Weekend Update 4/22/17

Weekend Update

Happy Easter Weekend everyone.  Another week zips by. 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.

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!Good morning.  Sometimes I get tired of CNBC hype. "This is worst month for the Dow since January 2016" was the headline earlier this week.  I thought to myself, gosh has it been that bad?

Well,  the answer is no - it is simply some CNBC headline writer trying to capture your attention.  Here is the Dow movement month by month:

Month	Change
Apr-17	-0.5%
Mar-17	-0.8%
Feb-17	4.8%
Jan-17	0.4%
Dec-16	3.2%
Nov-16	5.6%
Oct-16	-0.9%
Sep-16	-0.6%
Aug-16	-0.1%
Jul-16	2.9%
Jun-16	0.8%
May-16	0.0%
Apr-16	0.5%
Mar-16	7.1%
Feb-16	0.4%
Jan-16	-5.5%
Dec-15	-1.8%
Nov-15	0.4%
Oct-15	8.5%

The headline should really be "Virtually no downward volatility in Dow since January 2015".  Not a single month with a drop exceeding 0.9%.  I do not match their actual headline, but perhaps that was earlier in the week and we gained some back.

Past Week

It felt like a mediocre week to me.  But looking back that is because Friday was poor. It was actually a good week.  That lack of recall makes me think about a book I am reading, "The Undoing Project". It states that our projections are greatly impacted by what has most recently happened.  So right after a big hurricane, people are more likely to think big hurricanes have a higher probability than they really do.  Or after a big financial meltdown, we over estimate the odds of another meltdown.

Here are how my portfolios are faring:

Component	YTD
Overall	+4.39%
Select	+7.81%
Formula	+3.60%
Miscellaneous	-0.32%
Dividend	+3.97%
R3K	+5.18%
MFI Index	-2.59%

Again, MFI Index continues to drag.  But my MFI Select had a strong week (it was 5.7% just last week) - we will have to see what the big movers were.  Miscellaneous did gain some ground, but still in the red.  Overall, I did gain some ground on the R3K index, despite largish cash position.

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
4/1/2017	54.43%	224,094	169,663
Current	57.55%	226,670	169,120

A pretty nice move since 4/1, expanding to a 57.55% lead.  Here are the stocks during the week:

Stock	Last Week	Current	Dividend	Change
RHI	44.49	47.18	-	6.0%
ATHM	28.90	32.40	-	12.1%
CA	31.65	31.93	-	0.9%
AMGN	161.61	160.41	-	-0.7%
MPAA	28.49	29.47	-	3.4%
AKRX	32.42	32.91	-	1.5%
MSGN	24.30	24.40	-	0.4%
VLO	64.68	65.23	-	0.9%
BRCD	12.47	12.56	-	0.7%
YY	43.99	45.88	-	4.3%
CSCO	32.42	32.82	-	1.2%
KLAC	95.33	98.37	-	3.2%
RGR	56.85	56.30	-	-1.0%
GILD	66.51	65.93	-	-0.9%
CBI	28.94	29.95	-	3.5%
GNC	7.30	8.24	-	12.9%
WNC	19.74	19.72	-	-0.1%
Average				2.8%

Wow, it was a very good week. GNC and RHI had good earnings.  Then ATHM for some reason went up a lot (as did YY). Perhaps the risk of a war with North Korea diminished.  Here are my tranches:

5/6/2016	Start	Current	Dividend	Pct Gain	R3K Gain
BRCD	$7.97	$12.56	$0.17	59.7%	17.6%
CBI	$37.82	$29.95	$0.28	-20.1%	17.6%
HSII	$18.51	$26.15	$0.39	43.4%	17.6%
RHI	$38.51	$47.18	$0.90	24.9%	17.6%
UTHR	$107.99	$120.98	$0.00	12.0%	17.6%
Totals				24.0%	17.6%
8/15/2016	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$31.20	$32.82	$0.26	6.0%	9.2%
GNC	$19.79	$8.24	$0.38	-56.4%	9.2%
VLO	$54.73	$65.23	$1.30	21.6%	9.2%
MSGN	$16.68	$24.40	$0.00	46.3%	9.2%
GILD	$79.33	$65.93	$1.46	-15.1%	9.2%
Totals				0.5%	9.2%
11/15/2016	Start	Current	Dividend	Pct Gain	R3K Gain
MPAA	$26.55	$29.47	$0.00	11.0%	9.1%
ATHM	$22.61	$32.40	$0.00	43.3%	9.1%
AMGN	$145.14	$160.41	$1.00	11.2%	9.1%
RHI	$43.23	$47.18	$0.46	10.2%	9.1%
CA	$31.11	$31.93	$0.26	3.5%	9.1%
Totals				15.8%	9.1%
2/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
AKRX	$19.10	$32.91	$0.00	72.3%	3.3%
YY	$41.08	$45.88	$0.00	11.7%	3.3%
KLAC	$85.11	$98.37	$0.54	16.2%	3.3%
WNC	$17.65	$19.72	$0.06	12.1%	3.3%
RGR	$52.75	$56.30	$0.44	7.6%	3.3%
Totals				24.0%	3.3%

Wow, my February picks are scorching.  Up 24% in 2+ months.  November was strong as well. Nice to have some successes.

Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	0.5%	15.8%	24.0%	24.0%	16.2%
Previous Tranche	2.8%	8.0%	10.7%	-25.2%	-3.3%
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	85.3%	248.1%	127.5%	45.8%	126.7%
Current Balance	46,330	87,024	56,870	36,446	226,670
R3K Current Tranche	9.2%	9.1%	3.3%	17.6%	9.8%
R3K Overall Gain	82.5%	85.9%	67.1%	56.4%	69.1%
R3K Balance	41,779	46,465	41,785	39,091	169,120
Annualized IRR	14.1%	32.5%	21.5%	10.0%	19.5%

One might recall that IRR dropped below 19% last week. Back up to 19.5%. Sweet.  The May tranche will hit anniversary very soon. It feels tougher and tougher to find stocks that will do well.

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 did start a new tranche on April 1st.

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
4/1/2017	-1.86%	116,227	118,091
Current	-0.20%	117,381	117,585

After 2 1/2 years a virtual dead heat. 20 basis point difference.

Stock	Last Week	Current	Dividend	Change
CPLA	84.85	89.35	-	5.3%
GILD	66.51	65.93	-	-0.9%
SYNT	17.37	17.21	-	-0.9%
CSCO	32.42	32.82	-	1.2%
TGNA	25.21	25.83	-	2.5%
HPQ	18.20	18.29	-	0.5%
CA	31.65	31.93	-	0.9%
PBI	12.91	13.11	-	1.5%
OMC	84.46	83.25	-	-1.4%
BKE	17.90	18.80	-	5.0%
LDOS	50.64	52.21	-	3.1%
ILG	21.32	23.07	-	8.2%
VIAB	43.77	43.10	-	-1.5%
HRB	23.50	23.08	-	-1.8%
GME	22.38	23.19		3.6%
Average				1.7%

SYNT had earnings last week.  The stock price was all over the place, but you can't see it in the weekly table. ILG has been just a great pick, as has CPLA.

7/1/2016	Start	Current	Dividend	Pct Gain	R3K Gain
ILG	$16.76	$23.07	$0.39	40.0%	13.0%
VIAB	$44.00	$43.10	$0.60	-0.7%	13.0%
CPLA	$53.22	$89.35	$1.21	70.2%	13.0%
HRB	$23.62	$23.08	$0.66	0.5%	13.0%
PBI	$17.69	$13.11	$0.56	-22.7%	13.0%
Totals				17.5%	13.0%
10/3/2016	Start	Current	Dividend	Pct Gain	R3K Gain
CPLA	$58.15	$89.35	$0.82	55.1%	10.0%
LDOS	$43.01	$52.21	$0.00	21.4%	10.0%
GME	$27.70	$23.19	$0.75	-13.6%	10.0%
PBI	$18.15	$13.11	$0.38	-25.7%	10.0%
CSCO	$31.72	$32.82	$0.81	6.0%	10.0%
Totals				8.6%	10.0%
12/30/2016	Start	Current	Dividend	Pct Gain	R3K Gain
GILD	$71.69	$65.93	$0.52	-7.3%	5.1%
HPQ	$15.00	$18.29	$0.13	22.8%	5.1%
TGNA	$21.33	$25.83	$0.14	21.8%	5.1%
CA	$31.99	$31.93	$0.26	0.6%	5.1%
SYNT	$19.79	$17.21	$0.00	-13.0%	5.1%
Totals				5.0%	5.1%
4/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
BKE	$18.25	$18.80	$0.25	4.4%	-0.4%
CSCO	$33.91	$32.82	$0.29	-2.4%	-0.4%
GILD	$67.87	$65.93	$0.00	-2.9%	-0.4%
OMC	$86.24	$83.25	$0.00	-3.5%	-0.4%
SYNT	$16.80	$17.21	$0.00	2.4%	-0.4%
Totals				-0.4%	-0.4%

You can see April 1st has bounced back. It was a little shaky out of the gate.  OMC also reported this week and sold off 2 or 3 percent.

Category/Tranche	October	January	April	July	Total
Initial Investment	249,820	249,939	250,180	249,728	999,667
Current Tranche	8.6%	5.0%	-0.4%	17.5%	6.6%
Previous Tranche	5.5%	9.3%	25.2%	-12.5%	7.2%
Tranche -2	0.5%	11.0%	-0.2%	-	2.8%
MFI Overall Gain	15.1%	27.3%	24.4%	2.8%	17.4%
Current Balance	287,656	318,228	311,190	256,731	1,173,806
R3K Current Tranche	10.0%	5.1%	-0.4%	13.0%	6.9%
R3K Overall Gain	24.2%	17.4%	16.2%	12.7%	17.6%
R3K Balance	310,275	293,519	290,692	281,366	1,175,852
Annualized IRR	5.7%	11.0%	11.2%	1.5%	7.3%

Ok, I am not getting rich, but no disaster either.

Dividends/Miscellaneous

I did add this week to my TGONF.  This is like a closed end fund that pays a 5.6% dividend and trades at 35% under NAV.  The ultimate steady eddie.  My miscellaneous did better this week.  I had a pretty big position in AUPH that did very well and when it spiked yesterday morning I sold some calls to lock in some gains. I also had a parallel GNC position here and I sold at $9.30 on the post earnings short squeeze. So I actually did a few things right.  My gold plays have been great for the year (up 44%) but have struggled recently.  Funny, I would have sworn BAC warrants were down for the week (closed at $10.54) but that was actually up 3%.  Finally, I did keep my TIME stocks from 4/1/16 tranche in off chance a deal happened (and I had sold some calls that expired on Friday). Not much seems to have happened - I will sell my TIME early next week.

Have a great weekend.