Weekend Update - MFI Diary 12/23/17

Weekend Update 12/23/17

Well, since it is December 23rd, I clearly need to wish all my readers, young and old, Happy Festivus!  Feel free to air your grievances in the comments section.  :)

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).  (PS - let me know, in the grievance section, if this link does not work). 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.

Promised Santa From last week

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

The Past Week

It was a very solid week for me, up about 1% overall while the benchmark was pretty much flat.  Thus, for me at least, there was a Santa Claus rally!  Hoozah! The table below shows how everything is standing as we head into a well-deserved three day weekend.

Component	YTD	4th Q
Overall	+16.18%	+2.35%
MFI Select	+38.19%	+11.25%
MFI Formula	+19.49%	+9.06%
Miscellaneous	+3.19%	-3.56%
Dividend	+13.22%	-0.53%
R3K	+20.60%	+6.13%
MFI Index	+5.81%	+1.47%
GARIX	+10.31%	+5.17%

The keen-eyed reader will note my MFI Select and Miscellaneous (finally!) portfolios had a good week.  Here are how the individual stocks in my two real money MFI portfolios did during the week:

Portfolio	Stock	Last Week	Current	Dividend	Change
Formula	SYNT	25.57	24.73	-	-3.3%
Formula	HPQ	20.92	21.26	-	1.6%
Formula	GILD	75.57	72.71	-	-3.8%
Formula	CSCO	38.19	38.55	-	0.9%
Formula	OMC	74.41	73.61	-	-1.1%
Formula	GME	18.34	18.29	-	-0.3%
Formula	CA	33.71	33.52	-	-0.6%
Formula	DIN	49.13	49.95	-	1.7%
Formula	TGNA	22.71	24.04	-	5.9%
Formula	BKE	22.70	23.90	-	5.3%
Formula	RGR	52.50	55.20	-	5.1%

I know this actually looks pretty good (this is my Formula portfolio), but recall the stocks are listed from largest holding to smallest (generally).  So sadly, my three big winners on the week (TGNA, BKE and RGR) are also the three smallest holdings.  And the two worst (SYNT and GILD) are amongst my largest holdings (sniff).  So this is basically breakeven even though the straight average is up 1%.

Portfolio	Stock	Last Week	Current	Dividend	Change
Select	SIMO	52.96	52.89	-	-0.1%
Select	MSGN	19.80	20.30	-	2.5%
Select	YY	108.54	114.60	-	5.6%
Select	CELG	109.41	106.33	-	-2.8%
Select	EVC	7.50	7.40	-	-1.3%
Select	ICHR	25.18	25.07	-	-0.4%
Select	AKRX	32.36	32.08	-	-0.9%
Select	VIAB	30.24	32.23	-	6.6%
Select	RHI	55.26	55.68	-	0.8%
Select	MD	51.10	53.52	-	4.7%
Select	QCOM	64.76	64.73	-	0.0%
Select	KLAC	105.63	109.32	-	3.5%
Select	TIME	18.50	18.55	-	0.3%
Select	GHC	565.85	558.20	-	-1.4%
Select	WNC	19.31	20.92	-	8.3%
Select	RGR	52.50	55.20	-	5.1%
Select	TGNA	22.71	24.04	-	5.9%

Here, I had some decent gainers amongst my larger holdings (YY) and this portfolio is not quite as concentrated (recall in my formula portfolio I pick via random # generator and can/will get multiple positions).  So I was up almost 2 points on the week.

MFI Select

As my readers know,  I have two real money MFI portfolios: (1) Select and (2) Formula.  For the Select portfolio, I have 4 tranches of stocks, with each tranche having 5 stocks.  So up to 20 stocks at any time.  I have been running this portfolio since August 2012 after a one year hiatus where I quit MFI investing for a year out of frustration with sub par gains (seeing that again this year - if you look at my MFI Index in blue box above, you'll note my Index, 50 stocks from start of year, is up less than 6%).  Anyway, I regrouped, had a good think and started fresh in August 2012.  As the "Select" name suggests, I can pretty much select any stocks I want.  I even run my own screens, so not just tied to official screen. (I publish top 200 from my internal screen here once a month or so). Here is how the portfolio has done month by month (assuming it started out with $100,000 spread evenly over the four tranches):

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
12/1/2017	84.17%	280,887	196,716
Current	95.89%	294,446	198,560

It has been a skyrocket this year, up from 209,503 to $294,446.  That is 41%.  It now lead the benchmark (Russell 3000) by almost 96 percentage points... which is about a $100,000 lead.  So the reboot has been a success.  Is it just lucky? Or is it working?  You always wonder.

