Weekend Update 3/4/17

Weekend Update

Back to normal.  14 degrees out this morning.  I am listening this morning to Amazon Prime Music.  I have never tried Spotify,  but I am enjoying Amazon Music, which is included in my Prime membership.  They do not  have everything I'd like - but the jaxx selection seems solid.  Listening to my Amazon Jazz playlist of 500 songs right now.

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!

Last Week

I guess the big news last week was Trump addressing Congress.  The market liked what it heard and sprang forward big time on Wednesday.  I sadly had sold about 1/3 of my BAC warrants as a defensive move.  Oh well, hard to get them all right.

For the week I was up 38 basis points and am up 4.9% on the year.  This is all in and considers a decent chunk of cash (about 20%).  The Russell 3000 benchmark was up 60 basis points and is at 6.4% for the year.  So I am trailing. That is ok.

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.  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	53.87%	224,437	170,567

That is obviously very solid.  I have spread out my lead during 2017.  I am up 7.1% so far this year. Note my actual portfolio is up just 5.8%.  That is the fact that I have budgeted to bring in more cash in 2017, which dampens my results. Here are the 4 tranches:

5/6/2016	Start	Current	Dividend	Pct Gain	R3K Gain
BRCD	$7.97	$12.35	$0.17	57.0%	18.9%
CBI	$37.82	$32.43	$0.00	-14.3%	18.9%
HSII	$18.51	$24.70	$0.39	35.5%	18.9%
RHI	$38.51	$47.49	$0.90	25.7%	18.9%
UTHR	$107.99	$149.47	$0.00	38.4%	18.9%
Totals				28.5%	18.9%
8/15/2016	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$31.20	$34.29	$0.26	10.7%	10.5%
GNC	$19.79	$8.25	$0.38	-56.4%	10.5%
VLO	$54.73	$66.08	$1.30	23.1%	10.5%
MSGN	$16.68	$22.30	$0.00	33.7%	10.5%
GILD	$79.33	$70.74	$0.94	-9.6%	10.5%
Totals				0.3%	10.5%
11/15/2016	Start	Current	Dividend	Pct Gain	R3K Gain
MPAA	$26.55	$28.27	$0.00	6.5%	10.3%
ATHM	$22.61	$33.27	$0.00	47.1%	10.3%
AMGN	$145.14	$180.20	$1.00	24.8%	10.3%
RHI	$43.23	$47.49	$0.46	10.9%	10.3%
CA	$31.11	$32.48	$0.26	5.2%	10.3%
Totals				18.9%	10.3%
2/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
AKRX	$19.10	$24.12	$0.00	26.3%	4.5%
YY	$41.08	$44.49	$0.00	8.3%	4.5%
KLAC	$85.11	$90.42	$0.54	6.9%	4.5%
WNC	$17.65	$21.67	$0.00	22.8%	4.5%
RGR	$52.75	$48.75	$0.00	-7.6%	4.5%
Totals				11.3%	4.5%

So 3 of my 4 tranches are leading. 10 of my 20 stocks are leading.  I have always said if 2/3 of your stocks "win" you'll be rich. No one gets them all right.

Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	0.3%	18.9%	11.3%	28.5%	14.4%
Previous Tranche	2.8%	8.0%	10.7%	-25.2%	-2.7%
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	85.0%	257.4%	104.3%	51.1%	124.4%
Current Balance	46,250	89,345	51,071	37,771	224,437
R3K Current Tranche	10.5%	10.3%	4.5%	18.9%	11.0%
R3K Overall Gain	84.6%	88.0%	69.0%	58.1%	70.6%
R3K Balance	41,779	46,993	42,262	39,532	170,567
Annualized IRR	14.5%	34.5%	19.1%	11.4%	19.8%

This is my intense table that gives a lot of statistics.  You'll see my annualzed IRR is 19.8%. That is excellent.  You'll see my current tranches are up 14.4% versus R3K current at 11.0%.  Finally, here is how my stocks did for the week:

Stock	Last Week	Current	Dividend	Change
RHI	47.96	47.49	-	-1.0%
ATHM	33.42	33.27	-	-0.4%
CA	32.63	32.48	-	-0.5%
AMGN	174.56	180.20	-	3.2%
MPAA	28.37	28.27	-	-0.4%
AKRX	21.28	24.12	-	13.3%
MSGN	22.30	22.30	-	0.0%
VLO	66.72	66.08	-	-1.0%
BRCD	12.47	12.35	-	-1.0%
YY	44.82	44.49	-	-0.7%
CSCO	34.32	34.29	-	-0.1%
KLAC	90.29	90.42	-	0.1%
RGR	49.85	48.75	-	-2.2%
GILD	69.94	70.74	-	1.1%
CBI	33.87	32.43	-	-4.3%
GNC	8.53	8.25	-	-3.3%
WNC	20.85	21.67	-	3.9%
Average				0.4%

AKRX did report earnings during the week and while the initial pop was a bit muted, they finished very strongly.

