Current holdings and gain (loss) to date:
5/7/07 tranche
FDG +109.87%
JAKK +8.80%
MOCO +1.75%
MTEX -50.41%
AXCA (merger 2/8/08) +29.79%
Tranche cumulative = 19.97%, VFINX = -12.91%
7/9/07 tranche
EPIQ -15.55%
IVAC -45.77%
LRCX -26.63%
PACR -32.31%
PBT +75.03%
Tranche = -9.02%, VFINX = -14.39%
9/7/07 tranche
FTO -22.37%
KG -40.73%
BPT +34.17%
HSII -16.06%
TZOO -46.21%
Tranche = -18.46%, VFINX = -11.68%
11/7/07 tranche
BBSI -4.24%
BVF -27.06%
HOC -22.21%
LCAV -22.47%
ASPV (merger 1/7/08) +2.12%
Tranche = -14.71%, VFINX = -14.28%
1/7/08 tranche
RAIL +20.24%
EPAX +7.71%
SIMG +9.24%
VPHM +1.67%
IAR -68.05%
Tranche = -5.94%, VFINX = -8.03%
3/7/08 tranche
HLYS -2.30%
ICFI -0.56%
PRXI +2.65%
SRSL -3.03%
USMO -4.57%
Tranche = -1.56%, VFINX = -0.85%
Sunday, March 9, 2008
Saturday, March 8, 2008
2 YEAR ANNIVERSARY POST
It's been a while since I've posted. Due to family health problems and simply being too busy to keep this up, I haven't been able to maintain this. But, for the whopping 7 people who were reading this on a regular basis (thanks!!), I thought I'd update everyone as I've just hit my two year anniversary of using the MFI method. The real test seems to be how it will have done over 3 - 5 years, but now we're getting well into it.
Bottom line? Amazingly, even after all the market turbulence, I'm up over my benchmark, and still positive overall. Not better than I would have done if I had just stuck my money in a money market account, but neither is the S&P 500. Plus, one can't invest in stocks with that attitude. I'm not capable of being a market timer.
However, I think I may be fortunate enough to take advantage of this market dip with MFI. I just recently increased my allocation to MFI stocks and hopefully this will pay off with my weighted results.
Yesterday was the two year anniversary, and it consisted of selling off the single worst tranche I've had. 46.86% loss vs. 4.56% loss for VFINX. OUCH!!! The BEST stock in the lot was TBI (Trueblue, Inc., previously Labor Ready (LRW)) at a 36% loss. The random method picked only winners this time.
But my upcoming tranche is a big-time winner at a 20% gain vs. a 13% loss for VFINX, led by one time loser FDG, which is up 110%! In the first year with FDG, I lost 23%. It was still on MFI when it came up for renewal, I held onto it, and look at the results! On the flip side, in yesterday's closed tranche, I sold PNCL at a 41% loss, also a holdover from the first year. In its first year, it was a 145% gain.
Other examples of first year holdover results:
FTO - Yr 1 40% gain. Yr 2 (to date) - 22% loss.
KG - Yr 1 10% loss. Yr 2 (to date) - 41% loss (ouch)
ASPV - Yr 1 39% gain. Yr 2 (sold in merger) - 2 % gain
RAIL - Yr 1 43% loss. Yr 2 (to date) - 20% gain
So, very mixed bag on the one departure I do from the random method. But, FDG has made it seem like a worthwhile strategy (my overall view on this departure from being random is that these stocks are still in MFI because they have yet to pull off a value recovery but still have the fundamentals to do so. Since one year is a somewhat arbitrary number for a holding period, I'm comfortable giving them more. I was particularly happy that RAIL was still there because it had been in the news for months as a stock poised to take off and it wasn't budging. It literally didn't start increasing until about a month after I chose to hold it).
Overall results to my two year mark (3/7/08):
(all amounts are since inception (3/7/06) and in total, not annual averages, unless mentioned otherwise)
Weighted average return MFI: 1.31% S&P 500: -4.49%
"MFI Fund" return: 5.79% vs. S&P 500: 1.18%
Average tranche return (this is roughly avg annual performance):
MFI: 0.40% vs. VFINX: -0.99%
In general, I continue to be happy with the results. There was a period it was pretty bleak, but the portfolio seems to have weathered the volatility well.
