MFI Weekend Update 11/24/17

Weekend Update

Happy Black Friday.  Markets closed early.  I have done my online shopping.  I have eaten my share of leftovers.  Time to whip out a quick blog posting as the week is done.

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

It was actually a respectable week.  I was up about one percent overall.    Here are how all my portfolios, along with MFI Index are faring for the year and 4th quarter:

Component	YTD	4th Q
Overall	+12.36%	-1.01%
MFI Select	+31.82%	+6.12%
MFI Formula	+13.89%	+3.96%
Miscellaneous	+0.64%	-5.95%
Dividend	+10.39%	-3.02%
R3K	+17.60%	+3.49%
MFI Index	+2.41%	-1.80%
GARIX	+7.30%	+2.30%

You can see that Misc continues to struggle.  That does beg the question, why bother?  MFI is kind of my area of knowledge. Dividend portfolio is because I am now retired and want some form of income.  Misc is the area I have "fun" with, but having fun is a bit more expensive than makes sense.

So hand on heart, no more cash to Misc.  What is there is there. To buy something new, I need to sell something.  I also (at current time) do not see need to put more $ in dividend portfolios.  It is my largest portfolio and I did buy another slug of OIBAX this week.  And if interest rates/inflation start pinging up, it may make sense to wait for higher/safer yields.

So for 2018, my only "new" money will be to MFI.  I basically increased the two portfolios about 35% this year (in added dollars, exclusive of actual gains).  I will probably look at another 30% add in 2018.  That will make MFI easily the largest leg of my investing stool, but will also mean I will still maintain a healthy cash balance for opportunities down the road.

MFI Select

As my regular readers know I have two MFI-based portfolios with real cash.  My cash. I cheer very hard for these portfolios.  MFI Select is 4 tranches with 5 stocks in each tranche. I buy and hold for a year.  I allow myself totally free form on how I pick these stocks.  At times from the list but often I run my own screens and analysis.  I started this approach in August 2012 after quitting MFI for a year.  I used the year to analyze why MFI was not working particularly well for me.  The answer was I was getting to many "stinker" stocks... those that drop 30% or more in a year.  My approach to avoid these stinkers has really, really helped my Select portfolio.

Here are my 4 open tranches:

2/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
AKRX	$19.10	$32.61	$0.00	70.7%	15.5%
YY	$41.08	$120.03	$0.00	192.2%	15.5%
KLAC	$85.11	$105.04	$2.26	26.1%	15.5%
WNC	$17.65	$19.11	$0.18	9.3%	15.5%
RGR	$52.75	$49.95	$1.36	-2.7%	15.5%
Totals				59.1%	15.5%
5/6/2017	Start	Current	Dividend	Pct Gain	R3K Gain
WSTC	$24.15	$23.50	$0.00	-2.7%	9.6%
TGNA	$25.75	$21.05	$0.14	-17.7%	9.6%
TIME	$15.05	$16.90	$0.04	12.6%	9.6%
MSGN	$23.55	$17.50	$0.00	-25.7%	9.6%
QCOM	$54.93	$68.80	$1.14	27.3%	9.6%
Totals				-1.2%	9.6%
8/15/2017	Start	Current	Dividend	Pct Gain	R3K Gain
GHC	$591.10	$566.05	$1.27	-4.0%	6.7%
ICHR	$19.80	$29.06	$0.00	46.8%	6.7%
MD	$43.00	$49.10	$0.00	14.2%	6.7%
SIMO	$43.05	$49.45	$0.30	15.6%	6.7%
RHI	$44.15	$54.69	$0.48	25.0%	6.7%
Totals				19.5%	6.7%
11/15/2017	Start	Current	Dividend	Pct Gain	R3K Gain
MSGN	$16.67	$17.50	$0.00	5.0%	1.7%
CELG	$100.60	$104.50	$0.00	3.9%	1.7%
EVC	$5.78	$6.45	$0.00	11.6%	1.7%
SIMO	$46.88	$49.45	$0.00	5.5%	1.7%
VIAB	$24.41	$26.29	$0.00	7.7%	1.7%
Totals				6.7%	1.7%

You can see three very good tranches and one bad one (May for those challenged with numbers).  May though has bounced back, just a quarter ago it was down over 11% and now just off 1.2%.  TIME and QCOM being pursued has helped.  In my Feb tranche,  YY came very close this week to being a 3 bagger, it was up 199% on Tuesday.  But has since pulled back slightly.

Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	19.5%	6.7%	59.1%	-1.2%	18.4%
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	120.2%	357.5%	192.0%	38.4%	177.0%
Current Balance	55,060	114,376	72,993	34,588	277,017
R3K Current Tranche	6.7%	1.7%	15.5%	9.6%	8.4%
R3K Overall Gain	104.3%	108.4%	86.9%	74.8%	93.6%
R3K Balance	51,069	52,097	46,716	43,709	193,590
Annualized IRR	16.1%	35.3%	24.9%	7.4%	20.9%

This table shows how every tranche (open and closed) has fared.  It assumes I started with $100,000 spread over the 4 tranches. That would be $277,017 right now.  That works out to an annualized IRR of 20.9%.

