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Greenblatt's Magic Formula 30 Qualifying

The Magic Formula is a value investing strategy invented by the hedge fund manager Joel Greenblatt in the bestselling and highly recommended Little Book that Beats the Market. It focuses on finding quality value stocks using a blended ranking system (the Magic Formula rank) composed from two fundamental ratios: Return on Capital (which Greenblatt argues is the best determinant of whether a business is a good one) and Earnings Yield (his favoured measure for cheapness). He summarised his philosophy with the maxim "buying cheap stocks at bargain prices is the secret to making lots of money". In the fourth edition of his book Greenblatt claimed the top scoring portfolio of 30 stocks appreciated by 30.8% each year over the previous 17 years, though he stressed that the strategy could underperform during periods of up to two years. Having now sold hundreds of thousands of copies, the "Magic Formula" is credited for reinvigorating the practice of value investing.

To learn more about this strategy please click here »

This is an independent study based upon the methods of...
Picture of Joel Greenblatt

Joel Greenblatt

Value Investor, founder of Gotham Capital and the Value Investors Club. Author of The Little Book that Beats the Market.

The Little Book That Still Beats the Market

by Joel Greenblatt

In his best-selling "The Little Book that Beats the Market", Greenblatt espouses MFI as a do-it-yourself version of the approach he used at his fund Gotham Capital (which apparently returned over 40% annualized from 1985 to 2005). 

This screen uses the following criteria:

  • Mkt Cap £m > 30
  • Magic Formula Rank > 0
  • Rank ( Earnings Yield % ) < 99%
  • Rank ( ROC % Greenblatt ) < 99%

Results are sorted by:

  • Magic Formula Rank % in descending order


And limited to the first 30 Results


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Performance Tracking


Returns FTSE 100
1 week 1.1% 0.8% 1.2% -0.2% -0.8% -1.4% -0.8% 1.3%
1 month -3.8% -7.0% 4.7% 2.2% -6.1% -3.5% -4.6% -1.8%
3 months -1.9% -9.5% 3.5% 12.7% -11.0% 2.0% -9.4% 0.2%
6 months -4.0% -6.5% -2.9% 13.0% -6.6% 1.7% 1.8% -0.8%
1 year 15.3% 23.3% -2.9% 56.4% -1.8% 19.1% -1.9% 6.7%
2 years 30.8% 69.5% 24.5% - - - - 20.5%
Annualised 8.1% 14.1% 5.0% 60.5% 16.3% 18.2% 19.6%
 
Risks
Max Drawdown -25.2% -23.0% -21.2% -17.4% -16.6% -21.1% -15.5%
Avg Holdings 24.5 23.4 25 25 25 25 25
Diversification Good Good Good Good Good Good Good

 Studies based on equal weighted portfolios of max 25 stocks rebalanced quarterly. Qualifying shares below updated daily. Past performance not indicative of future returns.



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30 Qualifying

Ticker Name Mkt Cap £m Magic Formula Rank Magic Formula Rank % ROC % Greenblatt Earnings Yield % RS 6m Sector Flag
Subscriber Subscriber Industrials Japan
Subscriber Subscriber Technology Korea, Republic of
Subscriber Subscriber Technology Japan
Subscriber Subscriber Industrials Hong Kong
Subscriber Subscriber Industrials Japan
Subscriber Subscriber Industrials Japan
Subscriber Subscriber Technology Japan
Subscriber Subscriber Consumer Cyclicals Hong Kong
Subscriber Subscriber Healthcare Hong Kong
Subscriber Subscriber Consumer Cyclicals Japan
Subscriber Subscriber Basic Materials Korea, Republic of
Subscriber Subscriber Industrials Japan
Subscriber Subscriber Consumer Cyclicals Hong Kong
Subscriber Subscriber Technology Japan
Subscriber Subscriber Basic Materials Singapore
Subscriber Subscriber Industrials Japan
Subscriber Subscriber Consumer Cyclicals Taiwan
Subscriber Subscriber Industrials Korea, Republic of
Subscriber Subscriber Technology Korea, Republic of
Subscriber Subscriber Industrials Japan
Subscriber Subscriber Energy Singapore
Subscriber Subscriber Energy Canada
Subscriber Subscriber Financials Turkey
Subscriber Subscriber Consumer Cyclicals India
Subscriber Subscriber Technology Korea, Republic of
Subscriber Subscriber Basic Materials Hong Kong
Subscriber Subscriber Industrials Japan
Subscriber Subscriber Consumer Cyclicals United States
Subscriber Subscriber Consumer Cyclicals Australia
Subscriber Subscriber Healthcare Germany

Can't see the share you expect? View this screen as a checklist to find out why.

You should consider the results of any screening process, including this one, as candidates for further research, not as a buy list. Screening helps to narrow a search based on pre-defined criteria. It is not a substitute for independent research reflecting your individual criteria for investing/trading. Please note that the screening criteria used represents Stockopedia's interpretation of the author's investment approach and are not determined or endorsed by the original strategist.



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