Weekend Update 9/29/2017

Weekend Update

September was a very good (great?).  I am also officially closing my Oct 1st 2016 Formula tranche.  I will buy 5 new stocks on Monday.  Hopefully this weekend, I will write a post on the five new names (picked by formula/random number generator).

It will be a busy weekend. I am running a 5K in Providence RI.  I need to close out a MFI tracking portfolio and create a new one.

I also want to change the way I am tracking some of my portfolios.  I usually make that sort of change at year-end, but will do at end of Q3 as with my retirement (and the selling of some company stock), I now have a lot more invested in my active investing.

You have found your way to the MFI Diary, a blog where I let readers know my thoughts and performance on real life, real dollar Magic Formula Portfolios (based of course on "The Little Book The Beats The Market" by Joel Greenblatt.  I also spend some effort tracking hypothetical portfolios based on downloads from the official website going back to January 2006.

Of course, I have to have a disclaimer - I am just a guy with a spreadsheet and not a stock advisor.  You should do your own due diligence before acting on anything you read here.

Any opinions you read are my own unless they end up being really bad.

The Past Week

Last was pretty solid for me.  I did have one of my Misc names (BYBK) get bought for a 40%+ premium, so that certainly helped.  And the promise/perfume of tax reform keeps stocks going up like sailors drawn to the singing of harpies.  I do not  really care about individual taxes or estate taxes.  But I have very strong opinions about corporate tax rates as my belief is our high US tax rates hurts our competitiveness abroad.  They also cause business to either leave US (through inversions) or form in more tax friendly jurisdictions.  THIS HAPPENS ALL THE TIME.  I have sat on corporate boards, I have been through many merger and acquisition discussions, I have been around when new companies are formed; and being efficient in taxes is ALWAYS near the top of the list of discussion points.

Ok, I feel better. I have said my piece.  Here is where I stand ytd, through q3:

Component	YTD
Overall	+13.51%
MFI Select	+24.22%
MFI Formula	+9.56%
Miscellaneous	+7.00%
Dividend	+13.83%
R3K	+13.63%
MFI Index	+4.28%

So my two MFI components are up 24.2% and 9.6% - that is with a cash component during the year.  In aggregate they are beating the R3K index of 13.6%, so that is excellent.  The MFI Index has rallied, now at 4.3%.  All-in-all I am at 13.5% - I am extremely pleased with that as I have added quite a bit this year to bond-type investments as I retired.

Once a quarter or so, I like to show how the MFI Index (recall this is my creation, a basket of 50 MFI stocks reconstituted once a year) has done year by year versus benchmark:

	Annual		Inception to Date
Year	Russell	MFI	Russell ITD	MFI ITD
2006	11.40%	15.03%	11.40%	15.03%
2007	4.09%	-6.69%	15.96%	7.34%
2008	-37.05%	-37.97%	-27.00%	-33.42%
2009	32.51%	45.18%	-3.27%	-3.34%
2010	18.38%	22.77%	14.50%	18.67%
2011	-0.56%	-10.47%	13.87%	6.25%
2012	16.43%	9.70%	32.57%	16.56%
2013	33.01%	51.70%	76.34%	76.82%
2014	12.26%	12.07%	97.95%	98.15%
2015	0.38%	-8.95%	98.33%	89.37%
2016	12.50%	13.19%	110.62%	101.16%
2017	13.63%	4.28%	125.70%	105.49%

Clearly 2017 is not so hot.  Over all the years, MFI is trailing by about 20 percentage points.  That is all from the past three years, as inception to date, MFI was leading (ever so slightly) at the end of 2014.

MFI Select

This is my MFI portfolio that I rebooted in August 2012. I had actually "quit" MFI for about a year as my results had been subpar.  I went back and restudied all my data and have done much better since.  The "trick" to MFI (IMHO) is to avoid as many "stinker" stocks as you can (those that drop 30% or more in a year). Over the years, about 14% of stocks from the screens have been stinkers.  In most cases, a stinker is a stock where the earnings in the past 12 months is a poor indicator of future earnings.

In my MFI Select portfolio (4 tranches of 5 stocks apiece held for a year), I allow myself free form on what stocks I pick.  So some are from official screens, but others are from my own screen.

