Monthly Magic Formula Investing Tracking Portfolio 1/29/16

MFI Tracking Portfolio

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we reach the end of January 2017.  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.

Onward

 Fearless readers will recall we had a 29 month "losing streak"..  Then we had a 13 month winning streak. This month, MFI (wait for it) won by 2.4 percentage points, our third straight win. Amazingly, this is the biggest win since the June 28th 2013 portfolio.  It has been a dry spell. 18 of the 19 had recently lost, but concurrent with the Trump rally, MFI stocks saw a resurgence these past 3+ months. But the tising tide seems to be receding.  Only 6 of 11 open portfolios are leading.  In aggregate we are now slightly losing again, giving up our 4 point lead from a month ago.  It is disappointing and I have certainly felt some of that pain in my personal account.  Here are the 50 stocks in descending performance order:

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
AGX	31.46	69.90	122.2%	30.62	475
MKSI	32.47	66.70	105.4%	32.72	1,751
BLBD	8.71	16.70	91.7%	8.65	183
BBSI	34.57	62.30	80.2%	22.55	252
WNC	11.74	20.85	77.7%	10.74	777
IDCC	49.46	86.05	74.0%	49.53	1,777
HPQ	10.25	17.65	72.3%	10.60	18,482
OUTR	30.49	52.00	70.5%	24.81	524
CPLA	44.55	75.80	70.2%	45.62	541
STRA	44.68	75.95	70.0%	43.50	493
MCFT	9.63	14.94	55.1%	10.25	239
STRZA	23.85	35.50	48.8%	20.33	2,417
FFIV	97.12	144.41	48.7%	93.64	6,677
BBY	31.03	45.56	46.8%	28.76	10,546
AAPL	94.90	136.66	44.0%	89.47	537,316
TIME	13.00	18.30	40.7%	12.50	1,453
LEA	100.73	141.36	40.3%	97.35	7,579
TIVO	8.29	11.34	36.8%	15.06	811
IQNT	16.88	22.90	35.6%	14.56	584
MSGN	16.55	22.30	34.7%	14.73	1,238
CSCO	25.50	34.32	34.6%	25.81	133,423
DLX	56.39	75.51	33.9%	57.00	2,814
NSR	24.87	33.25	33.7%	21.10	1,327
TSRA	28.46	37.95	33.4%	28.57	1,473
PETS	16.04	21.33	33.0%	16.47	339
VC	71.63	94.16	31.5%	63.04	2,844
SRDX	19.46	25.05	28.7%	17.45	253
VIAB	35.12	43.89	25.0%	33.94	14,351
RHI	38.75	47.96	23.8%	34.34	5,191
RECN	13.76	17.00	23.6%	12.30	525
VEC	19.21	23.37	21.7%	12.50	203
FLR	46.05	55.09	19.6%	44.05	6,507
UTHR	123.80	146.71	18.5%	97.52	5,927
RPXC	9.84	10.99	11.7%	8.60	555
KFY	27.81	30.77	10.7%	18.57	1,449
WILN	1.76	1.83	3.8%	1.27	218
USNA	58.16	58.95	1.4%	54.25	1,499
ENTA	28.40	27.72	-2.4%	20.79	534
BPT	22.66	21.30	-6.0%	11.29	541
VDSI	14.46	13.55	-6.3%	12.80	572
GME	28.98	26.28	-9.3%	20.10	3,204
SCMP	13.21	11.75	-11.1%	9.59	599
NHTC	31.90	27.39	-14.1%	20.59	406
PBI	17.21	14.07	-18.2%	12.41	3,554
GILD	86.11	69.94	-18.8%	65.38	125,278
CALM	51.98	37.95	-27.0%	35.65	2,543
BKE	29.50	20.20	-31.5%	19.45	1,540
KORS	56.58	37.30	-34.1%	34.92	10,341
NLNK	21.63	14.18	-34.4%	9.23	705
FIT	12.15	6.15	-49.4%	5.62	2,517

Definitely a few trends here. The For Profit Education space finally ended its death spiral. CPLA and STRA were decent. Auto parts stocks did well: WNC, LEA and VC. Quite a few buyouts, IQNT,  OUTR, NSR and TIVO.  I have mentioned that a "Dogs of MFI" approach has shown some promise. KORS  BKE and PBI are still on the list.  It would take some courage to buy any of those - but I guess that is why they are called dogs. 

Here is a listing of every portfolio I have tracked:

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	26.5%	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	23.1%	22.4%	1
2/26/2016	28.5%	25.4%	1
3/24/2016	26.1%	19.7%	1
4/22/2016	13.0%	15.8%	0
5/27/2016	16.7%	15.3%	1
6/30/2016	16.6%	15.0%	1
7/29/2016	11.1%	10.6%	1
8/26/2016	11.6%	10.6%	1
9/30/2016	11.3%	10.2%	1
10/28/2016	12.3%	12.7%	0
11/25/2016	2.7%	7.1%	0
12/30/2016	1.9%	5.7%	0
1/27/2017	1.4%	3.2%	0

Subsets

I also have tracked 3 subsets of the larger portfolios:  (1) dividend stocks (those with a yield per Yahoo of at least 2.6%),  (2) new stocks (those new to the tracking portfolios in past 12 months and Dogs.   It is like the dogs of the Dow in that you take the worst five performing stocks from the prior year that renew or all those that dropped more that 29%. The dividend portfolio was solid, up about 24.6%.   The Dogs portfolio was bad, up just 6.5%.  The New approach very good, up 48.6%.

Stock	End Price	Percent Change
FFIV	144.41	49%
LEA	141.36	40%
MKSI	66.70	105%
RECN	17.00	24%
RHI	47.96	24%
SRDX	25.05	29%
TIME	18.30	41%
WNC	20.85	78%

 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	200,072
Total Russell 3K	229,563
New	168,466
Dogs	244,576
Dividend	438,205

Ok, that is a wrap.  Hope you find it useful. Off to set up a new portfolio.