Then this final table shows how the $100,000 has grown to $277,017 month by month (note in reality I do add $ at anniversary dates, as I am thinking about increasing stakes 30% in 2018), so all these figures are not exact replicas of my real gains - although if these hypotheticals are doing well, you can certainly imply I am doing well.  (actually, to save space, I may start just showing quarterly changes).

Date	Differential	MFI Value	R3K Value
12/1/2012	-2.20%	99,765	101,965
3/1/2013	-2.23%	102,881	105,114
6/1/2013	4.75%	115,831	111,085
9/1/2013	10.46%	124,536	114,079
12/1/2013	23.70%	150,105	126,405
3/1/2014	25.66%	158,116	132,458
6/1/2014	31.44%	167,001	135,559
9/1/2014	35.90%	177,792	141,892
12/1/2014	30.22%	176,420	146,198
3/1/2015	25.15%	175,476	150,324
6/1/2015	51.53%	202,897	151,371
9/1/2015	36.41%	178,603	142,195
12/1/2015	73.49%	223,435	149,946
3/1/2016	56.48%	194,415	137,934
6/1/2016	51.44%	201,999	150,558
9/1/2016	67.04%	222,481	155,446
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	83.43%	277,017	193,590

You can see I have really accelerated in November 2017. Don't get too excited, but it is nice.  Here are how the stocks did in past week:

Stock	Last Week	Current	Dividend	Change
SIMO	47.84	49.45	-	3.4%
MSGN	17.30	17.50	-	1.2%
YY	107.23	120.03	-	11.9%
CELG	104.10	104.50	-	0.4%
EVC	6.20	6.45	-	4.0%
ICHR	28.13	29.06	-	3.3%
AKRX	33.40	32.61	-	-2.4%
VIAB	26.15	26.29	-	0.5%
RHI	54.90	54.69	-	-0.4%
MD	49.91	49.10	-	-1.6%
QCOM	66.72	68.91	-	3.3%
KLAC	101.65	105.04	-	3.3%
TIME	16.40	16.90	-	3.0%
GHC	568.05	566.05	-	-0.4%
WNC	18.97	19.11	-	0.7%
RGR	50.20	49.95	-	-0.5%
TGNA	21.01	21.05	-	0.2%
Average				1.8%

These are in descending order of value.  So I do have large positions on SIMO and MSGN.  

MFI Formula

Same tables, but a bit faster.  I started this approach two years later, in October 2014.  It is kind of reverse of "select", in that I pick stocks by formula and random number generator.  It does cause more duplications as typically 10 to 12 stocks from a screen of 50 meet my formula and then I randomly pick 5, irregardless of whether I already hold.

12/30/2016	Start	Current	Dividend	Pct Gain	R3K Gain
GILD	$71.69	$72.46	$1.56	3.3%	17.5%
HPQ	$15.00	$21.24	$0.53	45.1%	17.5%
TGNA	$21.33	$21.05	$0.28	0.0%	17.5%
CA	$31.99	$32.63	$1.02	5.2%	17.5%
SYNT	$19.79	$25.18	$0.00	27.2%	17.5%
Totals				16.2%	17.5%
4/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
BKE	$18.45	$21.20	$0.75	19.0%	11.4%
CSCO	$33.76	$36.49	$0.87	10.7%	11.4%
GILD	$67.50	$72.46	$1.04	8.9%	11.4%
OMC	$85.53	$68.97	$1.10	-18.1%	11.4%
SYNT	$16.76	$25.18	$0.00	50.2%	11.4%
Totals				14.1%	11.4%
7/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$30.98	$36.49	$0.29	18.7%	8.1%
GME	$20.95	$17.42	$0.38	-15.0%	8.1%
HPQ	$17.60	$21.24	$0.13	21.4%	8.1%
RGR	$60.70	$49.95	$0.44	-17.0%	8.1%
SYNT	$16.21	$25.18	$0.00	55.3%	8.1%
Totals				12.7%	8.1%
10/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
DIN	$43.14	$42.99	$0.00	-0.3%	3.5%
GILD	$82.85	$72.46	$0.00	-12.5%	3.5%
GME	$20.50	$17.42	$0.00	-15.0%	3.5%
HPQ	$20.22	$21.24	$0.00	5.0%	3.5%
OMC	$74.80	$68.97	$0.00	-7.8%	3.5%
Totals				-6.1%	3.5%

On my open tranches, definitely not the eye-popping beats one sees in my select portfolio.  Give it time.  Then my December 31st tranche only has about a month left to go.  It is nip and tuck whether it'll be a winner.  It was winning last week, but HPQ stumbled a bit post earnings.

