MFI Weekend Update 11/18/17

MFI Weekend Update 11/18/17

Kind of a strange week for my portfolio.  I know we have been spoiled by low volatility for a stretch, but I sure saw some ups and downs.  I was down 2.8% the first 3 days of the week (market was down 0.8%).  While I had many stocks down, EXXI was the big culprit, off 45% for the week.

But the final two days I did rally (though not EXXI) up 2.1%.  The broader market was up 70 basis points.  So not a very good week (overall), but at least improved a lot last two days.

But the damage was primarily in my Misc and Dividend portfolios.  MFI was actually quite good.

You have found your way to the MFI Diary.  This is a blog following the investment approach described by Joel Greenblatt in The Little Book That Beats The Market.  I have been writing this blog and following his investment approach since early 2006.

I did create a guide recently for new readers to my blog that point you to some key/interesting posts. I encourage you to give it a whirl (Guide To New Readers).  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

Well, as I laid out above, it was a tale of two weeks (in a single week).  The excitement of the week was my newest tranche, which you will see is off to a snappy start.  Here are how all my portfolios, along with MFI Index are faring for the year and 4th quarter:

Component	YTD	4th Q
Overall	+11.33%	-1.92%
MFI Select	+28.96%	+3.82%
MFI Formula	+13.65%	+3.73%
Miscellaneous	-0.42%	-6.93%
Dividend	+9.86%	-3.48%
R3K	+16.36%	+2.40%
MFI Index	+0.74%	-3.39%
GARIX	+7.52%	+2.51%

So looking at Q4, you can see I am sucking in Q4, down 1.9%.  But my two MFI portfolios are each up about 3.8%.  YTD, kind of the same story - MFI for me is hanging in there very very well; but Misc is actually now in the red for the year (it has been crushed a couple times this quarter with the EXXI beat down this week and SELB the week before).  I do knowingly take more risk in my Misc portfolio and I am afraid I am often running through a dynamite factory with a lit match.

Here are my MFI stocks for the week (actually very very strong week):

Portfolio	Stock	Last Week	Current	Dividend	Change
Formula	SYNT	23.39	25.12	-	7.4%
Formula	HPQ	21.23	21.75	-	2.4%
Formula	GILD	73.77	72.44	-	-1.8%
Formula	CSCO	33.99	35.90	-	5.6%
Formula	OMC	67.55	69.44	-	2.8%
Formula	GME	16.43	16.31	-	-0.7%
Formula	CA	32.45	32.51	-	0.2%
Formula	DIN	46.63	45.20	-	-3.1%
Formula	TGNA	20.10	21.01	-	4.5%
Formula	BKE	19.00	20.75	-	9.2%
Formula	RGR	49.35	50.20	-	1.7%

Look at those stocks.  SYNT continues to be so so good for my portfolio.  BKE has really bounced back.  I had bought BKE for my dividend portfolio and did well with them, but then sold them (at the very least a week or two too early).  CSCO also had a strong week.

Stock	Last Week	Current	Dividend	Change
SIMO	47.17	47.84	-	1.4%
MSGN	17.20	17.30	-	0.6%
YY	88.90	107.23	-	20.6%
CELG	100.60	104.10	-	3.5%
EVC	5.78	6.20	-	7.3%
ICHR	27.98	28.13	-	0.5%
AKRX	33.21	33.40	-	0.6%
VIAB	24.41	26.15	-	7.1%
RHI	52.90	54.90	-	3.8%
MD	44.47	49.91	-	12.2%
QCOM	64.57	66.72	-	3.3%
KLAC	102.44	101.65	-	-0.8%
TIME	10.95	16.40	-	49.8%
GHC	558.65	568.05	-	1.7%
WNC	19.84	18.97	-	-4.4%
RGR	49.35	50.20	-	1.7%
TGNA	20.10	21.01	-	4.5%

Wow, wow, wow. Whatta week!  Look at the performance.  YY (a very large holding, recall these are in descending order or size) popped 20%.  MD up 12% on Activist action.  TIME, which I bought as I thought they might be taken out, finally had MDP step to the plate talking $17-$20.  Recall TIME was at $10 just a couple weeks ago, so up 60% since then.

