Another week zips by. Sipping a fruit smoothie made by my new Ninja IQ smoothie maker as the old one was starting to leak.
You have found your way to the MFI Diary. This is my blog where I discuss many things related to "The Little Book That Beats the Market" by Joel Greenblatt. I have been writing this blog since early 2006 and have tracked my performance with real money and tracking portfolios based on the official Magic Formula Investing (MFI) website. I also have created an MFI Index, which is fifty MFI stocks and is reconstituted once a year.
Finally, I should mention that I am just a guy with a spreadsheet. Not a CFA, not an expert... just a guy. So please use what I write for information, but do your own diligence in making stock decisions.
So welcome!
The Past Week
First the important stuff. I am 11th in my NCAA bracket out of 70 so far. Was at #6 when I went to bed, but MSU and South Carolina both winning dropped me. Then my alma mater fired our coach, Tom Crean - I am mixed about that. He seems like a good person and did a lot to pick IU's program back up. But this year's team way under-performed their talent and had zero team chemistry.
For the week I was up about 50 basis points. Here is where each of the portfolios stand as we go down the stretch on Q1:
| Component | YTD |
| Overall | +5.12% |
| Select | +6.49% |
| Formula | +2.33% |
| Miscellaneous | +11.51% |
| Dividend | +3.97% |
| R3K | +6.22% |
| MFI Index | -0.29% |
Very similar to week ago. While I am trailing in total, my 20% cash component is a drag and hey, +5% in a quarter is hard to be unhappy about. The real story for those who read my blog to find out about magic formula investing is that the index continues to struggle - in the red at -29 basis points. Nine of the 50 stocks (recall I take top 50 over 100m) are down 20% or more after just a quarter. It is early to dissect the results, but I promise you that my themes are in place. That is many of the losers are smaller cap stocks and those that do not have characteristics of Jake's Bubble Gum shop (earnings are not recurring).
MFI Select
I have two groups of MFI stocks with real money. The first (and oldest) is MFI Select. This is 4 baskets of 5 stocks that I buy and hold for a year. I have been doing this since my reboot in August 2012.
This approach has done very well for me. Note I am trying to avoid stocks that are on the screen, but in my view are not a true Jake's Bubble Gum Shop (ie a one hit wonder). To be fair, I have also had several stocks that did very well..
Here is my month by month performance, assuming I put in $100,000 spread over the 4 baskets evenly:
| Date | Differential | MFI Value | R3K Value |
| 12/1/2012 | -2.20% | 99,765 | 101,965 |
| 1/1/2013 | -1.78% | 102,798 | 104,575 |
| 2/1/2013 | -2.26% | 102,594 | 104,856 |
| 3/1/2013 | -2.23% | 102,881 | 105,114 |
| 4/1/2013 | -0.43% | 106,804 | 107,234 |
| 5/1/2013 | 2.00% | 110,423 | 108,423 |
| 6/1/2013 | 4.75% | 115,831 | 111,085 |
| 7/1/2013 | 4.29% | 114,888 | 110,597 |