Category/Tranche	October	January	April	July	Total
Initial Investment	249,820	249,939	250,180	249,728	999,667
Current Tranche	-6.1%	16.2%	14.1%	12.7%	9.3%
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	6.4%	40.9%	42.5%	25.0%	28.7%
Current Balance	265,925	352,159	356,520	312,114	1,286,717
R3K Current Tranche	3.5%	17.5%	11.4%	8.1%	10.1%
R3K Overall Gain	38.9%	31.3%	30.0%	25.9%	31.5%
R3K Balance	346,909	328,157	325,136	314,421	1,314,624
Annualized IRR	2.0%	12.5%	14.3%	9.7%	9.6%

You see my annualized IRR is 9.6%.  Not terrible, but not as good as I'd like.  You can also see my 4 current tranches are up 9.3% whilst the russell 3000 is up 10.2%. So I have lost about a point there.  But when you think about how much MFI is struggling in 2017 (look at my very first table and you'll see my MFI Index (a way I track MFI performance broadly) is trailing the Russell 3000 by 15 points (and I'll publish more shortfalls this weekend as I analysis all my tracking portfolios).  So relative to MFI in general, my Formula portfolio is a big winner.

Here is the 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
10/1/2017	-2.56%	124,448	127,007
11/1/2017	-3.85%	125,890	129,739
Current	-2.79%	128,672	131,463

You can see month by month it has been a step forward and a step back. Then 1/2 a step back.

Dividends and Miscellaneous

As I mentioned, I have two other legs of my investing stool besides MFI.  If that is all you care about, you might as well stop here.  As I discussed in my Thanksgiving post, I do think dividend stocks and bonds have been under duress of late.  I see this everywhere I look.  I think it is either in anticipation of tax reform or higher interest rates.  I do suspect this is a trend that will continue, we can't stay with a 10 year below 3% forever.

So my dividend stocks/bonds/CEFs will likely underperform.  But they are there to create an income stream, not be sexy high fliers.  Hopefully I do not see them getting impaired (I did see an article that said the first crash will be junk bonds Investors are fleeing junk bonds in near record numbers).  But that is why I have three legs of a stool... 4 if you count cash (and you should).

Dividend Stocks	Start	Current	Divvy	Overall Pct Gain	Weekly Pct Gain	9/30/17 Price	Yield
OIBAX	5.91	5.95	0.16	3.4%	0.5%	5.95	4.4%
VTIBX	10.96	11.01	0.01	0.5%	0.3%	10.89	1.0%
KCLI	48.89	47.96	0.33	-1.2%	-1.3%	49.75	2.3%
KNOP	21.30	20.70	-	-2.8%	2.2%	21.44	10.0%
TK	6.20	8.45	0.08	37.7%	-1.1%	8.93	2.6%
CPLP	3.54	3.28	0.08	-5.0%	1.9%	3.50	9.8%
JQC	8.18	8.14	1.57	18.8%	0.4%	8.49	7.0%
ISBC	13.25	14.17	0.15	8.1%	1.4%	13.64	2.5%
LADR	13.01	13.93	0.30	9.4%	1.6%	13.78	9.0%
EVG	14.46	13.80	0.26	-2.8%	-1.1%	14.24	6.7%
FDEU	18.40	18.65	0.69	5.1%	3.4%	19.42	7.8%
RLJ-PA	28.45	27.50	0.49	-1.6%	-0.1%	27.82	7.1%
TGP	17.89	17.25	-	-3.6%	0.0%	17.85	3.2%
RILY	15.58	18.50	0.21	20.1%	3.9%	17.05	0.9%
PSXP	47.39	46.73	1.03	0.8%	-1.2%	52.56	5.5%
NS	37.98	27.89	0.82	-24.4%	-4.2%	40.59	15.7%
SBRA	22.34	19.24	0.93	-9.7%	1.0%	21.94	9.4%
OCSI	8.68	8.60	0.19	1.3%	0.6%	8.80	8.8%
DSL	19.47	20.25	1.65	12.5%	0.3%	21.25	8.9%
TGONF	11.04	13.12	1.79	35.1%	-0.6%	12.80	5.3%
GLDI	9.29	9.00	0.24	-0.5%	-0.9%	9.07	6.7%
NRZ	16.22	17.83	0.88	15.4%	2.1%	16.73	11.2%
DHF	3.34	3.39	0.16	6.3%	1.5%	3.53	8.1%
MAC	65.01	64.26	-	-1.2%	-1.2%	65.01	4.6%
O	25.50	56.39	20.80	202.7%	-0.2%	57.19	4.5%
Totals				3.6%	0.4%		6.2%

The misc side continues to struggle.  Bio tech stocks are out of favor, shipping is not exactly en fuego and energy shows few green shoots.  MTG has been my most consistent winner.