MFI Select

Th is is a portfolio of MFI stocks (five stocks in 4 tranches) that I have been maintaining since August 2012.  Each tranche I buy and hold for a year.  It has done very well for me and had a great week (as I discussed above).  I did just start a new tranche this week.

I give myself the luxury in this portfolio to really pick whatever stocks I want.  They can be on the official list or from my own screens. This portfolio was started in August 2012.  I had quit MFI in the summer of 2011 out of frustration. I studied problems and data for a year and came out with my reboot - here is a good post on my reboot thoughts (Finding the Magic in MFI).

Here are the four tranches:

2/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
AKRX	$19.10	$33.40	$0.00	74.9%	14.3%
YY	$41.08	$107.23	$0.00	161.0%	14.3%
KLAC	$85.11	$101.65	$2.26	22.1%	14.3%
WNC	$17.65	$18.97	$0.18	8.5%	14.3%
RGR	$52.75	$50.20	$1.36	-2.3%	14.3%
Totals				52.8%	14.3%
5/6/2017	Start	Current	Dividend	Pct Gain	R3K Gain
WSTC	$24.15	$23.50	$0.00	-2.7%	8.4%
TGNA	$25.75	$21.01	$0.14	-17.9%	8.4%
TIME	$15.05	$16.40	$0.04	9.2%	8.4%
MSGN	$23.55	$17.30	$0.00	-26.5%	8.4%
QCOM	$54.93	$66.72	$1.14	23.5%	8.4%
Totals				-2.9%	8.4%
8/15/2017	Start	Current	Dividend	Pct Gain	R3K Gain
GHC	$591.10	$568.05	$1.27	-3.7%	5.5%
ICHR	$19.80	$28.13	$0.00	42.1%	5.5%
MD	$43.00	$49.91	$0.00	16.1%	5.5%
SIMO	$43.05	$47.84	$0.00	11.1%	5.5%
RHI	$44.15	$54.90	$0.24	24.9%	5.5%
Totals				18.1%	5.5%
11/15/2017	Start	Current	Dividend	Pct Gain	R3K Gain
MSGN	$16.67	$17.30	$0.00	3.8%	0.6%
CELG	$100.60	$104.10	$0.00	3.5%	0.6%
EVC	$5.78	$6.20	$0.00	7.3%	0.6%
SIMO	$46.88	$47.84	$0.00	2.0%	0.6%
VIAB	$24.41	$26.15	$0.00	7.1%	0.6%
Totals				4.7%	0.6%

Love the 11/15/17 start, up 4.7% in first 2 days.  Here is a table showing overall returns.

Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	18.1%	4.7%	52.8%	-2.9%	15.8%
Previous Tranche	-0.1%	42.6%	10.7%	19.1%	22.5%
Tranche -2	2.8%	8.0%	-14.3%	-25.2%	-7.2%
Tranche -3	11.2%	69.4%	8.5%	18.3%	26.8%
Tranche -4	41.4%	14.2%	78.3%	33.0%	41.7%
Tranche -5	14.1%	43.7%	0.0%	0.0%	14.5%
MFI Overall Gain	117.7%	349.0%	180.5%	36.1%	170.8%
Current Balance	54,417	112,247	70,119	34,021	270,804
R3K Current Tranche	5.5%	0.6%	14.3%	8.4%	7.2%
R3K Overall Gain	102.1%	105.0%	84.9%	73.0%	91.3%
R3K Balance	50,529	51,248	46,226	43,249	191,251
Annualized IRR	15.9%	35.0%	24.0%	7.0%	20.5%

You can see my annualized IRR (with this very good week) has gone back over 20% (20.5%).

Here is a table that shows if I had started in August 2012 with $100,000 what I would have today (month by month). Hint, at a 20.5% annualized IRR things start to look good!

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
10/1/2017	75.60%	262,489	186,886
11/1/2017	68.17%	259,061	190,888
Current	79.26%	270,804	191,548

Never a straight line, but to take $100,000 to 270,804 in a 5 1/4 years is satisfactory.  After a poor October, you can see November is rocking.  You can also see that 2017 starting at 209,503 and growing to 270,804 is strong.  Note this is hypothetical and assumes I have never added money to tranches beyond initial investment. In reality, I generally increased amounts this year by 35% and have also increased in the past.