Here is how MFI Select has done, month by month, assuming you started with $100,000 spread over the 4 tranches and just rolled over funds as each tranche hits one year anniversary date:

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	45.60%	209,503	163,936
2/1/2017	45.20%	212,330	167,146
3/1/2017	48.80%	222,583	173,829
4/1/2017	55.70%	229,473	173,735
5/1/2017	55.80%	231,497	175,712
6/1/2017	53.40%	230,599	177,203
7/1/2017	60.28%	239,060	178,782
8/1/2017	57.76%	239,924	182,163
9/1/2017	68.85%	251,265	182,419
Current	75.60%	262,489	186,886

Pretty much a rout as the LBTBTSM saw in their backtesting.  So this portfolio is doing very well, and has been en fuego since 8/1.  Really since 11/1/16 (up 34%), which suggests Trump has helped this portfolio.

Here are the 4 tranches:

11/15/2016	Start	Current	Dividend	Pct Gain	R3K Gain
MPAA	$26.55	$29.46	$0.00	11.0%	17.8%
ATHM	$22.61	$60.08	$0.00	165.7%	17.8%
AMGN	$145.14	$186.45	$3.15	30.6%	17.8%
RHI	$43.23	$50.34	$0.94	18.6%	17.8%
CA	$31.11	$33.38	$0.77	9.8%	17.8%
Totals				47.1%	17.8%
2/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
AKRX	$19.10	$33.19	$0.00	73.8%	11.6%
YY	$41.08	$86.78	$0.00	111.2%	11.6%
KLAC	$85.11	$106.00	$1.67	26.5%	11.6%
WNC	$17.65	$22.82	$0.06	29.6%	11.6%
RGR	$52.75	$51.70	$1.15	0.2%	11.6%
Totals				48.3%	11.6%
5/6/2017	Start	Current	Dividend	Pct Gain	R3K Gain
WSTC	$24.15	$23.47	$0.00	-2.8%	5.9%
TGNA	$25.75	$22.20	$0.14	-13.2%	5.9%
TIME	$15.05	$13.50	$0.04	-10.0%	5.9%
MSGN	$23.55	$21.20	$0.00	-10.0%	5.9%
QCOM	$54.93	$51.84	$1.14	-3.5%	5.9%
Totals				-7.9%	5.9%
8/15/2017	Start	Current	Dividend	Pct Gain	R3K Gain
GHC	$591.10	$585.10	$0.00	-1.0%	3.0%
ICHR	$19.80	$26.80	$0.00	35.4%	3.0%
MD	$43.00	$43.12	$0.00	0.3%	3.0%
SIMO	$43.05	$48.03	$0.00	11.6%	3.0%
RHI	$44.15	$50.34	$0.24	14.6%	3.0%
Totals				12.1%	3.0%

Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	12.1%	47.1%	48.3%	-7.9%	24.7%
Previous Tranche	-0.1%	8.0%	10.7%	19.1%	15.5%
Tranche -2	2.8%	69.4%	-14.3%	-25.2%	8.2%
Tranche -3	11.2%	14.2%	8.5%	18.3%	13.0%
Tranche -4	41.4%	43.7%	78.3%	33.0%	49.1%
Tranche -5	14.1%	0.0%	0.0%	0.0%	3.5%
MFI Overall Gain	106.7%	342.2%	172.1%	29.0%	162.5%
Current Balance	51,677	110,544	68,019	32,249	262,489
R3K Current Tranche	3.0%	17.8%	11.6%	5.9%	9.6%
R3K Overall Gain	97.3%	100.7%	80.6%	68.9%	86.9%
R3K Balance	49,334	50,180	45,142	42,230	186,886
Annualized IRR	15.2%	35.6%	23.9%	5.9%	20.2%

All of these except May 6th are doing very well.  Those were just 5 bad picks.  But note that of my 20 picks here, no stinkers (yet).  Also, my annualized IRR just topped 20!  woo-hoo. Here is how the stocks fared in past week:

