MFI Monthly Tracking Portfolio - 9/29/2017

MFI Monthly Tracking Portfolio - 9/29/2017

I'm running my first ever 1/2 marathon in October, so a running track seems appropriate (Hartford).  Just want to finish and run the whole way before they start closing things down.

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of September 2018.  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.

People ask, does MFI not work anymore?  I am not sure. Perhaps 12 years isn't long enough. Perhaps it works better at a higher market cap cut off (I believe this to be true).  I think too many stocks make the screen over the years by "mistake"... that is they are not true value/cheap stocks. In 2011, we had a bunch of Chinese Reverse Merger stocks that hurt that year and were out and out frauds.  Then we have also had a number of stocks that have a one time spike in earnings that fools the formula.  Frankly, it might do better if instead of a trailing 12 month income look, it used a trailing 24 month look on income, to filter out the one time spikes.

But even with that being said, Value stocks have not exactly been in favor the past couple of years, although this appears to be changing (although painstakingly slowly).

Onward

 Fearless readers will recall we had a 29 month "losing streak"..  Then we had a 13 month winning streak. Now we have our second straight win (after a 10 month losing streak), winning 20.0% to 17.3% this month. It feels always good to win one.  MFI does tend to be streaky.

Guess what?  The next 3 portfolios are all leading as well (although most recent 8 are trailing).  I am happy about that, even if my personal results have been struggling lately.

Here are the 50 stocks in descending performance order (from the portfolio that just hit a year):

Stock	Initial Price	End Price	Percent Change	Mkt Cap
RCM	3.71	10.16	173.9%	389
USNA	57.70	120.55	108.9%	1,421
SYNT	19.65	40.98	108.5%	1,644
DIN	41.11	81.32	97.8%	773
BPT	18.13	34.50	90.3%	480
FOXA	26.15	46.33	77.2%	48,831
MCFT	20.38	35.88	76.1%	380
NCMI	6.25	10.59	69.4%	423
FFIV	120.56	199.42	65.4%	7,661
SCMP	11.80	18.00	52.5%	547
CPLA	69.09	104.00	50.5%	819
DISCA	21.29	32.00	50.3%	12,306
ESRX	63.32	95.01	50.0%	36,570
CSCO	32.58	48.65	49.3%	167,578
TIME	13.47	18.50	37.3%	1,344
HPQ	19.49	25.77	32.2%	33,333
AVID	4.54	5.93	30.6%	187
MSB	20.90	26.70	27.7%	302
VIAB	27.11	33.76	24.5%	11,203
MSGN	21.20	25.85	21.9%	1,592
LEE	2.20	2.67	21.6%	125
BOJA	13.50	15.70	16.3%	498
EGRX	59.64	69.33	16.2%	967
IPG	20.05	22.87	14.1%	8,176
AMCX	58.47	66.34	13.5%	3,771
ABC	81.32	92.23	13.4%	18,617
TRNC	14.53	16.33	12.4%	478
IDCC	72.47	80.00	10.4%	2,560
UTHR	117.19	127.88	9.1%	5,460
AMAG	18.45	20.00	8.4%	651
MD	43.12	46.66	8.2%	4,031
NHTC	23.02	23.28	1.1%	271
HRB	25.49	25.76	1.1%	5,536
VEC	30.84	31.16	1.0%	342
GHC	579.82	581.30	0.3%	3,272
GILD	78.65	77.21	-1.8%	105,812
OMC	71.67	67.97	-5.2%	17,110
TGNA	13.02	11.97	-8.1%	2,858
MNKD	2.17	1.83	-15.7%	227
NLS	16.90	13.93	-17.6%	520
GME	18.82	15.27	-18.9%	2,093
MPAA	29.46	23.45	-20.4%	571
DLX	71.65	56.92	-20.6%	3,528
DHX	2.60	2.05	-21.2%	131
PDLI	3.39	2.63	-22.4%	522
AGX	64.99	42.95	-33.9%	1,045
SQBG	2.99	1.67	-44.1%	189
VVUS	9.90	4.41	-55.5%	105
CJREF	8.68	3.27	-62.3%	2,121
ICON	5.69	0.31	-94.5%	325

Three stocks over 100% really helps.  And only 5 stinkers losing 30% or more (although ICON was one of all-time worst). Recall long term stinker rate is 14% or so. Here is a listing of every tracking portfolio back to 2006:

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	17.1%	16.0%	1
8/26/2016	10.6%	14.6%	0
9/30/2016	18.6%	18.5%	1
10/28/2016	18.3%	24.1%	0
11/25/2016	7.4%	19.2%	0
12/30/2016	4.7%	20.5%	0
1/27/2017	10.5%	30.3%	0
2/24/2017	7.6%	17.4%	0
3/31/2017	6.4%	13.6%	0
4/28/2017	5.8%	13.8%	0
5/26/2017	11.1%	15.1%	0
6/29/2017	11.1%	14.7%	0
7/28/2017	12.5%	16.1%	0
8/25/2017	28.8%	21.5%	1
9/29/2017	20.0%	17.3%	1
10/27/2017	20.9%	14.6%	1
11/24/2017	16.2%	13.3%	1
12/29/2017	14.9%	10.3%	1
1/26/2018	3.0%	3.1%	0
2/23/2018	6.5%	7.4%	0
3/29/2018	8.6%	11.1%	0
4/27/2018	4.4%	9.9%	0
5/25/2018	4.1%	7.3%	0
6/29/2018	0.7%	7.1%	0
7/27/2018	2.5%	3.6%	0
8/31/2018	-1.2%	0.2%	0

Dividend Subset

My backtracking has shown that MFI stocks that pay a dividend seem to do better. I believe this is because a dividends infers that income flows are more likely to be sustainable.  This tends to extract stocks with large one time payments.  That was true again this month-year. My dividend MFI portfolio (which are stocks I track with a yield of 2.6% or greater) were up 24.5%.

Here are those winners:

Stock	Initial Price	End Price	Percent Change
DIN	41.11	81.32	97.8%
BPT	18.13	34.50	90.3%
NCMI	6.25	10.59	69.4%
CSCO	32.58	48.65	49.3%
HPQ	19.49	25.77	32.2%
MSB	20.90	26.70	27.7%
VIAB	27.11	33.76	24.5%
IPG	20.05	22.87	14.1%
HRB	25.49	25.76	1.1%
GILD	78.65	77.21	-1.8%
OMC	71.67	67.97	-5.2%
GME	18.82	15.27	-18.9%
CJREF	8.68	3.27	-62.3%

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	237,276
Total Russell 3K	288,975
Dividend	557,213