MFI Tracking Portfolio June 30th 2016

MFI Tracking Portfolio June 30th, 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 (wait for it) lost to the benchmark by seven points, one of the best over the past 3 years!.  7 of the 11 open portfolios are leading so value may be coming back into vogue.

Here are the 50 stocks in descending performance order:

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
MBUU	12.08	25.87	114.2%	12.13	222
STRA	48.54	93.22	92.0%	43.50	557
ACHI	2.00	3.75	87.5%	1.47	221
MCFT	11.05	19.55	76.9%	10.44	207
WNC	12.53	21.98	75.4%	10.74	824
IILG	15.79	27.49	74.1%	10.61	945
KFY	20.00	34.53	72.6%	19.94	1,200
CPLA	50.47	85.60	69.6%	51.50	623
ENTA	22.05	35.98	63.2%	20.79	429
BPT	13.41	21.60	61.0%	15.00	389
AAPL	92.02	144.02	56.5%	94.37	525,328
RPXC	9.17	13.95	52.1%	8.99	475
AGX	40.27	60.00	49.0%	40.69	616
HPQ	11.75	17.48	48.7%	12.04	21,756
MSGN	15.34	22.45	46.3%	14.73	1,137
HRB	21.32	30.91	45.0%	19.85	5,156
IDCC	54.11	77.30	42.9%	52.33	1,910
BLBD	11.90	17.00	42.9%	11.10	250
BRCD	8.83	12.61	42.8%	8.64	3,694
BBSI	40.31	57.29	42.1%	38.77	287
NSR	23.51	33.35	41.9%	21.10	1,307
NATH	44.50	63.00	41.6%	43.40	187
HSII	16.02	21.75	35.8%	16.57	316
SYNT	13.42	16.96	26.4%	15.82	3,777
OUTR	41.52	52.00	25.2%	24.81	737
UTHR	105.92	129.73	22.5%	105.33	5,236
TDC	25.07	29.49	17.6%	24.51	3,267
CSCO	26.76	31.30	17.0%	28.17	144,979
USNA	55.72	64.10	15.0%	52.55	1,339
VEC	28.49	32.32	13.4%	12.50	312
NHTC	25.40	27.85	9.7%	20.59	314
DLX	64.09	69.22	8.0%	59.47	3,250
ICON	6.76	6.91	2.2%	5.91	334
UNTD	11.00	11.00	0.0%	9.50	164
INSY	12.94	12.65	-2.2%	8.70	1,015
PBI	16.10	15.10	-6.2%	12.31	3,398
GME	23.51	21.61	-8.1%	20.10	2,814
AVID	5.81	5.26	-9.5%	3.99	230
GILD	78.82	70.78	-10.2%	63.76	114,391
CALM	44.32	39.60	-10.6%	35.10	2,164
VIAB	39.72	33.57	-15.5%	33.30	16,454
BKE	22.10	17.80	-19.5%	16.00	1,262
PDLI	3.14	2.47	-21.3%	1.93	529
AMAG	23.92	18.40	-23.1%	16.00	850
KORS	49.48	36.25	-26.7%	32.38	9,041
FPRX	41.35	30.11	-27.2%	26.65	1,186
CHKE	11.11	6.95	-37.4%	6.55	101
WILN	2.45	1.39	-43.3%	1.27	306
DHX	6.23	2.85	-54.3%	2.50	326
FIT	12.22	5.31	-56.5%	4.90	2,983

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	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	17.9%	12.3%	1
8/26/2016	17.4%	12.2%	1
9/30/2016	17.3%	12.3%	1
10/28/2016	15.3%	14.9%	1
11/25/2016	5.7%	9.1%	0
12/30/2016	3.3%	8.3%	0
1/27/2017	3.4%	5.7%	0
2/24/2017	3.2%	2.4%	1
3/31/2017	2.0%	2.9%	0
4/28/2017	2.5%	1.9%	1
5/26/2017	3.0%	0.7%	1
Average 12	9.5%	8.3%

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 officially stopping the dogs and new subsets.  It takes time and they have never really shown any advantage.  The dividend approach has proven merit.  Even in this excellent overall tranche, the dividend subset did a bit better (24.8%).

Stock	Initial Price	End Price	Percent Change	Yield
MCFT	11.05	19.55	76.9%	38.9%
IILG	15.79	27.49	74.1%	3.0%
CPLA	50.47	85.60	69.6%	3.1%
BPT	13.41	21.60	61.0%	21.2%
HPQ	11.75	17.48	48.7%	4.3%
HRB	21.32	30.91	45.0%	3.8%
HSII	16.02	21.75	35.8%	3.2%
OUTR	41.52	52.00	25.2%	5.8%
CSCO	26.76	31.30	17.0%	3.9%
PBI	16.10	15.10	-6.2%	4.7%
GME	23.51	21.61	-8.1%	6.3%
CALM	44.32	39.60	-10.6%	4.0%
VIAB	39.72	33.57	-15.5%	4.0%
BKE	22.10	17.80	-19.5%	4.5%
PDLI	3.14	2.47	-21.3%	6.4%

Even better, I owned a few of these (IILG, CPLA and HRB). Though I also had PBI and VIAB.

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	206,598
Total Russell 3K	233,725
Dividend	460,930

So, per my workbooks, a $100,000 in MFI evenly split over 12 monthly portfolios in 2006 would have grown to $206,598 today.  If put in Russell 3000 you'd have $233,725.  So trailing by 15 points.  But if you went with stocks on the $100m+ screen that paid a dividend of 2.6% or greater, you'd have $460,930!

Finally, my standard caveats - always possible (actually almost certain) that I have made some errors or Yahoo Finance has messed something up.  But I do believe that directionally this is accurate.

Time to start a new one.  Have a great 4th of July!