Does Value Investing Still Work?

Does Value Investing Still Work?

In today's world, I at times wonder whether value investing is dead.  At least for the average investor.  I mean think about it.

Warren Buffett and Berkshire have been trailing the S&P for the past decade. 

Russell Growth has been whipping Russell Value. Over past 5 years Russell Value is up 24% and Russell GRowth is up 49%.

With all the disruptors around, AMZN, GOOG, AAPL, TTD, EBAY, PYPL, TSLA, SHOP, NFLX etc - it seems that the companies being disrupted (often "value" stocks) just keep falling further and further behind.

We are certainly seeing the Value struggle in my MFI Index over past five years:

	Annual
Year	Russell	MFI
2015	0.4%	-8.9%
2016	12.5%	13.2%
2017	20.8%	4.7%
2018	-5.4%	-3.4%
2019	14.6%	5.5%

I mean that is a pretty sound thumping.  Down by 9 points in first year.  Down by 16 points in 3rd year and 9 points this year.  Slight wins in other two years.

Here are the 12 open tracking portfolios versus benchmark:

5/25/2018	-11.4%	5.3%
6/29/2018	-9.0%	5.1%
7/27/2018	-7.4%	1.7%
8/31/2018	-10.1%	-1.7%
9/28/2018	-11.7%	-1.8%
10/26/2018	-4.2%	8.2%
11/30/2018	-7.0%	4.0%
12/31/2018	5.6%	14.5%
1/25/2019	-5.1%	7.2%
2/26/2019	-9.9%	1.7%
3/29/2019	-2.9%	0.5%
4/30/2019	-4.1%	-3.3%
	-6.4%	3.5%

Down an average of 10 points!

Bigger MFI stocks are doing a bit better.  I started a 3b+ tracking portfolio 2/1.  It is up by 0.5%.  Better that the -5.1% from 1/25/19 above, but still worse than benchmark.

I started another one 3/1 and it is down 4%... again better that the 2/26 -9.9% above, but worse than benchmark.  One more, the 4/1 3B+:   It is down 1%.  So same story... beating the 100m+ MFI portfolio but losing to benchmark.

Hmm.  Even GARIX is struggling, up just 2.7% this year.  I hear even Bobby Axelrod is struggling to beat benchmarks.

Warren Buffett makes some strong points about just going with S&P Index here (Warren Buffett has just about given up on beating the S&P 500).

Basically information is just better and everyone has it.  You don't have an advantage over professional traders and algos.

My Portfolio

Now my two real money MFI portfolios have been managing to beat the index since they started.  My MFI Select has been lagging of late and MFI Formula is a push better than the Index:

Select:

Date	Differential	MFI Value	R3K Value
1/1/2013	-1.78%	102,798	104,575
4/1/2013	-0.43%	106,804	107,234
7/1/2013	4.29%	114,888	110,597
10/1/2013	19.67%	138,655	118,990
1/1/2014	26.63%	157,138	130,503
4/1/2014	30.38%	162,991	132,616
7/1/2014	39.23%	177,971	138,740
10/1/2014	29.38%	168,321	138,944
1/1/2015	28.17%	174,306	146,140
4/1/2015	29.95%	178,565	148,612
7/1/2015	62.69%	211,437	148,743
10/1/2015	43.12%	181,175	138,052
1/1/2016	63.33%	209,514	146,186
4/1/2016	47.34%	195,770	148,430
7/1/2016	50.41%	201,092	150,680
10/1/2016	42.98%	198,563	155,582
1/1/2017	45.60%	209,503	163,936
4/1/2017	55.70%	229,473	173,735
7/1/2017	60.28%	239,060	178,782
10/1/2017	75.60%	262,489	186,886
1/1/2018	92.19%	291,114	198,926
4/1/2018	96.21%	293,665	197,451
7/1/2018	68.20%	273,125	204,921
10/1/2018	65.80%	284,097	218,297
1/1/2019	39.77%	228,246	188,479
4/1/2019	46.16%	260,553	214,391
Current	42.43%	258,543	216,117

But you can see since 1/1/2016 I am only up 23% and the Index is up 48%.

MFI Formula

Date	Differential	Value	R3K Value
10/1/2014	0.00%	100,000	100,000
1/1/2015	-0.33%	100,664	100,995
4/1/2015	5.09%	106,781	101,695
7/1/2015	4.82%	106,423	101,604
10/1/2015	6.39%	100,703	94,312
1/1/2016	-3.36%	96,830	100,012
4/1/2016	0.34%	102,371	101,548
7/1/2016	-0.19%	103,022	103,216
10/1/2016	-0.85%	106,377	107,230
1/1/2017	1.57%	113,406	111,832
4/1/2017	-1.86%	116,227	118,091
7/1/2017	-2.40%	119,144	121,545
10/1/2017	-2.56%	124,448	127,007
1/1/2018	-3.63%	131,460	135,086
4/1/2018	-0.16%	133,734	133,898
7/1/2018	2.28%	141,126	138,849
10/1/2018	-0.85%	147,963	148,808
1/1/2019	3.90%	132,405	128,506
4/1/2019	0.98%	147,070	146,092
Current	5.36%	152,195	146,833

This one has hung in better.

Next Steps

Looking through this makes me question whether it is really worth it.  What am I doing?  I am tempted to just dismantle the whole thing over the next year.  I have this fear the market is going to crash again (and last fall was no picnic).  I am retired, so what I have is what I have.

Perhaps as the various tranches roll off I just move to safe havens until the market crashes.  I was thinking about what are "safe havens"?

PNC Money Market is 2.3% right now.

Wells Fargo Preferred is 5.8%.

JPM Preferred is 7.9%

NEE Preferred is 4%

BAC Preferred 5.6%

BDX Preferred 5.4%

ACGL Preferred 5.7%

KKR preferred 6.0%

JPC CEF 7.7%