Stock	Last Week	Current	Dividend	Change
ATHM	64.17	60.08	-	-6.4%
RHI	48.60	50.34	-	3.6%
YY	80.52	86.78	-	7.8%
AKRX	33.06	33.19	-	0.4%
AMGN	185.76	186.45	-	0.4%
CA	32.68	33.38	-	2.1%
ICHR	24.69	26.80	-	8.5%
WNC	21.29	22.82	-	7.2%
SIMO	45.00	48.03	-	6.7%
MPAA	28.01	29.46	-	5.2%
MD	42.14	43.12	-	2.3%
GHC	567.55	585.10	-	3.1%
WSTC	23.51	23.47	-	-0.2%
QCOM	52.09	51.84	-	-0.5%
KLAC	100.59	106.00	-	5.4%
MSGN	20.80	21.20	-	1.9%
TGNA	21.60	22.20	-	2.8%
RGR	51.00	51.70		1.4%
TIME	12.55	13.50		7.6%

That is an unbelievable week!  Up about 2.5%.  My semi names, ICHR, KLAC and SIMO were all boosted by a great ER by MU.  ATHM was the one downer as key management left.

MFI Formula

I started this approach 3 years ago in October 2014.  It was based on my observation that dividend-paying MFI stocks have done much better that non dividend paying MFI stocks.  So this approach picks 5 stocks with a 2.4% yield or better randomly from official screen 4 times a year and holds for a year.

While it worked great in back testing, my real money results have been lukewarm.  Actually making a bit of a comeback, but I still have work to do.  Today is actually the last Day for my October 2016 tranche. Here is month by month:

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
5/1/2017	1.11%	120,403	119,296
6/1/2017	-2.65%	117,824	120,472
7/1/2017	-2.40%	119,144	121,545
8/1/2017	-1.96%	121,873	123,828
9/1/2017	-6.09%	117,879	123,973
Current	-2.56%	124,448	127,007

I am trailing by 2.5 percentage points.  But remember that my MFI Index since end of 2014 has lost over 20 percentage points versus benchmark.  So that makes me feel a little better.

Here are the four tranches:

10/3/2016	Start	Current	Dividend	Pct Gain	R3K Gain
CPLA	$58.15	$70.15	$1.64	23.5%	18.8%
LDOS	$43.01	$59.22	$1.28	40.7%	18.8%
GME	$27.70	$20.66	$1.51	-20.0%	18.8%
PBI	$18.15	$14.01	$0.75	-18.7%	18.8%
CSCO	$31.72	$33.63	$1.10	9.5%	18.8%
Totals				7.0%	18.8%
12/30/2016	Start	Current	Dividend	Pct Gain	R3K Gain
GILD	$71.69	$81.02	$1.56	15.2%	13.5%
HPQ	$15.00	$19.96	$0.53	36.6%	13.5%
TGNA	$21.33	$22.20	$0.28	5.4%	13.5%
CA	$31.99	$33.38	$0.77	6.7%	13.5%
SYNT	$19.79	$19.65	$0.00	-0.7%	13.5%
Totals				12.6%	13.5%
4/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
BKE	$18.45	$16.85	$0.50	-6.0%	7.6%
CSCO	$33.76	$33.63	$0.58	1.3%	7.6%
GILD	$67.50	$81.02	$1.04	21.6%	7.6%
OMC	$85.53	$74.07	$1.10	-12.1%	7.6%
SYNT	$16.76	$19.65	$0.00	17.2%	7.6%
Totals				4.4%	7.6%
7/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$30.98	$33.63	$0.00	8.6%	4.5%
GME	$20.95	$20.66	$0.38	0.4%	4.5%
HPQ	$17.60	$19.96	$0.13	14.2%	4.5%
RGR	$60.70	$51.70	$0.23	-14.4%	4.5%
SYNT	$16.21	$19.65	$0.00	21.2%	4.5%
Totals				6.0%	4.5%
Category/Tranche	October	January	April	July	Total
Initial Investment	249,820	249,939	250,180	249,728	999,667
Current Tranche	7.0%	12.6%	4.4%	6.0%	7.5%
Previous Tranche	5.5%	9.3%	25.2%	26.7%	16.1%
Tranche -2	0.5%	11.0%	-0.2%	-12.5%	-0.3%
MFI Overall Gain	13.4%	36.6%	30.4%	17.5%	24.5%
Current Balance	283,298	341,499	326,151	293,528	1,244,476
R3K Current Tranche	18.8%	13.5%	7.6%	4.5%	11.1%
R3K Overall Gain	34.1%	26.9%	25.6%	21.6%	27.0%
R3K Balance	335,080	317,098	314,139	303,742	1,270,059
Annualized IRR	4.3%	12.0%	11.2%	7.4%	8.7%