So, to close out, here's a chart of my portfolio since inception:
Good luck to everyone over the next year!
-A
Bottom line? Amazingly, even after all the market turbulence, I'm up over my benchmark, and still positive overall. Not better than I would have done if I had just stuck my money in a money market account, but neither is the S&P 500. Plus, one can't invest in stocks with that attitude. I'm not capable of being a market timer.
However, I think I may be fortunate enough to take advantage of this market dip with MFI. I just recently increased my allocation to MFI stocks and hopefully this will pay off with my weighted results.
Yesterday was the two year anniversary, and it consisted of selling off the single worst tranche I've had. 46.86% loss vs. 4.56% loss for VFINX. OUCH!!! The BEST stock in the lot was TBI (Trueblue, Inc., previously Labor Ready (LRW)) at a 36% loss. The random method picked only winners this time.
But my upcoming tranche is a big-time winner at a 20% gain vs. a 13% loss for VFINX, led by one time loser FDG, which is up 110%! In the first year with FDG, I lost 23%. It was still on MFI when it came up for renewal, I held onto it, and look at the results! On the flip side, in yesterday's closed tranche, I sold PNCL at a 41% loss, also a holdover from the first year. In its first year, it was a 145% gain.
Other examples of first year holdover results:
FTO - Yr 1 40% gain. Yr 2 (to date) - 22% loss.
KG - Yr 1 10% loss. Yr 2 (to date) - 41% loss (ouch)
ASPV - Yr 1 39% gain. Yr 2 (sold in merger) - 2 % gain
RAIL - Yr 1 43% loss. Yr 2 (to date) - 20% gain
So, very mixed bag on the one departure I do from the random method. But, FDG has made it seem like a worthwhile strategy (my overall view on this departure from being random is that these stocks are still in MFI because they have yet to pull off a value recovery but still have the fundamentals to do so. Since one year is a somewhat arbitrary number for a holding period, I'm comfortable giving them more. I was particularly happy that RAIL was still there because it had been in the news for months as a stock poised to take off and it wasn't budging. It literally didn't start increasing until about a month after I chose to hold it).
Overall results to my two year mark (3/7/08):
(all amounts are since inception (3/7/06) and in total, not annual averages, unless mentioned otherwise)
Weighted average return MFI: 1.31% S&P 500: -4.49%
"MFI Fund" return: 5.79% vs. S&P 500: 1.18%
Average tranche return (this is roughly avg annual performance):
MFI: 0.40% vs. VFINX: -0.99%
In general, I continue to be happy with the results. There was a period it was pretty bleak, but the portfolio seems to have weathered the volatility well.
So, to close out, here's a chart of my portfolio since inception:
Good luck to everyone over the next year!
-A
Saturday, September 8, 2007
Current results
It's been a while. Here are my current holdings and unrealized gains/losses to date.
FCX 50.6%
OVTI 44.4%
FDG 31.0%
HNR 12.3%
CRYP 11.0%
ASPV 9.8%
AXCA 8.7%
PBT 5.9%
LRW 3.5%
MOCO 3.1%
EPIQ 0.8%
LRCX -0.3%
TZOO -0.8%
BPT -1.3%
TRLG -1.3%
HSII -1.5%
FTO -2.3%
KG -3.0%
PNCL -11.0%
JAKK -12.2%
PACR -14.4%
KSWS -19.6%
RAIL -20.0%
NOOF -23.9%
CLHI -26.4%
IVAC -30.5%
OPTI -30.7%
VCI -41.5%
MTEX -53.1%
If MTEX doesn't recover, it could end up as my worst loss (the position currently held by Forward Industries (FORD) which had a 53.87% loss).
Also, I have read many articles which think the RAIL is going to do well. I'd certainly like to see that happen (and it's still in MFI.com).