Here are the current open tranches:

2/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
AKRX	$19.10	$32.08	$0.00	68.0%	18.5%
YY	$41.08	$114.60	$0.00	179.0%	18.5%
KLAC	$85.11	$109.32	$2.26	31.1%	18.5%
WNC	$17.65	$20.92	$0.18	19.5%	18.5%
RGR	$52.75	$55.20	$1.36	7.2%	18.5%
Totals				61.0%	18.5%
5/6/2017	Start	Current	Dividend	Pct Gain	R3K Gain
WSTC	$24.15	$23.50	$0.00	-2.7%	12.4%
TGNA	$25.75	$24.04	$0.21	-5.8%	12.4%
TIME	$15.05	$18.55	$0.08	23.8%	12.4%
MSGN	$23.55	$20.30	$0.00	-13.8%	12.4%
QCOM	$54.93	$64.73	$1.71	21.0%	12.4%
Totals				4.5%	12.4%
8/15/2017	Start	Current	Dividend	Pct Gain	R3K Gain
GHC	$591.10	$558.20	$1.27	-5.4%	9.4%
ICHR	$19.80	$25.07	$0.00	26.6%	9.4%
MD	$43.00	$53.52	$0.00	24.5%	9.4%
SIMO	$43.05	$52.89	$0.30	23.6%	9.4%
RHI	$44.15	$55.68	$0.48	27.2%	9.4%
Totals				19.3%	9.4%
11/15/2017	Start	Current	Dividend	Pct Gain	R3K Gain
MSGN	$16.67	$20.30	$0.00	21.8%	4.3%
CELG	$100.60	$106.33	$0.00	5.7%	4.3%
EVC	$5.78	$7.40	$0.05	28.9%	4.3%
SIMO	$46.88	$52.89	$0.00	12.8%	4.3%
VIAB	$24.41	$32.23	$0.20	32.9%	4.3%
Totals				20.4%	4.3%

Three of the four are solid beats.  And even May has made a great comeback.  You will see I have doubled down on a few stocks like MSGN and SIMO.  The key (in my view) has been to avoid stinker stocks, which I define as losing 30% or more.  These are often stocks that do not have sustainable earnings (as seen through my backtesting), so my number 1 criteria is looking to see whether earnings are driven by one or two unsustainable blips.

Here is a table that shows aggregate results of all my tranches as well as annualized IRR:

Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	19.3%	20.4%	61.0%	4.5%	24.7%
Previous Tranche	-0.1%	42.6%	10.7%	19.1%	23.6%
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	119.9%	416.2%	195.4%	46.4%	194.4%
Current Balance	54,971	129,038	73,841	36,596	294,446
R3K Current Tranche	9.4%	4.3%	18.5%	12.4%	11.1%
R3K Overall Gain	109.5%	113.8%	91.6%	79.3%	98.6%
R3K Balance	52,382	53,442	47,908	44,828	198,560
Annualized IRR	15.8%	37.9%	24.8%	8.6%	21.8%

So you can see my four current tranches are up an aggregate 24.7% versus R3K 11.1%.  A very satisfactory margin.

MFI Formula

This is my second portfolio of real money.  As the name suggests, this approach is formulaic.  I lay it out and give an example in my post earlier this week (Final week for 12/31/16 tranche in sidebar on left).  Same tables.

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
12/1/2017	-0.97%	132,616	133,585
Current	-0.66%	134,173	134,837

You'll note I started this approach in October 2014.  So far it is a dead heat with the Russell benchmark.  It is way out performing MFI in general. I still have faith in it (actually both approaches).  I have increased my $ to MFI by about 35% in 2017 and will do the same in 2018.  So I am truly eating my own cooking.