 

Not great, but not horrible either.  Here is how each stock did in past week:

Stock	Last Week	Current	Dividend	Change
SYNT	19.06	19.65	-	3.1%
CSCO	33.37	33.63	-	0.8%
HPQ	19.94	19.96	-	0.1%
GILD	83.27	81.02	-	-2.7%
GME	20.01	20.66	-	3.2%
CA	32.68	33.38	-	2.1%
TGNA	21.60	22.20	-	2.8%
OMC	75.00	74.07	-	-1.2%
CPLA	67.35	70.15	-	4.2%
BKE	15.95	16.85	-	5.6%
RGR	51.00	51.70	-	1.4%
LDOS	58.83	59.22	-	0.7%
PBI	13.58	14.01	-	3.2%

SYNT is quietly becoming a very good pick.

Dividend and Misc Portfolios

While these are not "MFI", I do include a few words about my other legs of my investing table.  My miscellaneous approach, which has struggled in 2017, had a nice pop this week - primarily as BYBK got bought at a 50% premium.  This is a microcap bank that was frankly difficult to buy (I started accumulating in March). Of course now I wish I had bought more!  I will hold through the merger as I do not want to pay ST CG taxes.

I had to laugh as 2 days after merger was announced, one of the robot news story writers wrote about BYBK (Is Bay Bancorp, Inc. (NASDAQ:BYBK) Overbought?

First News 24-14 hours ago).

So hopefully my Misc portfolio starts to hum a bit more.  I did have some biotech names (NVIV for example) that really hurt me earlier this year.  My hurricane reconstruction plays, FIX and BLDR have been doing nicely.  BAC warrants have popped 14% in September. Some of my more recent buys are in the Energy and Shipping spaces.

On the dividend side, I did some more adding this week.  I added to TGONF, ISBC and SBRA.  TGONF is just cheap, under $13 with NAV over $20 and a 5.5% yield.

ISBC is another regional bank (like BYBK), with a yield over 2%, P to BV of 1.40 and should benefit from yield curve boosts.

SBRA had a secondary offering that drove stock down about 6%.  Seemed like a good time to add on the cheap.

Stock	Initial	Current	Div/Sh	Gain/Loss	Yield
FDEU	18.40	19.42	0.48	8.2%	7.5%
EVG	14.46	14.24	0.10	-0.8%	6.4%
PSXP	47.39	52.56	0.38	11.7%	4.7%
KCLI	49.31	49.75	0.22	1.3%	2.4%
LADR	13.01	13.78	0.30	8.3%	8.7%
ISBC	13.25	13.64	0.06	3.4%	2.3%
NS	41.04	40.59	-	-1.1%	10.8%
RLJ-PA	28.45	27.82	-	-2.2%	7.0%
JQC	8.20	8.49	1.07	16.6%	6.7%
TK	5.24	8.93	0.06	71.3%	2.5%
DSL	19.47	21.25	1.35	16.1%	8.5%
OIBAX	5.85	5.95	0.40	8.5%	4.0%
FSFR	8.68	8.80	0.19	3.6%	8.6%
RILY	15.58	17.05	0.13	10.3%	1.5%
SBRA	23.13	21.94	0.52	-2.9%	6.6%
TGONF	11.04	12.80	1.61	30.6%	5.5%
VTIBX	10.92	10.89	0.01	-0.2%	1.1%
GLDI	9.29	9.07	0.10	-1.2%	9.1%
CPLP	3.57	3.50	-	-2.0%	9.1%
NRZ	16.22	16.73	0.88	8.6%	12.0%
DHF	3.34	3.53	0.12	9.1%	8.0%
BKE	14.15	16.85	-	19.1%	5.9%
O	25.26	57.19	20.74	208.5%	4.4%

Note these are listed in descending size.  Over rest of year, I will likely look to increase stakes in smaller ones - but I am not really looking for new names.

Let me also share my dividend graph.  This shows my growth in dividend income since 2010.  It assumes I had $100,000 of annual dividend income in 2010 (I wish) and how it has grown.  Part of growth is from reinvested dividends, but larger component is a greater focus on income as I retired.

Of my total net worth, I still am about 35% cash - so over time I will continue to grow this out.

Off to the Ocean State!  Have a great weekend everybody.