More Than 2 Years In, Still Beating the Market (Thanks Joel!)

Fortunately I've been more rigorous in actually investing than in blogging about it, but since I'm taking the week off work, I thought it a good time to do the "two-year update" post I'd meant to do back in May.

So I guess this is a "28-month-update."

I've been generally following the strategy outlined in Joel Greenblatt's "Little Book that Beats the Market," which in a nutshell says:

1. Pick stocks using this screener


2. Hold them for about a year (if they're down, sell just prior to one year; if they're up sell just after one year, for tax purposes)


3. Lather, rinse, repeat (holding about 20 stocks at any one time)

Current/previous holdings now updated, and the chart below shows my performance since May 2006.

Also, in an attempt to get myself posting more frequently, I'm considering folding this blog into my main personal one. I'll try to maintain all the relevant links, but may well fail miserably. Check back at andrewsavikas.com/blog for updates.

New Round of MFI Picks

I picked up my (now quarterly) basket of new MFI stocks on Monday (I was a bit too tied up to post sooner). All of these had recent data in the MFI screener:

• Cal Dive International (DVR)
• Maximus (MMS)
• Supertex (SUPX)
• American Eagle Outfitters (AEO)
• Administaff (ASF)

Also sold the following:

• FDG (+45.89%)
• WDC (+47.02%)

The full list of holdings has been updated.

Performance Update (Live from New York)

I'm in New York this week, where I had the opportunity to attend the O'Reilly Money:Tech Conference, and while the conference content was excellent, I was left with mixed feelings about the market.

On the plus side, seeing and hearing so many market luminaries left me re-energized about investing, and excited to make my next round of picks (doing bi-weekly picks was problematic for two reasons: it was a lot of work; and the MFI site only updates with quarterly reports, so in some cases I was working off data nearly 3 months old).

One of the highlights from the conference was a conversation between conference program chair Paul Kedrosky and Mad Money's Jim Cramer. Not only is Jim as entertaining as you'd expect in person, he was very bullish on GOOG. (He said a lot of people were making "momentum" decisions: they open the drawer today, it says 'sell google'; after the market improves, they'll open the drawer again and it'll say 'buy google'.)

On the downside, there's a strong consensus among the Wall Street crowd that we're either in or heading toward a recession (an interesting data point here). While that does mean market opportunities, it also means a lot of people are looking at some lean times ahead.

Regardless, I'll be making a new round of MFI picks on Monday, this time five at a time (done every quarter to leave me with 20 at any given time). On that note (and because I'm tired of that Covestor widget to your right mocking me -- that precipitous decline you see in July coincides almost exactly with my Covestor signup), I thought I'd post my performance since inception, which now represents about 18 months of data. Still short-term, but I find the results encouraging: 25.32% against the S&P's 8.66% for the same period.

You can read about how this performance is calculated here. (There was actually someone from FolioFN at the conference, but unfortunately I didn't get a chance to connect.)

Sticking with it: this round's pick: GYI

The only way I can really know if the Greenblatt strategy really works is if I stick with it, even when "Mr. Market" as Greenblatt calls it, is acting up.

This round's pick is Getty Images (I was spooked enough to pick something with a fairly large market cap at $1.8B), and I'm also selling Herbalife (HLF), for a gain.

Interesting counterpoint on Getty here. My involvement with content and digital-asset management suggests to me that replacing Getty with a wiki will take a mite longer than my 1-year investment horizon.

Last Week's Wild Ride, in Context

No doubt that last week took the wind out of more than a few sails as the broader market took quite a beating. A quick peak at my Covestor standings (as of today) suggests I fared even worse than the overall market. Indeed, a similar trend over the same time period (roughly the past month) can be seen in the performance graph (my performance is the darker of the two lines) taken directly from my FolioFN account:

Of course, such is the nature of short-term performance measures. I waited a year to start this blog in part to be sure that I had at least that much performance data to share. Even a single year is on the low end of my comfort zone for judging portfolio performance.

Viewed in the context of the past 12 months worth of performance data, you can see that while my positions did fall pretty far, pretty fast last week, they did so from quite a bit higher of a starting point than the broader market:

Covestor appears to be gearing up to display member rankings, but with only a few months worth of data (and significantly less than that for a lot of their newer members), I hope they delay the launch of that feature until they have a critical mass of reasonably useful data. If not, those rankings may well be as volatile as last week's wild ride.