Sunday, March 31, 2019

MFI Monthly Tracking Portfolio - March 2018

MFI Tracking Portfolio - March 2018

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of March 2019.

It is not without thinking that I have picked a picture of diving this month.  The drop was sharp in the past 30 days, as I have alluded several times.

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.

Onward

 Fearless readers will recall we had a 29 month "losing streak"..  Then we had a 13 month winning streak. Now we have our third straight loss , "losing"  -3.0% to 8.5% this month.

Guess what?   Last month 3 open portfolios were leading.  Now all open portfolios are trailing, by an average of almost 10 points.  That is really bad.  Like bad enough it makes you want to throw in the towel or make major changes in market cap.  But I don't know, I did start a $3b+ tracking portfolio on March 1st and it was down 2.8%

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 
LEE                1.95             3.30 69.2%            111
NTRI              26.40           42.90 62.5%            810
SYNT              25.53           41.00 60.6%         2,118
ESRX              69.08           95.80 38.7%       38,989
CERC                4.29             5.84 36.1%            112
BPT              19.91           26.60 33.6%            511
EGOV              13.03           17.09 31.2%            881
MSB              23.06           29.29 27.0%            338
TGNA              11.13           14.10 26.7%         2,451
DISCA              21.43           27.02 26.1%       12,172
AGX              41.63           49.95 20.0%            668
AMGN            165.59         189.98 14.7%     123,871
CSVI              44.26           50.75 14.7%            626
JNPR              23.70           26.47 11.7%         8,893
AMCX              51.70           56.76 9.8%         3,158
CJREF                4.04             4.43 9.7%            965
UIS              10.75           11.67 8.6%            543
CELG              89.21           94.34 5.8%       67,737
UTHR            112.36         117.37 4.5%         5,142
SYX              21.68           22.64 4.4%         1,059
OMC              70.27           72.99 3.9%       16,721
RPXC              10.69           10.48 -2.0%            531
HRB              24.43           23.94 -2.0%         5,314
MSGN              22.60           21.75 -3.8%         1,701
SP              35.60           34.12 -4.2%            792
EGRX              52.69           50.49 -4.2%            841
IPG              22.19           21.01 -5.3%         8,825
ABC              84.68           79.52 -6.1%       18,837
VIAB              30.21           28.07 -7.1%       12,502
IDCC              72.26           65.98 -8.7%         2,548
HPQ              21.33           19.43 -8.9%       35,576
GILD              72.89           65.01 -10.8%       98,535
MPAA              21.43           18.87 -11.9%            409
BIIB            273.82         236.38 -13.7%       57,886
INVA              16.67           14.03 -15.8%         1,699
QTRH                1.40             1.11 -20.6%            172
AEIS              63.90           49.68 -22.3%         2,531
ASYS                7.32             5.33 -27.2%            108
EVC                4.46             3.24 -27.4%            423
NHTC              17.97           12.96 -27.9%            216
TRNC              16.42           11.79 -28.2%            553
VEC              37.24           26.59 -28.6%            414
SQBG                2.09             1.28 -38.8%            132
DLX              72.44           43.72 -39.6%         3,549
MIK              19.71           11.42 -42.1%         3,586
TUP              45.28           25.58 -43.5%         2,470
ACOR              23.65           13.29 -43.8%         1,095
CNCE              22.90           12.07 -47.3%            562
NLS              13.45             5.56 -58.7%            408
MDCA                7.20             2.25 -68.7%            421


8 of the 50 (16%) were down 30% or more.  15 of the 50 (30%) were down 20% or more.  And this is in a market up 8%.  Brutal.

Here are all tracking portfolios 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% 27.2% 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 11.8% 4.0% 1
11/24/2017 9.8% 7.0% 1
12/29/2017 -3.4% -5.4% 1
1/26/2018 -7.5% -5.6% 0
2/23/2018 0.4% 3.7% 0
3/29/2018 -3.0% 8.5% 0
4/27/2018 -6.7% 7.3% 0
5/25/2018 -8.7% 4.8% 0
6/29/2018 -8.4% 4.5% 0
7/27/2018 -7.6% 1.1% 0
8/31/2018 -11.3% -2.2% 0
9/28/2018 -11.5% -2.4% 0
10/26/2018 -1.7% 7.6% 0
11/30/2018 -3.9% 3.5% 0
12/31/2018 7.9% 13.9% 0
1/25/2019 -3.1% 6.6% 0
2/26/2019 -8.5% 1.2% 0

Note of the 11 open ones (the final 11), 12/31/18 is the only one in the black.  And I wonder why my MFI portfolios (real money) have been struggling.  

Picking stocks with a 2.6% dividend or higher does help, for March 2018 it changed the -3.0% above to +4.3%.  That still seems to be the path to go, although admittedly some high dividend names (TUP, GME and PBI) have been crushed as well.

I am just going to end there.

1 comment:

PeteC said...

Marsh, if the formula were to change it to a 24 month outlook, I suspect that the holding period would have to increase also. This is because the current model assumes that the price/value discrepancies adjust or close up within one year...if it was shown that they may persist for 24 months then I think it may invalidate your holding strategy