Here are the four open tranches (just 4 trading days left on first one):

 

12/30/2016	Start	Current	Dividend	Pct Gain	R3K Gain
GILD	$71.69	$72.71	$2.08	4.3%	20.5%
HPQ	$15.00	$21.26	$0.53	45.3%	20.5%
TGNA	$21.33	$24.04	$0.35	14.4%	20.5%
CA	$31.99	$33.52	$1.02	8.0%	20.5%
SYNT	$19.79	$24.73	$0.00	25.0%	20.5%
Totals				19.4%	20.5%
4/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
BKE	$18.45	$23.90	$0.75	33.6%	14.2%
CSCO	$33.76	$38.55	$0.87	16.8%	14.2%
GILD	$67.50	$72.71	$1.56	10.0%	14.2%
OMC	$85.53	$73.61	$1.65	-12.0%	14.2%
SYNT	$16.76	$24.73	$0.00	47.5%	14.2%
Totals				19.2%	14.2%
7/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
CSCO	$30.98	$38.55	$0.29	25.4%	10.9%
GME	$20.95	$18.29	$0.76	-9.1%	10.9%
HPQ	$17.60	$21.26	$0.27	22.3%	10.9%
RGR	$60.70	$55.20	$0.44	-8.3%	10.9%
SYNT	$16.21	$24.73	$0.00	52.6%	10.9%
Totals				16.6%	10.9%
10/1/2017	Start	Current	Dividend	Pct Gain	R3K Gain
DIN	$43.14	$49.95	$0.97	18.0%	6.2%
GILD	$82.85	$72.71	$0.52	-11.6%	6.2%
GME	$20.50	$18.29	$0.38	-8.9%	6.2%
HPQ	$20.22	$21.26	$0.13	5.8%	6.2%
OMC	$74.80	$73.61	$0.55	-0.9%	6.2%
Totals				0.5%	6.2%

Looking at stock names here, you will see more multiple stocks than "Select".  I think I have SYNT 3 times.  This happens as typically the filter only leaves 9 to 14 stocks and then I randomly pick five.  Many quarters have duplicate stocks (like CSCO is almost always on list).

Then here is table showing aggregate results:

Category/Tranche	October	January	April	July	Total
Initial Investment	249,820	249,939	250,180	249,728	999,667
Current Tranche	0.5%	19.4%	19.2%	16.6%	14.0%
Previous Tranche	7.0%	9.3%	25.2%	26.7%	16.5%
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	14.0%	44.8%	48.8%	29.3%	34.2%
Current Balance	284,680	361,916	372,301	322,835	1,341,732
R3K Current Tranche	6.2%	20.5%	14.2%	10.9%	12.9%
R3K Overall Gain	42.4%	34.6%	33.3%	29.1%	34.9%
R3K Balance	355,865	336,530	333,463	322,506	1,348,364
Annualized IRR	4.1%	13.2%	15.7%	10.9%	11.0%

I am ok with 11% annualized IRR and encouraged that current tranches are beating the benchmark 14.0% to 12.9%.  As I said, next week my new tranche will get 35% bump in investment dollars (I will actually start new tranche on January 2nd).

Dividend Portfolio

If you are here to read about my Magic Formula thoughts, I am done.  I will now talk about my other two portfolios, Dividends and Miscellaneous.  My Dividend is actually my largest portfolio.  I am retired and it has the purpose of spinning off income for my retirement.

So I am not as focused on capital gains as income.  I will also be the first to admit that I do stretch a bit for yield - so this is not a widows and orphans dividend portfolio (note I keep right now a 40% cash hoard, as market is extended... though that may drop to 30% by end of 2018 when I increase MFI allotment).  Here is how my portfolio shapes up, I did make one change this week - selling GLDI and buying AMID.

Dividend Stocks	Start	Current	Divvy	Overall Pct Gain	Weekly Pct Gain	9/30/17 Price	Yield
OIBAX	5.91	5.94	0.17	3.3%	0.3%	5.95	4.0%
KCLI	48.89	45.10	0.33	-7.1%	-1.1%	49.75	2.4%
KNOP	21.30	20.30	-	-4.7%	0.2%	21.44	10.2%
TK	6.20	9.18	0.08	49.5%	0.4%	8.93	2.4%
CPLP	3.54	3.39	0.08	-1.9%	0.9%	3.50	9.4%
JQC	8.18	8.20	0.62	7.9%	0.5%	8.49	7.0%
ISBC	13.25	14.02	0.15	7.0%	-0.8%	13.64	2.6%
EVG	14.46	14.25	0.33	0.8%	1.8%	14.24	6.4%
LADR	13.01	13.60	0.62	9.3%	-0.9%	13.78	9.3%
FDEU	18.40	18.95	0.82	7.4%	1.0%	19.42	7.7%
NS	37.98	29.65	0.82	-19.8%	-2.9%	40.59	14.8%
TGP	17.89	20.05	-	12.1%	3.9%	17.85	2.8%
RLJ-PA	28.45	27.50	0.49	-1.6%	0.4%	27.82	7.1%
PSXP	47.39	52.04	1.03	12.0%	4.4%	52.56	5.0%
NRZ	16.56	18.28	0.67	14.4%	-0.1%	16.73	10.9%
SBRA	22.28	18.71	0.91	-11.9%	-6.0%	21.94	9.6%
RILY	15.58	18.55	0.21	20.4%	-3.4%	17.05	0.9%
DSL	19.47	20.15	1.80	12.8%	0.1%	21.25	8.9%
OCSI	8.68	8.60	0.38	3.5%	1.1%	8.80	8.8%
TGONF	11.04	13.65	1.79	39.9%	3.6%	12.80	5.1%
AMID	13.25	13.35	-	0.8%	0.8%	13.25	12.4%
DHF	3.34	3.33	0.19	5.2%	0.6%	3.53	8.5%
MAC	65.01	65.20	-	0.3%	-0.4%	65.01	4.5%
O	25.61	55.85	20.93	199.8%	-2.7%	57.19	4.6%
Totals				5.9%	0.2%		6.6%

