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A Look at Magic Formula Investing
By JLP | January 4, 2007
I read Joel Greenblatt’s The Little Book That Beats The Market
Fortunately, Greenblatt has a website called MagicFormulaInvesting.com that will list the stocks that meet the criteria. So, I thought I would try it out.
I went to MagicFormulaInvesting.com and entered the following information:
After entering that information, I hit the “Go” button, which took me to a sign-in page where it asked me for my email address and password. After signing in, I was taken to the final page, which offered the following results:
The note at the bottom of the printout says the following:
Note: See The Little Book That Beats The Market
The printout isn’t all that useful since the results are in alphabetical order rather than a ranked order. So, I ranked them by their pre-tax earnings yields:
As the note above states, I highlighted the top 5 in dark grey (and the next two to bring the total to 7 are highlighted in lighter grey).
I thought it would be fun for us to follow this strategy for a year or two to see how it works. So, I’m going to set up a hypothetical account with FOLIOfn and “purchase” the first 5 stocks in the above list. Then in early March, I’ll run the screen again and “purchase” 5 more from that list. I’ll continue purchase stocks every two months until there are 20 stocks in the portfolio. Finally, in January I’ll sell the first batch of stocks and replace them with stocks from another new screen.
It should be fun.
Topics: Investing |