FCX 50.6%
OVTI 44.4%
FDG 31.0%
HNR 12.3%
CRYP 11.0%
ASPV 9.8%
AXCA 8.7%
PBT 5.9%
LRW 3.5%
MOCO 3.1%
EPIQ 0.8%
LRCX -0.3%
TZOO -0.8%
BPT -1.3%
TRLG -1.3%
HSII -1.5%
FTO -2.3%
KG -3.0%
PNCL -11.0%
JAKK -12.2%
PACR -14.4%
KSWS -19.6%
RAIL -20.0%
NOOF -23.9%
CLHI -26.4%
IVAC -30.5%
OPTI -30.7%
VCI -41.5%
MTEX -53.1%
If MTEX doesn't recover, it could end up as my worst loss (the position currently held by Forward Industries (FORD) which had a 53.87% loss).
Also, I have read many articles which think the RAIL is going to do well. I'd certainly like to see that happen (and it's still in MFI.com).
9/7/07 new tranche
Been very busy lately so it's been tough to do updates. Not to mention the fact the MFI fund continues to fibrillate along with the market.
Sold the 9/7/06 tranche on Friday. It was my most successful tranche so far, primarily thanks to WNR and FTO, and no stinkers. The final results were:
DEBS 10.65% gain
FTO 40.03% gain
KG -9.52% loss
WNR 139.99% gain (placing it in 2nd so far, since PNCL has the one year record at 144.65%).
(this tranche also previously included SCC which had a cash merger and resulted in a 1.09% loss very quickly).
Total tranche return: 36.04% vs. VFINX 16.29%.
Because they were still in the MFI list, I held on to FTO and KG. I was sad to let WNR go, because I personally believe it still has potential. I even checked to see if it was in the top 100 over $50M (since I only grab the top 25 over $50M for my random picking method). But, it wasn't. And so away it goes. I continue to follow the MFI method to the letter of the book. The other sad thing, of course, was that at its peak, WNR was at a 200% gain. Ah, July and August. It was perhaps an appropriate kick in the nuts that the morning I sold these stocks the market had already declined another 1%. Sure, I was able to buy the next tranche after that decline, but on principle it still sucks.
The new tranche consists of the following stocks:
FTO
KG
BPT
HSII
TZOO
Weighted gain since inception = 11.74% vs. S&P 500 = 7.76%.
Sold the 9/7/06 tranche on Friday. It was my most successful tranche so far, primarily thanks to WNR and FTO, and no stinkers. The final results were:
DEBS 10.65% gain
FTO 40.03% gain
KG -9.52% loss
WNR 139.99% gain (placing it in 2nd so far, since PNCL has the one year record at 144.65%).
(this tranche also previously included SCC which had a cash merger and resulted in a 1.09% loss very quickly).
Total tranche return: 36.04% vs. VFINX 16.29%.
Because they were still in the MFI list, I held on to FTO and KG. I was sad to let WNR go, because I personally believe it still has potential. I even checked to see if it was in the top 100 over $50M (since I only grab the top 25 over $50M for my random picking method). But, it wasn't. And so away it goes. I continue to follow the MFI method to the letter of the book. The other sad thing, of course, was that at its peak, WNR was at a 200% gain. Ah, July and August. It was perhaps an appropriate kick in the nuts that the morning I sold these stocks the market had already declined another 1%. Sure, I was able to buy the next tranche after that decline, but on principle it still sucks.
The new tranche consists of the following stocks:
FTO
KG
BPT
HSII
TZOO
Weighted gain since inception = 11.74% vs. S&P 500 = 7.76%.