So up 20 basis points.  My new dividend index was down 50 basis points, so can't be unhappy with that.  I moved to AMID as GLDI is a gold play and I now have a gold portfolio under Misc.  Also, I note MLPs have really been beaten down in 2017 and tax loss selling seems to have  exacerbated that down the stretch.  With AMID (and NS) I expect them to start bouncing back after that abates.

Miscellaneous

It probably is not an uplifting thing to do, but I track (often) how stocks do after I sell them.  And while my Misc approach has struggled, stocks that I have sold from my Miscellaneous portfolio have spiked post my selling.  Here are some examples of the best ones:

BAC Warrants:    +28%

SN:                      +18%

LPG:                   +14%

GNRT:                 +30%

SBLK                   +17%

URA:                   +8%

OSTK:                  +29%

BLDR:                  +24%

FIX:                      +22%

KR:                       +37%

ITEK:                    +180%  (can't believe that one)

Obviously some of gone down... but in aggregate this "sold" portfolio would be close to my best portfolio.

So that suggests I am better at picking stocks than deciding when to sell.  It made me think about my recent posting from Deep Value book about Contrarian approach (do the opposite - link in left sidebar).

So I took a big breathe this week and actually added significantly (usually more than doubling) my five positions I am always thinking about selling: EXXI, AUPH, OMER, SGYP and SELB.  Please note that these are all highly speculative positions.  I generally don't list my speculative holdings as I would feel terrible if readers lost money by following me.  I am taking the risk with eyes wide open.  I did get a good start as EXXI popped about 10% on Friday.

Finally, I do have two "baskets" in my Misc holdings: (1) small banks and (2) gold/mining companies.  The bank are smallish and generally trading at 1.40 or less of book value.  So my play is they are good acquisition targets and should do very well with tax reform.  The miners are my hedge against inflation, which I think is a risk.

Bank	Start	Current	Dividends	Change	Yield
ACBI	16.99	17.45	-	2.7%	0.0%
ASB	25.69	26.00	-	1.2%	2.3%
FBIZ	23.69	22.51	-	-5.0%	2.4%
FULT	18.81	18.30	-	-2.7%	3.4%
FNB	14.47	14.23	-	-1.7%	2.5%
MSBI	32.96	32.10	-	-2.6%	2.5%
NRIM	37.47	35.00	0.21	-6.0%	4.1%
PACW	48.30	50.44	-	4.4%	2.0%
SONA	17.13	16.07	-	-6.2%	1.1%
WNEB	10.88	10.85	-	-0.3%	8.3%
Total				-1.6%	2.9%

Miner	Start	Current	Change
TORXF	9.90	9.42	-4.9%
SAND	4.48	5.04	12.5%
NSU	2.38	2.28	-4.2%
KLDX	2.41	2.52	4.6%
KL	14.49	14.73	1.7%
GSS	0.87	0.85	-1.4%
FSM	4.24	5.24	23.6%
EXK	2.14	2.47	15.4%
BTG	2.61	2.94	12.6%
EGO	1.18	1.34	13.6%
Total			7.3%

So that is it.  I will post a pretty extensive write up about 2017 next week.  I am very happy with where my overall holdings are.  I do plan to add to MFI in 2018, but I also plan to really, really stand pat next year. My New Year's resolution is no trades in January except for the kickoff of MFI tranche on the 2nd.

Have a great holiday season everybody!