      237,973
Total Russell 3K      287,661
Dividend      539,183

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