Thursday, August 30, 2007
How I measure performance
Just to make it clear so no one has to look back in all my posts, here's how my comparisons to benchmarks work:
1. Individual tranches - I compare the individual purchase dates (5 stocks every two months held for a year) to the return for VFINX (Vanguard S&P 500 Index Fund) including reinvested dividends. I recognize that a Russell 2000 fund might be more accurate, but one, I started with the VFINX and don't feel like recalculating and two, it's not that far off. Basically, I'm trying to see how the tranche is doing against a common measure. I used the fund rather than the actual S&P 500 because I wasn't originally sure that the S&P 500 index includes reinvested dividends, which I have since learned it does. Again, since it was already set up, I haven't changed it. So, in my last post, the gain on the 9/06 tranche (purchased approximately 9/7/06) is more than double the gain on a comparable investment in VFINX. I will be "closing" that tranche next week. If I choose to keep a security, I will still treat it for purposes of my analysis as if "sold" and will include it in the new tranche as if "purchased" on that date.
2. Cumulative tranches - I take a weighted average of the individual tranche gains, both open AND closed and compare it to the weighted average VFINX return. As a result, the maximum period is one year. I don't annualize the open tranches because due to the volatility of MFI stocks, I think it's misleading to annualize returns, either gain or loss. Typically these stocks "spike" up or down at certain events (press announcements, earnings releases, etc) and these can happen at any time during the year. Essentially, this figure is somewhat of a comparison of annual return to VFINX. It is never more than annual.
3. MFI Fund gain since inception (or any other date) - I am also tracking my investments as if it is a fund and am comparing its performance to the S&P 500, as many other funds do (again, with the understanding that it is a slightly imperfect benchmark to be using). When I personally invest more money in these stocks, I treat it as though more shares have been issued in the fund. I picked an arbitrary number of starting shares and have been moving forward as if all gains and dividends are reinvested. So, when I say gain since inception (3/6/06), I am starting from my arbitrary starting share price and comparing it to the current date, much like anyone would evaluate the share price performance of a mutual fund. I also chart the "MFI Fund's" performance against the S&P 500 performance. It lagged for about 9 months, crossed the S&P gain since inception, skyrocketed through July, then came down to earth (I'd attach it, but it's not on the computer I'm currently typing on). For the last few weeks, it has been trading places with the S&P 500 for which is in the lead since inception.
4. Weighted gain - This is my REAL return since inception. Based on real dollars I've invested vs. a comparable investment in the S&P 500. Because a lot of my original investment in this methodology was while I lagged the index, even though I'm now equal since inception, I'm actually well ahead. Since I have been doing this for more than a year (a year and half now) this return is MORE than a year's return. I do not quote it on an average annual basis. This is pure return since inception, on a weighted basis.
If this is still unclear, I'll add some charts soon to make it clearer. I'd be interested if anyone thinks there's a flaw in these methods or if there's a better way to track it (aside from tracking against the Russell 2000...I really don't want to spend the time re-doing my analyses and it just hasn't been that much different from the S&P 500). Maybe I'll fix it if I ever have some free time. Ha!!
-A
1. Individual tranches - I compare the individual purchase dates (5 stocks every two months held for a year) to the return for VFINX (Vanguard S&P 500 Index Fund) including reinvested dividends. I recognize that a Russell 2000 fund might be more accurate, but one, I started with the VFINX and don't feel like recalculating and two, it's not that far off. Basically, I'm trying to see how the tranche is doing against a common measure. I used the fund rather than the actual S&P 500 because I wasn't originally sure that the S&P 500 index includes reinvested dividends, which I have since learned it does. Again, since it was already set up, I haven't changed it. So, in my last post, the gain on the 9/06 tranche (purchased approximately 9/7/06) is more than double the gain on a comparable investment in VFINX. I will be "closing" that tranche next week. If I choose to keep a security, I will still treat it for purposes of my analysis as if "sold" and will include it in the new tranche as if "purchased" on that date.
2. Cumulative tranches - I take a weighted average of the individual tranche gains, both open AND closed and compare it to the weighted average VFINX return. As a result, the maximum period is one year. I don't annualize the open tranches because due to the volatility of MFI stocks, I think it's misleading to annualize returns, either gain or loss. Typically these stocks "spike" up or down at certain events (press announcements, earnings releases, etc) and these can happen at any time during the year. Essentially, this figure is somewhat of a comparison of annual return to VFINX. It is never more than annual.
