MFI Tracking Portfolio - July 29th, 2016

MFI Tracking Portfolio July 29th, 2016

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of June 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 lost to the benchmark by three points, reversing course after a 7 point win last month.  All 11 open portfolios are trailing after 7 of 11 leading a month ago.  It has been a rugged month for MFI stocks.  Here are 8 poorly performing stocks in past month:

Stock	Initial Price	End Price	Percent Change
SQBG	3.88	3.04	-21.6%
DHX	2.85	2.40	-15.8%
FRAN	11.18	9.51	-14.9%
AOBC	23.94	20.45	-14.6%
WNC	21.88	19.03	-13.0%
USNA	64.20	56.65	-11.8%
NHTC	27.85	24.84	-10.8%
PDLI	2.58	2.32	-10.1%

Here are the 50 stocks in descending performance order (from the portfolio that just hit a year):

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
MBUU	13.64	28.55	109.3%	12.35	244
BBY	32.71	57.64	76.2%	32.02	10,886
STRA	45.45	79.03	73.9%	44.58	510
ENTA	22.49	38.04	69.1%	21.00	426
ACHI	1.99	3.30	65.8%	1.47	220
MCFT	11.48	18.44	60.6%	10.44	213
IILG	17.86	26.52	48.5%	10.61	1,034
KFY	22.62	33.41	47.7%	19.94	1,318
AAPL	102.25	149.50	46.2%	102.53	562,022
BPT	14.14	20.50	44.9%	15.00	352
AGX	45.33	64.35	42.0%	45.51	685
HPQ	13.56	19.17	41.4%	13.55	23,971
BRCD	9.12	12.58	37.9%	8.64	3,714
MSGN	16.05	21.85	36.1%	15.05	1,201
WNC	14.34	19.03	32.7%	10.74	939
NSR	25.19	33.30	32.2%	21.10	1,373
HRB	22.91	30.23	31.9%	19.85	5,246
NATH	48.57	63.40	30.5%	44.46	203
BBSI	42.25	54.99	30.2%	41.06	310
IDCC	58.42	74.90	28.2%	58.19	2,047
UIS	9.91	12.50	26.1%	8.95	496
BLBD	14.09	17.55	24.6%	12.87	296
AMCX	55.36	66.53	20.2%	46.17	4,023
CPLA	58.63	70.10	19.6%	56.88	695
VEC	31.15	34.61	11.1%	12.50	332
TDC	28.38	31.50	11.0%	26.27	3,672
KBR	13.73	14.92	8.7%	13.16	1,998
CSCO	29.49	31.52	6.9%	29.12	153,688
UTHR	121.01	128.35	6.1%	110.90	5,694
OUTR	52.06	52.00	-0.1%	24.81	906
MPAA	28.03	27.73	-1.1%	21.75	519
HSII	18.96	18.45	-2.7%	17.37	362
ICON	7.20	6.86	-4.7%	5.91	350
SPOK	17.74	16.35	-7.9%	15.85	381
CALM	41.90	38.35	-8.5%	33.40	2,034
PBI	18.38	15.48	-15.8%	12.31	3,688
USNA	68.66	56.65	-17.5%	52.55	1,642
VIAB	44.51	35.66	-19.9%	32.68	18,015
AVID	6.51	5.19	-20.3%	3.99	258
NHTC	31.91	24.84	-22.2%	20.59	379
WILN	1.79	1.39	-22.2%	1.27	219
AMAG	26.53	19.60	-26.1%	16.00	917
GME	29.14	21.50	-26.2%	20.10	3,219
SVU	4.88	3.54	-27.5%	2.90	1,293
KORS	51.72	36.55	-29.3%	32.38	9,337
SYNT	29.37	19.73	-32.8%	15.82	3,804
BKE	25.17	16.85	-33.0%	16.00	1,332
PDLI	3.52	2.32	-34.1%	1.93	578
FPRX	50.69	28.84	-43.1%	26.65	1,430
FIT	13.66	5.22	-61.8%	4.90	3,265

So it seems it was a good time (a year ago) to go boating! MBUU was up 109% and MCFT was up over 60%.

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	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	13.3%	16.0%	0
8/26/2016	12.8%	15.9%	0
9/30/2016	12.7%	15.6%	0
10/28/2016	12.7%	18.2%	0
11/25/2016	3.6%	12.3%	0
12/30/2016	1.7%	10.9%	0
1/27/2017	1.6%	8.3%	0
2/24/2017	-0.5%	4.9%	0
3/31/2017	0.5%	5.0%	0
4/28/2017	0.6%	3.9%	0
5/26/2017	2.5%	2.7%	0
6/29/2017	-1.4%	2.1%	0

Subsets

I also have historically 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 (3) 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%.

I am starting a new subset - stocks with momentum.

I am officially stopping the dogs and new subsets.  It takes time and they have never really shown any advantage.  The dividend approach has proven merit.  In this portfolio, the dividend subset struggled. (10.7%).

Stock	Initial Price	End Price	Percent Change
BBY	32.71	57.64	76.2%
MCFT	11.48	18.44	60.6%
IILG	17.86	26.52	48.5%
BPT	14.14	20.50	44.9%
HPQ	13.56	19.17	41.4%
HRB	22.91	30.23	31.9%
CPLA	58.63	70.10	19.6%
CSCO	29.49	31.52	6.9%
OUTR	52.06	52.00	-0.1%
HSII	18.96	18.45	-2.7%
SPOK	17.74	16.35	-7.9%
CALM	41.90	38.35	-8.5%
PBI	18.38	15.48	-15.8%
VIAB	44.51	35.66	-19.9%
GME	29.14	21.50	-26.2%
BKE	25.17	16.85	-33.0%
PDLI	3.52	2.32	-34.1%

Two "stinkers" with BKE and PDLI.  In case you were wondering, the momentum approach was 13.2%, so just "average".

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	201,299
Total Russell 3K	239,647
Dividend	459,504