MFI Tracking Portfolio 9/30/16

MFI Tracking Portfolio 9/30/16

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 edged the benchmark by a tenth of a percentage point. As I mentioned earlier this week, the whiff of tax reform seems to have caused a spurt in MFI stocks.

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	14.90	31.64	112.3%	14.12	264
VEC	15.23	30.84	102.5%	12.50	163
STRA	46.25	87.27	88.7%	44.63	521
MCFT	11.40	20.38	78.8%	10.84	212
ENTA	26.61	46.80	75.9%	22.17	507
MYGN	20.58	36.18	75.8%	15.15	1,422
WNC	14.11	22.82	61.8%	10.74	915
ACHI	2.44	3.71	52.0%	1.47	262
LEA	119.70	173.08	44.6%	110.77	8,670
IQNT	16.14	22.90	41.9%	14.90	552
BLBD	14.61	20.60	41.0%	13.85	313
NATH	52.55	73.95	40.7%	47.20	219
LDOS	42.26	59.22	40.1%	40.96	3,159
BPT	16.02	22.45	40.1%	15.00	399
AAPL	111.09	154.12	38.7%	104.08	609,697
RHI	37.09	50.34	35.7%	34.42	4,927
TGNA	13.64	18.23	33.7%	11.46	4,685
HPQ	15.06	19.96	32.5%	13.77	26,510
NSR	26.59	33.50	26.0%	21.10	1,449
CPLA	56.85	70.15	23.4%	56.88	674
GHC	476.90	585.10	22.7%	440.55	2,648
HRB	22.32	26.48	18.7%	19.85	5,072
HSII	18.07	21.15	17.0%	17.37	345
BBSI	48.75	56.53	15.9%	42.59	358
AGX	58.16	67.25	15.6%	54.00	890
SSNI	14.18	16.17	14.0%	9.68	726
MSGN	18.61	21.20	13.9%	18.20	1,395
AMCX	51.86	58.47	12.7%	46.17	3,727
DLX	65.67	72.96	11.1%	59.47	3,258
CSCO	30.64	33.63	9.8%	29.12	158,790
TDC	31.00	33.79	9.0%	26.27	4,015
GILD	76.91	81.02	5.3%	63.76	105,309
KORS	46.79	47.85	2.3%	32.38	8,098
PDLI	3.35	3.39	1.2%	1.93	550
UTHR	118.08	117.19	-0.8%	110.90	5,540
RECN	14.48	13.90	-4.0%	12.05	541
NHTC	26.42	23.90	-9.5%	18.05	319
SPOK	17.11	15.35	-10.3%	14.45	366
WILN	1.51	1.32	-12.6%	1.26	183
UIS	9.74	8.50	-12.7%	6.90	488
PBI	17.20	14.01	-18.6%	12.31	3,370
GME	25.80	20.66	-19.9%	18.47	2,869
FPRX	52.49	40.91	-22.1%	25.97	1,488
BKE	22.08	16.85	-23.7%	13.50	1,168
INSY	11.79	8.88	-24.7%	8.70	893
VIAB	37.23	27.84	-25.2%	26.65	15,118
SYNT	27.17	19.65	-27.7%	15.82	3,521
ICON	8.12	5.69	-29.9%	4.79	424
SWHC	26.59	15.25	-42.6%	7.46	1,489
AVID	7.94	4.54	-42.8%	3.99	316

AVID was the big loser.  Boat companies MBUU and  MCFT were full steam ahead. 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	13.7%	16.0%	0
8/26/2016	10.6%	14.6%	0
9/30/2016	18.6%	18.5%	1
10/28/2016	17.4%	21.2%	0
11/25/2016	6.8%	15.2%	0
12/30/2016	5.0%	13.7%	0
1/27/2017	4.8%	11.0%	0
2/24/2017	1.6%	7.5%	0
3/31/2017	2.6%	7.6%	0
4/28/2017	-0.6%	6.5%	0
5/26/2017	2.9%	5.3%	0
6/29/2017	0.3%	4.7%	0
7/28/2017	1.8%	2.5%	0
8/25/2017	7.5%	3.8%	1

Recall last month the final column had 13 straight zeros, meaning the 13 most recent monthly tracking portfolios were losing or had lost to the benchmark.  Well, we now have two "1s" in there.  So as I noted earlier this week, MFI seems to be making a bit of a comeback.

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 a bit. (up 15.4%). (My new momentum approach was up 11.6%).

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	206,678
Total Russell 3K	245,697
Dividend	462,650