3. MFI Fund gain since inception (or any other date) - I am also tracking my investments as if it is a fund and am comparing its performance to the S&P 500, as many other funds do (again, with the understanding that it is a slightly imperfect benchmark to be using). When I personally invest more money in these stocks, I treat it as though more shares have been issued in the fund. I picked an arbitrary number of starting shares and have been moving forward as if all gains and dividends are reinvested. So, when I say gain since inception (3/6/06), I am starting from my arbitrary starting share price and comparing it to the current date, much like anyone would evaluate the share price performance of a mutual fund. I also chart the "MFI Fund's" performance against the S&P 500 performance. It lagged for about 9 months, crossed the S&P gain since inception, skyrocketed through July, then came down to earth (I'd attach it, but it's not on the computer I'm currently typing on). For the last few weeks, it has been trading places with the S&P 500 for which is in the lead since inception.
4. Weighted gain - This is my REAL return since inception. Based on real dollars I've invested vs. a comparable investment in the S&P 500. Because a lot of my original investment in this methodology was while I lagged the index, even though I'm now equal since inception, I'm actually well ahead. Since I have been doing this for more than a year (a year and half now) this return is MORE than a year's return. I do not quote it on an average annual basis. This is pure return since inception, on a weighted basis.
If this is still unclear, I'll add some charts soon to make it clearer. I'd be interested if anyone thinks there's a flaw in these methods or if there's a better way to track it (aside from tracking against the Russell 2000...I really don't want to spend the time re-doing my analyses and it just hasn't been that much different from the S&P 500). Maybe I'll fix it if I ever have some free time. Ha!!
-A
Waiting for the next tranche
Nothing going on with the portfolio lately. One day it goes up 1%, the next down...the S&P and my portfolio have been trading places on which is up more since inception. Currently MFI is in the lead, but only slightly (still well up on a weighted basis). Next tranche is on 9/7, coming up. The tranche that I'll be completing is the one that's crushing the benchmark. As of today, it stands at 36.96% vs. VFINX at 15.04%.
All tranches cumulative stands at 7.63% vs VFINX at 7.31%.
MFI fund return since inception stands at 16.06% vs. S&P 500 at 14.51%.
Weighted average MFI = 13.35% vs. S&P 500 = 8.85%.
All tranches cumulative stands at 7.63% vs VFINX at 7.31%.
MFI fund return since inception stands at 16.06% vs. S&P 500 at 14.51%.
Weighted average MFI = 13.35% vs. S&P 500 = 8.85%.
Monday, August 20, 2007
More comments on the subprime debt "crisis"
I put "crisis" in quotes because I feel that term is far too overused. There was an article in the Wall Street Journal this week about a family "trapped" in the subprime mess.
There are clearly two ways to look at this article. One is that the family is a "victim" of unethical mortgage brokers. There is no way a family with $90,000 of combined income could afford a $567,000 mortgage, (2 yr ARM). Their mortgage payments alone (without regard to insurance, taxes, etc.) were $38,400/yr. That's over 42% of their pre-tax gross income. By any mortgage qualification threshold, that's far too high. And that's before any potential reset. The reset is moving them to $50,000/yr, or more than 55% of their gross. Plus, they had virtually no money down. The mortgage company was insane to lend to them.
But, and here's the libertarian in me talking, this family needed to take a little responsibility. How they ever thought they could afford the payments, even before any potential reset, is beyond me. I fully understand that many people don't understand basic finance concepts, but this example goes beyond the pale of irresponsibility. At a bare minimum, they should have recognized that they don't know what they're doing and should have conferred with a professional, i.e. a financial planner, an accountant, etc. I'd say their real estate attorney could have raised a flag, but the attorney may not have known anything about their income (I don't believe that my real estate attorney when I bought my house was privy to any of that information). As a result, the only person they probably conferred with financially was the mortgage broker, who was clearly irresponsible to begin with. I can't even believe they were talking with the same mortgage broker about arranging refinancing.
