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Greetings for the start of 2015!

My results using the Magic Formula Investing strategy are presented below. As you might have read from some of the other posters (around the web) in the past the strategy appears to be somewhat ‘streaky’. My results for the most recent quarter appear to support that observation. The one year results from the previous quarter’s posting were solidly ahead of the R3000 index, and this posting shows that they trailed slightly for the year. The returns of my portfolio versus those of several Russell indexes through 31-Dec-2014 are as follows:

Portfolio Inception Date IRR R3000 R2000
Real Money 02-Feb-2006 +11.21% +7.81 +7.14

The following table details performance over various time frames through 31-Dec-2014:
Portfolio 5 year IRR 4 year IRR 3 year IRR 2 year IRR 1 year IRR
Real Money +15.68 +18.33 +23.37 +36.51 +11.56
R3000 +15.63 +15.31 +20.51 +22.61 +12.56
R2000 +15.55 +12.88 +19.21 +20.67 +4.89

I also have several tracking portfolios that I maintain on Marketocracy as additional 'data points'. These were started on various dates using free data sources available from the internet. These portfolios are rebalanced annually near the date of inception with a small component left as cash to 'pay' expenses. Only portfolios with at least one year of history are included. The annualized returns of these portfolios versus those of several Russell indexes through 31-Dec-2014 are as follows:

Portfolio Inception Date IRR R3000 R2000
MFI 20-Mar-2006 +8.72 +7.67 +7.05
Fidelity 20-Mar-2006 +3.03 +7.67 +7.05
Yahoo 21-Mar-2006 +5.93 +7.69 +7.06
FinViz 30-Mar-2011 +4.09 +14.68 +11.97
MG1 08-Jan-2012 +18.91 +19.99 +18.87
SCHW 18-Mar-2012 +6.72 +17.12 +15.86

The results seem to indicate that perhaps there is something in the MFI secret sauce since it is the only tracking portfolio that is ahead of both the indexes. All other tracking portfolios are trailing the market returns. The portfolio that really counts with my actual money is doing well over the long term, thus I continue to remain committed to the Magic Formula with a portion of my overall portfolio. I'll try to post my results again at the end of each quarter.


R3000 and R2000 are the internal rates of return for the Russell3000® and the Russell 2000® Indexes, respectively, over the given time period.
My self-managed account consists of four groups of 10 stocks each that were purchased and spaced out about 3 months apart. The picks are from the MFI website and selected from the top 50 and then run through a list randomizer. The first 10 on the list that I did not previously own are selected for the next cycle. They are rebalanced/shuffled/changed out on their respective anniversaries. I do not continue hold stocks that are still on the list or buy the same stock that is held in the other three cycles.

Marketocracy fund notes:
Only the MFI portfolio uses actual magic formula stocks picked from the website. All the other portfolios use the general screening option method outlined in the book to pick your own stocks using ROA and P/E ratios. The MG1 portfolio consists of the 30 highest ranked stocks from M.Gerda who posts about MFI on his blog. There were several funds that may have somewhat incorrect overall returns due to an error in Marketocracy's software. These portfolios held a position that was acquired for cash and did not reflect in the transactions in a timely fashion (or possibly correctly).
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