| 8/1/2013 | 6.91% | 124,799 | 117,889 |
| 9/1/2013 | 10.46% | 124,536 | 114,079 |
| 10/1/2013 | 19.67% | 138,655 | 118,990 |
| 11/1/2013 | 19.75% | 143,514 | 123,764 |
| 12/1/2013 | 23.70% | 150,105 | 126,405 |
| 1/1/2014 | 26.63% | 157,138 | 130,503 |
| 2/1/2014 | 24.70% | 150,619 | 125,918 |
| 3/1/2014 | 25.66% | 158,116 | 132,458 |
| 4/1/2014 | 30.38% | 162,991 | 132,616 |
| 5/1/2014 | 29.65% | 162,428 | 132,779 |
| 6/1/2014 | 31.44% | 167,001 | 135,559 |
| 7/1/2014 | 39.23% | 177,971 | 138,740 |
| 8/1/2014 | 31.13% | 167,054 | 135,922 |
| 9/1/2014 | 35.90% | 177,792 | 141,892 |
| 10/1/2014 | 29.38% | 168,321 | 138,944 |
| 11/1/2014 | 26.14% | 168,810 | 142,666 |
| 12/1/2014 | 30.22% | 176,420 | 146,198 |
| 1/1/2015 | 28.17% | 174,306 | 146,140 |
| 2/1/2015 | 20.63% | 162,833 | 142,201 |
| 3/1/2015 | 25.15% | 175,476 | 150,324 |
| 4/1/2015 | 29.95% | 178,565 | 148,612 |
| 5/1/2015 | 37.31% | 186,655 | 149,348 |
| 6/1/2015 | 51.53% | 202,897 | 151,371 |
| 7/1/2015 | 62.69% | 211,437 | 148,743 |
| 8/1/2015 | 40.75% | 192,117 | 151,369 |
| 9/1/2015 | 36.41% | 178,603 | 142,195 |
| 10/1/2015 | 43.12% | 181,175 | 138,052 |
| 11/1/2015 | 69.02% | 217,959 | 148,936 |
| 12/1/2015 | 73.49% | 223,435 | 149,946 |
| 1/1/2016 | 63.33% | 209,514 | 146,186 |
| 2/1/2016 | 49.49% | 187,428 | 137,934 |
| 3/1/2016 | 56.48% | 194,415 | 137,934 |
| 4/1/2016 | 47.34% | 195,770 | 148,430 |
| 5/1/2016 | 46.38% | 194,301 | 147,923 |
| 6/1/2016 | 51.44% | 201,999 | 150,558 |
| 7/1/2016 | 50.41% | 201,092 | 150,680 |
| 8/1/2016 | 52.72% | 207,223 | 154,501 |
| 9/1/2016 | 67.04% | 222,481 | 155,446 |
| 10/1/2016 | 42.98% | 198,563 | 155,582 |
| 11/1/2016 | 41.86% | 195,726 | 153,863 |
| 12/1/2016 | 45.92% | 202,775 | 156,859 |
| 1/1/2017 | 47.19% | 209,503 | 162,313 |
| 2/1/2017 | 47.65% | 212,330 | 164,675 |
| 3/1/2017 | 52.99% | 222,583 | 169,589 |
| Current | 55.42% | 225,784 | 170,367 |
Then here are how the individual stocks fared during the week:
| Stock | Last Week | Current | Dividend | Change |
| RHI | 48.21 | 49.54 | - | 2.8% |
| ATHM | 35.61 | 33.26 | - | -6.6% |
| CA | 32.40 | 32.43 | - | 0.1% |
| AMGN | 181.44 | 168.61 | - | -7.1% |
| MPAA | 27.86 | 27.98 | - | 0.4% |
| AKRX | 22.66 | 22.32 | - | -1.5% |
| MSGN | 22.90 | 23.05 | - | 0.7% |
| VLO | 66.57 | 68.90 | - | 3.5% |
| BRCD | 12.47 | 12.45 | - | -0.2% |
| YY | 46.81 | 51.01 | - | 9.0% |
| CSCO | 34.26 | 34.23 | - | -0.1% |
| KLAC | 93.20 | 94.69 | - | 1.6% |
| RGR | 52.15 | 53.55 | - | 2.7% |
| GILD | 68.19 | 69.06 | - | 1.3% |
| CBI | 30.32 | 29.76 | - | -1.8% |
| GNC | 7.51 | 7.40 | - | -1.5% |
| WNC | 20.71 | 21.14 | - | 2.1% |
| Average | 0.3% |
YY had their earnings during the week (
). I thought they were very positive, but stock sold off about 3% that day. But they bounced back.
AMGN felt some pain (ha, ha - get it?), I guess they announced the results of a big study for a drug (
). I thought the results looked good (like a 20% reduction in stroke risk), but I guess I am naive and that is not enough (perhaps) to warrant the high price for the drug.