MFI Formula

This is my formula approach that I started in October 2014.  It was based on back testing from my own MFI tracking database (back to 2006) that has shown that dividend MFI stocks do better. So my screen here is top 2/3 stocks from screen in market cap with a dividend yield of 2.4% or greater.  Of course, it has not really worked very well since I went with real money.  I do think occassionally about pulling the plug as my Select approach does much better. But I will give it more time.  Same series of 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	-5.57%	113,359	118,926

You can see 2017 has been a struggle. Going from a 1.57% lead to a 5.57% deficit. Let us look at individual stocks:

Stock	Last Quarter	Current	Dividend	Change
CPLA	86.80	76.95	-	-11.3%
HPQ	14.85	17.35	-	16.8%
ILG	18.10	18.55	-	2.5%
PBI	15.86	13.57	-	-14.4%
GILD	74.16	70.74	-	-4.6%
CA	32.29	32.48	-	0.6%
SYNT	19.92	17.61	-	-11.6%
TGNA	21.54	25.92	-	20.3%
XPER	44.85	35.40	-	-21.1%
LDOS	50.95	53.69	-	5.4%
TIME	18.00	18.45	-	2.5%
CSCO	30.54	34.29	-	12.3%
GME	25.37	25.28	-	-0.4%
HRB	22.91	20.98	-	-8.4%
CALM	43.75	37.40		-14.5%
VIAB	35.90	42.31		17.9%

So these are all my stocks thus far in 2017.  5 of them are down more than 10%, that has clearly been a drag.  To some extent, that is just the way it is.  If you look at any of my approaches for a quarter, you can find some bad ones.  Here are my four baskets:

4/1/16 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
CALM	$51.27	$37.40	$0.44	-26.2%	18.8%
HPQ	$12.10	$17.35	$0.38	46.4%	18.8%
TIME	$15.24	$18.45	$0.76	26.0%	18.8%
ILG	$13.85	$18.55	$0.36	36.5%	18.8%
XPER	$30.79	$35.40	$0.80	17.6%	18.8%
Totals				20.1%	18.8%
7/1/2016	Start	Current	Dividend	Pct Gain	R3K Gain
ILG	$16.76	$18.55	$0.24	12.1%	14.3%
VIAB	$44.00	$42.31	$0.40	-2.9%	14.3%
CPLA	$53.22	$76.95	$0.80	46.1%	14.3%
HRB	$23.62	$20.98	$0.44	-9.3%	14.3%
PBI	$17.69	$13.57	$0.56	-20.1%	14.3%
Totals				5.2%	14.3%
10/3/2016	Start	Current	Dividend	Pct Gain	R3K Gain
CPLA	$58.15	$76.95	$0.41	33.0%	11.2%
LDOS	$43.01	$53.69	$0.00	24.8%	11.2%
GME	$27.70	$25.28	$0.37	-7.4%	11.2%
PBI	$18.15	$13.57	$0.38	-23.2%	11.2%
CSCO	$31.72	$34.29	$0.52	9.7%	11.2%
Totals				7.4%	11.2%
12/30/2016	Start	Current	Dividend	Pct Gain	R3K Gain
GILD	$71.69	$70.74	$0.00	-1.3%	6.3%
HPQ	$15.00	$17.35	$0.00	15.7%	6.3%
TGNA	$21.33	$25.92	$0.00	21.5%	6.3%
CA	$31.99	$32.48	$0.26	2.3%	6.3%
SYNT	$19.79	$17.61	$0.00	-11.0%	6.3%
Totals				5.4%	6.3%

So now just 1 of 4 tranches leading (9 of 20 stocks).  This is actually on par with the broader MFI. I noted yesterday in slip sliding away that just 1 of the 12 tracking portfolios is leading.

Category/Tranche	October	January	April	July	Total
Initial Investment	249,820	249,939	250,180	249,728	999,667
Current Tranche	7.4%	5.4%	20.1%	5.2%	9.1%
Previous Tranche	5.5%	9.3%	-0.2%	-12.5%	1.1%
Tranche -2	0.5%	11.0%	-	-	2.9%
MFI Overall Gain	13.8%	27.9%	19.8%	-7.9%	13.4%
Current Balance	284,394	319,647	299,665	229,886	1,133,593
R3K Current Tranche	11.2%	6.3%	18.8%	14.3%	12.6%
R3K Overall Gain	25.6%	18.8%	17.5%	13.9%	19.0%
R3K Balance	313,803	296,873	294,013	284,554	1,189,243
Annualized IRR	5.5%	12.0%	9.8%	-4.8%	5.6%