MFI Formula

My MFI Formula portfolio is also real money.  I started it in October 2014.  Unlike my Select portfolio, where I give myself free rein to pick stocks, here I pick by formula.  The idea is that takes out my biases and it is a formula that backtested to 2006 has worked very very well.  Of course so far it has been sub par (though not terrible).  It is losing (slightly) to the benchmark, but way outperforming the broader MFI Index that I track and GARIX (a mutual fund based on MFI principles). So it is a partial win right now as value stocks have been a bit out of favor.

Same tables.

12/30/2016	Start	Current	Dividend	Pct Gain	R3K Gain
GILD	$71.69	$72.44	$1.56	3.2%	16.2%
HPQ	$15.00	$21.75	$0.53	48.5%	16.2%
TGNA	$21.33	$21.01	$0.28	-0.2%	16.2%
CA	$31.99	$32.51	$0.77	4.0%	16.2%
SYNT	$19.79	$25.12	$0.00	26.9%	16.2%
Totals				16.5%	16.2%
4/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
BKE	$18.45	$20.75	$0.75	16.5%	10.2%
CSCO	$33.76	$35.90	$0.87	8.9%	10.2%
GILD	$67.50	$72.44	$1.04	8.9%	10.2%
OMC	$85.53	$69.44	$1.10	-17.5%	10.2%
SYNT	$16.76	$25.12	$0.00	49.9%	10.2%
Totals				13.3%	10.2%
7/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$30.98	$35.90	$0.29	16.8%	7.0%
GME	$20.95	$16.31	$0.38	-20.3%	7.0%
HPQ	$17.60	$21.75	$0.13	24.3%	7.0%
RGR	$60.70	$50.20	$0.44	-16.6%	7.0%
SYNT	$16.21	$25.12	$0.00	55.0%	7.0%
Totals				11.8%	7.0%
10/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
DIN	$43.14	$45.20	$0.00	4.8%	2.4%
GILD	$82.85	$72.44	$0.00	-12.6%	2.4%
GME	$20.50	$16.31	$0.00	-20.4%	2.4%
HPQ	$20.22	$21.75	$0.00	7.6%	2.4%
OMC	$74.80	$69.44	$0.00	-7.2%	2.4%
Totals				-5.6%	2.4%

The 10/1 tranche is off to a terrible start.  GME is being treated like they will not survive more than a couple more years.  GILD got a big boost with purchase of KITE, but then market immediately threw that out the window when earnings came in.  Never easy.

Category/Tranche	October	January	April	July	Total
Initial Investment	249,820	249,939	250,180	249,728	999,667
Current Tranche	-5.6%	16.5%	13.3%	11.8%	9.1%
Previous Tranche	7.0%	9.3%	25.2%	26.7%	16.6%
Tranche -2	5.5%	11.0%	-0.2%	-12.5%	1.0%
Tranche -3	0.5%	0.0%	0.0%	0.0%	0.1%
MFI Overall Gain	7.1%	41.3%	41.5%	24.0%	28.5%
Current Balance	267,531	353,205	354,006	309,752	1,284,493
R3K Current Tranche	2.4%	16.2%	10.2%	7.0%	9.0%
R3K Overall Gain	37.4%	29.9%	28.6%	24.6%	30.1%
R3K Balance	343,228	324,715	321,714	311,098	1,300,755
Annualized IRR	2.2%	12.7%	14.1%	9.4%	9.6%

You know, considering that my MFI Index is trailing R3K in 2017 by over 15 points, I am pretty happy to have my 4 open tranches at +9.0% versus R3K at 9.1%.  And my overall annualized IRR of 9.6%, while not super satisfactory is at least decent. 

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
10/1/2017	-2.56%	124,448	127,007
11/1/2017	-3.85%	125,890	129,739
Current	-1.63%	128,449	130,076

Month by month table shows the Formula approach lagging the benchmark.  But it is close and I have been gaining some ground of late. I still have confidence in this approach and will add money at end of year.