Here are all my tranches:
| 5/6/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| BRCD | $7.97 | $12.45 | $0.17 | 58.3% | 18.8% |
| CBI | $37.82 | $29.76 | $0.00 | -21.3% | 18.8% |
| HSII | $18.51 | $26.05 | $0.39 | 42.8% | 18.8% |
| RHI | $38.51 | $49.54 | $0.90 | 31.0% | 18.8% |
| UTHR | $107.99 | $142.08 | $0.00 | 31.6% | 18.8% |
| Totals | 28.5% | 18.8% | |||
| 8/15/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| CSCO | $31.20 | $34.23 | $0.26 | 10.5% | 10.3% |
| GNC | $19.79 | $7.40 | $0.38 | -60.7% | 10.3% |
| VLO | $54.73 | $68.90 | $1.30 | 28.3% | 10.3% |
| MSGN | $16.68 | $23.05 | $0.00 | 38.2% | 10.3% |
| GILD | $79.33 | $69.06 | $1.46 | -11.1% | 10.3% |
| Totals | 1.0% | 10.3% | |||
| 11/15/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| MPAA | $26.55 | $27.98 | $0.00 | 5.4% | 10.1% |
| ATHM | $22.61 | $33.26 | $0.00 | 47.1% | 10.1% |
| AMGN | $145.14 | $168.61 | $1.00 | 16.9% | 10.1% |
| RHI | $43.23 | $49.54 | $0.46 | 15.7% | 10.1% |
| CA | $31.11 | $32.43 | $0.26 | 5.1% | 10.1% |
| Totals | 18.0% | 10.1% | |||
| 2/1/2017 | Start | Current | Dividend | Pct Gain | R3K Gain |
| AKRX | $19.10 | $22.32 | $0.00 | 16.9% | 4.3% |
| YY | $41.08 | $51.01 | $0.00 | 24.2% | 4.3% |
| KLAC | $85.11 | $94.69 | $0.54 | 11.9% | 4.3% |
| WNC | $17.65 | $21.14 | $0.00 | 19.8% | 4.3% |
| RGR | $52.75 | $53.55 | $0.44 | 2.4% | 4.3% |
| Totals | 15.0% | 4.3% |
As I preach, I try to be a bit defensive in my picks... avoiding disasters. Just one here in the 20 picks, GNC. And you can see how a -60% sucks the wind out of a tranche.
| Category/Tranche | August | November | February | May | Total |
| Initial Investment | 25,000 | 25,000 | 25,000 | 25,000 | 100,000 |
| Current Tranche | 1.0% | 18.0% | 15.0% | 28.5% | 15.2% |
| Previous Tranche | 2.8% | 8.0% | 10.7% | -25.2% | -2.9% |
| Tranche -2 | 11.2% | 69.4% | -14.3% | 18.3% | 21.2% |
| Tranche -3 | 41.4% | 14.2% | 8.5% | 33.0% | 24.3% |
| Tranche -4 | 14.1% | 43.7% | 78.3% | 0.0% | 34.0% |
| MFI Overall Gain | 86.4% | 254.7% | 111.0% | 51.1% | 125.8% |
| Current Balance | 46,591 | 88,663 | 52,761 | 37,769 | 225,784 |
| R3K Current Tranche | 10.3% | 10.1% | 4.3% | 18.8% | 10.9% |
| R3K Overall Gain | 84.3% | 87.7% | 68.8% | 57.9% | 70.4% |
| R3K Balance | 41,779 | 46,921 | 42,197 | 39,472 | 170,367 |
| Annualized IRR | 14.5% | 33.9% | 19.8% | 11.3% | 19.9% |
Still holding strong to almost a 20% annualized IRR. Current tranche up a snappy 15.2%.
MFI Formula
These are stocks picked by formula rather than my selecting. Formula is based on my backtesting - stocks have to have yield of 2.4% or greater and be in upper 2/3 in market cap. I then randomly select 5 names. I will be retiring a tranche in acouple weeks (4/1) and starting a new one. I have been also planning to dedicate more $, but I am starting to re-think that. Not so much that I do not believe in MFI Formula... rather the whole market seems extended. Check out this amazing headline (The S&P 500 and Dow have now gone 108 days without a 1% decline).
Same tables.
