MFI Monthly Tracking Portfolio - March 2018

MFI Tracking Portfolio - March 2018

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

It is not without thinking that I have picked a picture of diving this month.  The drop was sharp in the past 30 days, as I have alluded several times.

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.

Onward

 Fearless readers will recall we had a 29 month "losing streak"..  Then we had a 13 month winning streak. Now we have our third straight loss , "losing"  -3.0% to 8.5% this month.

Guess what?   Last month 3 open portfolios were leading.  Now all open portfolios are trailing, by an average of almost 10 points.  That is really bad.  Like bad enough it makes you want to throw in the towel or make major changes in market cap.  But I don't know, I did start a $3b+ tracking portfolio on March 1st and it was down 2.8%

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
LEE	1.95	3.30	69.2%	111
NTRI	26.40	42.90	62.5%	810
SYNT	25.53	41.00	60.6%	2,118
ESRX	69.08	95.80	38.7%	38,989
CERC	4.29	5.84	36.1%	112
BPT	19.91	26.60	33.6%	511
EGOV	13.03	17.09	31.2%	881
MSB	23.06	29.29	27.0%	338
TGNA	11.13	14.10	26.7%	2,451
DISCA	21.43	27.02	26.1%	12,172
AGX	41.63	49.95	20.0%	668
AMGN	165.59	189.98	14.7%	123,871
CSVI	44.26	50.75	14.7%	626
JNPR	23.70	26.47	11.7%	8,893
AMCX	51.70	56.76	9.8%	3,158
CJREF	4.04	4.43	9.7%	965
UIS	10.75	11.67	8.6%	543
CELG	89.21	94.34	5.8%	67,737
UTHR	112.36	117.37	4.5%	5,142
SYX	21.68	22.64	4.4%	1,059
OMC	70.27	72.99	3.9%	16,721
RPXC	10.69	10.48	-2.0%	531
HRB	24.43	23.94	-2.0%	5,314
MSGN	22.60	21.75	-3.8%	1,701
SP	35.60	34.12	-4.2%	792
EGRX	52.69	50.49	-4.2%	841
IPG	22.19	21.01	-5.3%	8,825
ABC	84.68	79.52	-6.1%	18,837
VIAB	30.21	28.07	-7.1%	12,502
IDCC	72.26	65.98	-8.7%	2,548
HPQ	21.33	19.43	-8.9%	35,576
GILD	72.89	65.01	-10.8%	98,535
MPAA	21.43	18.87	-11.9%	409
BIIB	273.82	236.38	-13.7%	57,886
INVA	16.67	14.03	-15.8%	1,699
QTRH	1.40	1.11	-20.6%	172
AEIS	63.90	49.68	-22.3%	2,531
ASYS	7.32	5.33	-27.2%	108
EVC	4.46	3.24	-27.4%	423
NHTC	17.97	12.96	-27.9%	216
TRNC	16.42	11.79	-28.2%	553
VEC	37.24	26.59	-28.6%	414
SQBG	2.09	1.28	-38.8%	132
DLX	72.44	43.72	-39.6%	3,549
MIK	19.71	11.42	-42.1%	3,586
TUP	45.28	25.58	-43.5%	2,470
ACOR	23.65	13.29	-43.8%	1,095
CNCE	22.90	12.07	-47.3%	562
NLS	13.45	5.56	-58.7%	408
MDCA	7.20	2.25	-68.7%	421

8 of the 50 (16%) were down 30% or more.  15 of the 50 (30%) were down 20% or more.  And this is in a market up 8%.  Brutal.

Here are all tracking portfolios 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%	27.2%	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	-3.0%	8.5%	0
4/27/2018	-6.7%	7.3%	0
5/25/2018	-8.7%	4.8%	0
6/29/2018	-8.4%	4.5%	0
7/27/2018	-7.6%	1.1%	0
8/31/2018	-11.3%	-2.2%	0
9/28/2018	-11.5%	-2.4%	0
10/26/2018	-1.7%	7.6%	0
11/30/2018	-3.9%	3.5%	0
12/31/2018	7.9%	13.9%	0
1/25/2019	-3.1%	6.6%	0
2/26/2019	-8.5%	1.2%	0

Note of the 11 open ones (the final 11), 12/31/18 is the only one in the black.  And I wonder why my MFI portfolios (real money) have been struggling.  

Picking stocks with a 2.6% dividend or higher does help, for March 2018 it changed the -3.0% above to +4.3%.  That still seems to be the path to go, although admittedly some high dividend names (TUP, GME and PBI) have been crushed as well.

I am just going to end there.