Misc & Dividend Portfolios

As I mentioned at outset, Misc has been volatile and as of late not very good.  I keep telling myself I will make this portfolio smaller (or even discontinue), but the perfume of easy money on some riskier stocks/warrants is always out there.  We are often our own worst enemy.  I will try and wind down some positions by year end (I did sell one today).

The dividend side has also been a struggle of late. I worry less about that as long as I feel income stream is safe.  I actually turned on reinvestment component on SBRA, CPLP and NS as I felt they were beyond cheap.

Dividend Stocks	Start	Current	Divvy	Overall Pct Gain	Weekly Pct Gain	9/30/17 Price	Yield
TK	6.20	8.54	0.08	39.2%	-6.4%	8.93	2.6%
CPLP	3.54	3.22	0.08	-6.7%	-1.2%	3.50	9.9%
EVG	14.46	13.95	0.18	-2.3%	-0.5%	14.24	6.6%
KNOP	21.44	20.25	-	-5.6%	-3.1%	21.44	10.3%
LADR	13.01	13.71	0.30	7.7%	0.4%	13.78	9.2%
FDEU	18.40	18.04	0.69	1.8%	-3.0%	19.42	8.0%
KCLI	49.31	48.60	0.49	-0.4%	0.0%	49.75	2.2%
ISBC	13.25	13.97	0.15	6.6%	5.8%	13.64	2.6%
RLJ-PA	28.45	27.54	0.49	-1.5%	-0.6%	27.82	7.1%
PSXP	47.39	47.32	1.03	2.0%	-1.7%	52.56	5.5%
SBRA	22.34	19.05	0.93	-10.6%	-2.1%	21.94	9.4%
OIBAX	5.85	5.92	0.44	8.7%	0.3%	5.95	4.4%
JQC	8.20	8.11	2.02	23.5%	-1.1%	8.49	7.0%
DSL	19.47	20.18	1.65	12.1%	-1.9%	21.25	8.9%
OCSI	8.68	8.55	0.19	0.7%	-0.6%	8.80	8.9%
RILY	15.58	17.80	0.13	15.1%	7.9%	17.05	1.3%
NS	40.74	29.10	1.06	-26.0%	-8.3%	40.59	15.1%
TGONF	11.04	13.20	1.79	35.8%	1.0%	12.80	5.3%
VTIBX	10.92	10.98	0.03	0.8%	0.2%	10.89	1.0%
TGP	18.12	17.25	-	-4.8%	-4.2%	17.85	3.2%
GLDI	9.29	9.08	0.19	-0.2%	1.5%	9.07	6.6%
NRZ	16.22	17.46	0.88	13.1%	1.1%	16.73	11.5%
DHF	3.34	3.34	0.16	4.8%	-1.2%	3.53	8.3%
O	25.50	56.48	20.80	203.1%	0.4%	57.19	4.5%
Totals				4.6%	-0.8%		6.6%

This table tells you a lot.  The NS yield is up to 15.1% as the stock fell another 8.3% this week.  You can see my shipping income plays, TK, CPLP, KNOP and TGP had tough weeks.  Shipping is always a tough sector, but I am in these stocks for a reason as I believe prices for charters are firming.  I will be patient.

If/when I sell some Misc names, I will likely move some dollars into here. JQC, KNOP, NS, TGONF and KCLI all seem very tempting at today's prices.

On the Misc side, I have exposure to Bio tech, Energy, some shipping and some small bank stocks (FUNC and OFED).  So certainly some high risk names.  I will likely sell at least one shipping name next week (SBLK) as they report on Monday (fingers crossed).

Finally, here is the graph that illustrates what I am doing now that I am in retirement.  it shows by calendar quarter how my dividend income has grown as (1) I reinvested dividends and (2) added additional capital. It benchmarks the dividend income to $100,000 the first year.  So you can see it is growing rapidly.  This is really the "picture that tells 1000 words".  While the true numbers are masked by the factoring, this income stream (should it remain on trajectory) is making retirement possible and comfortable.