| Date | Differential | Value | R3K Value |
| 10/1/2014 | 0.00% | 100,000 | 100,000 |
| 11/1/2014 | 1.63% | 102,288 | 100,658 |
| 12/1/2014 | 0.30% | 101,375 | 101,075 |
| 1/1/2015 | -0.33% | 100,664 | 100,995 |
| 2/1/2015 | 1.67% | 101,281 | 99,611 |
| 3/1/2015 | 3.62% | 106,073 | 102,454 |
| 4/1/2015 | 5.09% | 106,781 | 101,695 |
| 5/1/2015 | 5.78% | 107,859 | 102,077 |
| 6/1/2015 | 5.08% | 108,213 | 103,134 |
| 7/1/2015 | 4.82% | 106,423 | 101,604 |
| 8/1/2015 | 3.71% | 107,112 | 103,404 |
| 9/1/2015 | 4.38% | 101,523 | 97,139 |
| 10/1/2015 | 6.39% | 100,703 | 94,312 |
| 11/1/2015 | 2.93% | 104,835 | 101,907 |
| 12/1/2015 | -3.48% | 99,443 | 102,926 |
| 1/1/2016 | -3.36% | 96,830 | 100,012 |
| 2/1/2016 | -0.72% | 93,797 | 94,367 |
| 3/1/2016 | 4.07% | 98,588 | 94,367 |
| 4/1/2016 | 0.34% | 102,371 | 101,548 |
| 5/1/2016 | -1.91% | 99,774 | 101,200 |
| 6/1/2016 | -0.42% | 103,145 | 103,568 |
| 7/1/2016 | -0.19% | 103,022 | 103,216 |
| 8/1/2016 | 2.56% | 109,419 | 106,857 |
| 9/1/2016 | -0.34% | 106,704 | 107,048 |
| 10/1/2016 | -0.85% | 106,377 | 107,230 |
| 11/1/2016 | 0.42% | 105,421 | 105,003 |
| 12/1/2016 | 1.62% | 110,705 | 109,088 |
| 1/1/2017 | 1.57% | 113,406 | 111,832 |
| 2/1/2017 | 1.32% | 114,809 | 113,486 |
| 3/1/2017 | -5.09% | 112,930 | 118,024 |
| Current | -2.80% | 115,937 | 118,741 |
| Stock | Last Week | Current | Dividend | Change |
| CPLA | 77.80 | 82.25 | - | 5.7% |
| HPQ | 17.39 | 17.56 | - | 1.0% |
| ILG | 18.24 | 19.26 | - | 5.6% |
| PBI | 13.29 | 12.84 | - | -3.4% |
| GILD | 68.19 | 69.06 | - | 1.3% |
| CA | 32.40 | 32.43 | - | 0.1% |
| SYNT | 17.54 | 17.64 | - | 0.6% |
| TGNA | 26.23 | 26.07 | - | -0.6% |
| XPER | 33.70 | 35.80 | - | 6.2% |
| LDOS | 52.81 | 53.95 | - | 2.2% |
| TIME | 19.10 | 19.15 | - | 0.3% |
| CSCO | 34.26 | 34.23 | - | -0.1% |
| GME | 25.18 | 24.64 | - | -2.1% |
| HRB | 23.73 | 24.45 | - | 3.0% |
| CALM | 38.80 | 38.50 | -0.8% | |
| VIAB | 43.73 | 43.40 | -0.8% | |
| Average | 1.1% |
So you can see it was a pretty good week. While the 1.1% average is a straight average, not a weighted average, it is pretty close (I was up 1.05% YTD last week and now 2.33%). TIME is very close to perhaps doing a deal with MDP (rumor mill is $21 to $22). I only have two weeks left with them So a good news announcement next week would be a nice boost (
).
| 4/1/16 Stocks | Start | Current | Dividend | Pct Gain | R3K Gain |
| CALM | $51.27 | $38.50 | $0.44 | -24.1% | 18.6% |
| HPQ | $12.10 | $17.56 | $0.51 | 49.3% | 18.6% |
| TIME | $15.24 | $19.15 | $0.76 | 30.6% | 18.6% |
| ILG | $13.85 | $19.26 | $0.51 | 42.7% | 18.6% |
| XPER | $30.79 | $35.80 | $0.80 | 18.9% | 18.6% |
| Totals | 23.5% | 18.6% | |||
| 7/1/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| ILG | $16.76 | $19.26 | $0.39 | 17.2% | 14.1% |
| VIAB | $44.00 | $43.40 | $0.60 | 0.0% | 14.1% |
| CPLA | $53.22 | $82.25 | $1.21 | 56.8% | 14.1% |
| HRB | $23.62 | $24.45 | $0.66 | 6.3% | 14.1% |
| PBI | $17.69 | $12.84 | $0.56 | -24.2% | 14.1% |
| Totals | 11.2% | 14.1% | |||
| 10/3/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| CPLA | $58.15 | $82.25 | $0.82 | 42.9% | 11.1% |
| LDOS | $43.01 | $53.95 | $0.00 | 25.4% | 11.1% |
| GME | $27.70 | $24.64 | $0.75 | -8.3% | 11.1% |
| PBI | $18.15 | $12.84 | $0.38 | -27.2% | 11.1% |
| CSCO | $31.72 | $34.23 | $0.52 | 9.6% | 11.1% |
| Totals | 8.5% | 11.1% | |||
