February 23rd, 2018 Monthly Tracking Portfolio

February 23rd, 2018 Monthly Tracking Portfolio

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of February 2019.

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).  Greenblatt wrote a great analysis of growth vs value lately (Market Observations – September 2018 ).  His writing may be starting to be bearing fruit yet as January/February have been unbelievably good for my MFI stocks.

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 loss , "losing"  0.4% to 3.7% this month. At least we bounced back from our 30 month low (January) at -7.5%. 

Guess what?   Last month 9 open portfolios were trailing.  Now the most recent 3 are leading.

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
MEET	2.59	5.85	125.9%	186
HSII	25.25	43.13	70.8%	479
CERC	4.40	6.69	52.0%	115
SYNT	26.98	41.00	52.0%	2,235
BPT	17.33	26.06	50.4%	445
PDLI	2.48	3.63	46.4%	383
MSB	22.66	30.77	35.8%	332
ALSN	38.65	51.69	33.7%	5,464
USNA	77.40	99.88	29.0%	1,853
EGOV	13.45	17.07	26.9%	911
ESRX	77.00	95.80	24.4%	43,613
AGX	38.04	45.98	20.9%	610
AMCX	51.99	62.45	20.1%	3,260
UIS	11.45	13.64	19.1%	578
LEE	2.50	2.96	18.4%	143
DISCA	24.01	28.39	18.2%	13,710
BIIB	292.78	327.62	11.9%	61,894
HPQ	21.59	23.90	10.7%	35,917
KLAC	107.38	116.12	8.1%	17,302
PCOA	640.00	690.00	7.8%	158
UTHR	118.04	121.95	3.3%	5,402
RPXC	10.15	10.48	3.3%	506
OMC	74.80	75.52	1.0%	17,789
VEC	28.41	27.95	-1.6%	315
SP	36.00	35.23	-2.1%	801
MSGN	25.05	23.93	-4.5%	1,886
HRB	25.83	24.27	-6.0%	5,607
MPAA	22.00	20.50	-6.8%	420
TGNA	13.44	12.52	-6.8%	2,961
IDCC	74.33	69.02	-7.1%	2,623
VIAB	32.85	29.14	-11.3%	13,580
PTN	0.98	0.86	-12.2%	180
ABC	96.67	83.92	-13.2%	21,505
CJREF	5.52	4.60	-16.6%	1,324
NHTC	16.12	13.26	-17.8%	191
GME	14.43	11.64	-19.3%	1,618
AEIS	67.23	51.58	-23.3%	2,663
EGRX	66.86	46.74	-30.1%	1,067
CNCE	21.75	14.66	-32.6%	534
DLX	72.24	48.02	-33.5%	3,543
QTRH	1.58	1.03	-34.9%	195
TUP	48.08	31.04	-35.4%	2,631
ASYS	7.69	4.85	-36.9%	113
SQBG	2.01	1.23	-38.8%	127
EVC	6.58	3.98	-39.5%	624
TRNC	19.73	11.87	-39.8%	662
ACOR	26.05	14.00	-46.3%	1,205
CASA	19.64	10.40	-47.0%	662
NLS	11.95	6.10	-49.0%	367
MDCA	8.75	3.50	-60.0%	493

Not very good.  Especially if you didn't have MEET.  I always preach the importance of avoiding stinker stocks, those off by 30% or more.  13 of the 50 (26%) were in the stinker category here. That is dreadful.  

Here is a listing of every MFI Tracking portfolio, back to January 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%	25.7%	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	11.8%	4.0%	1
11/24/2017	9.8%	7.0%	1
12/29/2017	-3.4%	-5.4%	1
1/26/2018	-7.5%	-5.6%	0
2/23/2018	0.4%	3.7%	0
3/29/2018	1.3%	7.2%	0
4/27/2018	-2.9%	6.0%	0
5/25/2018	-4.7%	3.5%	0
6/29/2018	-4.1%	3.3%	0
7/27/2018	-3.3%	-0.1%	0
8/31/2018	-6.4%	-3.4%	0
9/28/2018	-6.8%	-3.5%	0
10/26/2018	2.4%	6.3%	0
11/30/2018	2.4%	2.2%	1
12/31/2018	15.5%	12.5%	1
1/25/2019	5.6%	5.3%	1