Again, you see my open tranche is 9.1% versus 12.6% for benchmark. The 5.6% annualized IRR is a far cry from Select (looking at similar time periods, Select is up 33% since 10/1/14 and Formula is 13.4%).  Here are stocks for the week:

Stock	Last Week	Current	Dividend	Change
CPLA	75.80	76.95	-	1.5%
HPQ	17.65	17.35	-	-1.7%
ILG	19.09	18.55	-	-2.8%
PBI	14.07	13.57	-	-3.6%
GILD	69.94	70.74	-	1.1%
CA	32.63	32.48	-	-0.5%
SYNT	17.98	17.61	-	-2.1%
TGNA	24.80	25.92	-	4.5%
XPER	37.95	35.40	-	-6.7%
LDOS	54.08	53.69	-	-0.7%
TIME	18.30	18.45	-	0.8%
CSCO	34.32	34.29	-	-0.1%
GME	26.28	25.28	-	-3.8%
HRB	20.05	20.98	-	4.6%
CALM	37.95	37.40		-1.4%
VIAB	43.89	42.31		-3.6%

That is a rugged week (down about 1%) in a week that so broader market up.

Dividend Portfolio

Those of you who only care about MFI can sign off now.  I have two other investing approaches in play.  The first is dividends, which is my attempt to build an portfolio that will produce an income stream for me as I rapidly approach retirement.

These securities are intended to be buy and hold and I reinvest dividends on many of them.  There is nothing that makes investing more real for me that getting regular dividend checks, especially when they are every increasing through compounding.  So it is hard to benchmark my results against the market as I have stock and bond funds.  I do not even really focus on overall gains in "value", but rather I focus on gains in income stream.  With reinvested dividends plus extra cash allocations over the years, it is an impressive chart.  Here is a table below assuming I had $100,000 in income first year:

Year	q1	q2	q3	q4	Total
2010	9,265	27,220	21,995	41,520	100,000
2011	33,489	9,698	43,504	49,229	135,919
2012	30,622	94,712	58,293	74,554	258,182
2013	47,731	71,101	91,882	120,367	331,080
2014	53,322	77,030	89,511	152,400	372,264
2015	89,702	96,291	89,858	97,046	372,897
2016	130,148	186,892	102,782	155,833	575,654

Not bad.  This is all income (so dividends from MFI stocks as well). (sadly, not really $575,000 per year).

Here are my holdings from start of year. I have sold SBRA and PSX.

Dividend Stocks	Start	Current	Divvy	Overall Pct Gain	Weekly Pct Gain	1/1/17 Price	% Chg Since 1/1/17
CSQ	9.13	11.19	2.36	48.5%	0.4%	10.27	10.2%
AOD	7.64	8.26	1.77	31.3%	0.7%	7.58	10.1%
SBRA	22.46	25.74	0.41	16.4%	0.0%	24.42	5.4%
PSXP	47.04	55.34	1.08	19.9%	-1.1%	48.64	14.9%
TGONF	10.24	12.38	2.02	40.7%	1.1%	12.14	3.4%
JQC	7.85	9.01	0.74	24.1%	1.5%	8.85	2.9%
PSX	80.00	78.90	3.51	3.0%	0.0%	86.41	-8.0%
DSL	18.45	20.25	1.30	16.8%	0.2%	18.99	8.1%
GLDI	10.63	9.46	0.86	-2.9%	-1.4%	8.94	7.3%
PEO	20.49	19.79	0.10	-2.9%	1.5%	20.17	-1.4%
O	24.43	60.34	19.78	228.0%	-4.5%	57.48	5.6%
DHF	3.19	3.46	0.06	10.3%	0.6%	3.36	4.0%
OIBAX	5.08	5.71	2.34	58.6%	-0.2%	5.61	2.6%
Totals				26.9%			5.0%

The securities are listed in descending order of size.  So it really helps that my four largest are all doing really well in 2017.  You can see O is my longest holding.  I wish I had had more on day one back in 2000 something at $24.43.  It is $57.48 now and has also paid $19.78 in dividends (the math is complicated as this also includes reinvestments).

Miscellaneous Portfolio

This is actually my "best"portfolio of 2017, up 13%.  It is also my smallest.  It does take more risk and I'll note it does not always do better.  It has some covered calls on gold, BAC warrants (largest component) and some arbitrage plays.  I do not go into detail here as the plays are often risky and I do not want to encourage that.  The BAC Warrants have been great. Up 33% in 2017 and up 171% since Trump was elected.  I may regret selling 1/3 of these this past week - but it is risk management.  They had become much larger than my 2nd and third largest positions combined (CSQ and AOD).  It is okay. I always maintain that I am not investing to get rich quickly. It is ok to take some chances, but don't risk material losses of capital.

Ok, that is a wrap.  Off to enjoy the weekend.