| 12/30/2016 | Start | Current | Dividend | Pct Gain | R3K Gain |
| GILD | $71.69 | $69.06 | $0.52 | -2.9% | 6.1% |
| HPQ | $15.00 | $17.56 | $0.13 | 18.0% | 6.1% |
| TGNA | $21.33 | $26.07 | $0.14 | 22.9% | 6.1% |
| CA | $31.99 | $32.43 | $0.26 | 2.2% | 6.1% |
| SYNT | $19.79 | $17.64 | $0.00 | -10.9% | 6.1% |
| Totals | 5.8% | 6.1% | |||
| Category/Tranche | October | January | April | July | Total |
| Initial Investment | 249,820 | 249,939 | 250,180 | 249,728 | 999,667 |
| Current Tranche | 8.5% | 5.8% | 23.5% | 11.2% | 11.4% |
| Previous Tranche | 5.5% | 9.3% | -0.2% | -12.5% | 1.2% |
| Tranche -2 | 0.5% | 11.0% | - | - | 2.9% |
| MFI Overall Gain | 15.0% | 28.4% | 23.2% | -2.6% | 16.0% |
| Current Balance | 287,187 | 320,872 | 308,188 | 243,127 | 1,159,375 |
| R3K Current Tranche | 11.1% | 6.1% | 18.6% | 14.1% | 12.5% |
| R3K Overall Gain | 25.4% | 18.6% | 17.3% | 13.8% | 18.8% |
| R3K Balance | 313,317 | 296,411 | 293,561 | 284,116 | 1,187,405 |
| Annualized IRR | 5.8% | 11.9% | 11.2% | -1.5% | 6.8% |
So the jury is still out on Formula approach. Overall up 16.0% versus R3K at 18.8%. Not a disaster, but not dancing on sunshine either.
Dividend Portfolio
For those of you who care about MFI, you may want to stop here. I also have a dividend portolio which is my attempt to build an income stream for retirement. While I buy these names with a long term buy and hold mentaility, I have (admittedly) been selling some names this 1st quarter (see S&P headline above if you want to know why). This week I sold my GLDI. Previously I sold PSX and SBRA. I am in no rush to find replacement names... I am frankly a little fearful right now. But my very long term plays (CSQ, AOD, O, JQC and OIBAX) will just continue to chug along (I am also worried about PEO).
| Dividend Stocks | Start | Current | Divvy | Overall Pct Gain | Weekly Pct Gain | 1/1/17 Price | % Chg Since 1/1/17 |
| CSQ | 9.14 | 11.11 | 2.42 | 48.1% | 0.9% | 10.27 | 10.1% |
| AOD | 7.64 | 8.27 | 1.77 | 31.4% | 1.3% | 7.58 | 10.3% |
| SBRA | 22.46 | 25.74 | 0.41 | 16.4% | 0.0% | 24.42 | 5.4% |
| PSXP | 47.04 | 50.91 | 1.08 | 10.5% | -3.5% | 48.64 | 5.8% |
| TGONF | 10.24 | 12.32 | 2.02 | 40.1% | -0.7% | 12.14 | 2.9% |
| JQC | 7.85 | 8.87 | 0.79 | 23.0% | 0.7% | 8.85 | 1.9% |
| PSX | 80.00 | 78.90 | 3.51 | 3.0% | 0.0% | 86.41 | -8.0% |
| DSL | 18.45 | 19.76 | 1.45 | 14.9% | 0.6% | 18.99 | 6.3% |
| GLDI | 10.63 | 9.40 | 0.86 | -3.5% | 2.1% | 8.94 | 6.7% |
| PEO | 20.49 | 19.31 | 0.10 | -5.3% | 0.6% | 20.17 | -3.8% |
| O | 24.55 | 59.86 | 19.71 | 224.1% | 4.3% | 57.48 | 4.6% |
| DHF | 3.19 | 3.35 | 0.09 | 7.7% | 1.8% | 3.36 | 1.5% |
| OIBAX | 5.08 | 5.72 | 2.34 | 58.8% | 0.7% | 5.61 | 2.7% |
| Totals | 25.8% | 4.0% |
Note this % change since 1/1/17 does not reflect a cash component while my initial table at top of blog does.
Miscellaneous
This continues to be my best performing portfolio for the year (up over 11%). It is much riskier than the rest, using options, warrants and now a couple speculative bio tech plays. I will not go into the details and I am not comfortable with people possibly following me. My biggest holding continues to be BAC warrants (from TARP) that now have under two years to run. These have been great, cost basis is 4.49 and they are at 12.61. But they can be volatile.
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