People have a responsibility to become minimally conversant in financial matters that affect them. I simply can't feel bad for this family because they were so irresponsible. My wife and I on a combined basis make a multiple of what these people make, and yet our mortgage is a fraction of theirs (and we only put 5% down on our house, so our mortgage isn't lower as if we simply had more money to begin with).
Though I doubt that the people who read my blog will cry "elitist!", let me point out that I come from a lower-middle class family, not wealth, and I started my career with college debt balance that equaled my starting pay. I was out on my own immediately after college, so I didn't live rent free with my parents and save up lots of money. The only thing my parents did "give" me was an upbringing that focused on the importance of education and, fortunately, inexpensive tastes. Oh, and I live in a pretty expensive part of the country, too, so an argument of "they had no choice" doesn't hold water either.
Finally, I recognized that unforeseen things can happen to people...illnesses, injuries, lay-offs, etc., but these people couldn't afford their decisions if everything went right.
I've been reading a lot lately about people getting in over their heads and about people who don't have enough saved for retirement. But, time and again, the articles mention all the things these people have bought or the vacations they have taken. My wife and I treat ourselves once and a while (which we can well afford), but we follow a simple rule that seems to be blasphemy to so many:
LIVE BELOW YOUR MEANS. Don't try to keep up with the Joneses, because it turns out the Joneses are living beyond their means as well.
Sorry, I know this is off-topic...however, how does one ever save enough money to participate in MFI if you can't follow that simple rule?
There are clearly two ways to look at this article. One is that the family is a "victim" of unethical mortgage brokers. There is no way a family with $90,000 of combined income could afford a $567,000 mortgage, (2 yr ARM). Their mortgage payments alone (without regard to insurance, taxes, etc.) were $38,400/yr. That's over 42% of their pre-tax gross income. By any mortgage qualification threshold, that's far too high. And that's before any potential reset. The reset is moving them to $50,000/yr, or more than 55% of their gross. Plus, they had virtually no money down. The mortgage company was insane to lend to them.
But, and here's the libertarian in me talking, this family needed to take a little responsibility. How they ever thought they could afford the payments, even before any potential reset, is beyond me. I fully understand that many people don't understand basic finance concepts, but this example goes beyond the pale of irresponsibility. At a bare minimum, they should have recognized that they don't know what they're doing and should have conferred with a professional, i.e. a financial planner, an accountant, etc. I'd say their real estate attorney could have raised a flag, but the attorney may not have known anything about their income (I don't believe that my real estate attorney when I bought my house was privy to any of that information). As a result, the only person they probably conferred with financially was the mortgage broker, who was clearly irresponsible to begin with. I can't even believe they were talking with the same mortgage broker about arranging refinancing.
People have a responsibility to become minimally conversant in financial matters that affect them. I simply can't feel bad for this family because they were so irresponsible. My wife and I on a combined basis make a multiple of what these people make, and yet our mortgage is a fraction of theirs (and we only put 5% down on our house, so our mortgage isn't lower as if we simply had more money to begin with).
Though I doubt that the people who read my blog will cry "elitist!", let me point out that I come from a lower-middle class family, not wealth, and I started my career with college debt balance that equaled my starting pay. I was out on my own immediately after college, so I didn't live rent free with my parents and save up lots of money. The only thing my parents did "give" me was an upbringing that focused on the importance of education and, fortunately, inexpensive tastes. Oh, and I live in a pretty expensive part of the country, too, so an argument of "they had no choice" doesn't hold water either.
Finally, I recognized that unforeseen things can happen to people...illnesses, injuries, lay-offs, etc., but these people couldn't afford their decisions if everything went right.
I've been reading a lot lately about people getting in over their heads and about people who don't have enough saved for retirement. But, time and again, the articles mention all the things these people have bought or the vacations they have taken. My wife and I treat ourselves once and a while (which we can well afford), but we follow a simple rule that seems to be blasphemy to so many:
LIVE BELOW YOUR MEANS. Don't try to keep up with the Joneses, because it turns out the Joneses are living beyond their means as well.
Sorry, I know this is off-topic...however, how does one ever save enough money to participate in MFI if you can't follow that simple rule?
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