Magic Formula Investing Update – 2nd “Purchase”

I meant to do this earlier this month but forgot about it.

As discussed in an earlier post, I’m going to follow a hypothetical post using the Magic Formula found in Joel Greenblatt’s The Little Book That Beats The Market.

Following the procedure in the first post, I re-ran the numbers and came up with the following list:

Magic Formula Investing

I’m ignoring the stocks (those listed in red) that were picked in the previous session. That leaves the stocks highlighted in gray. I’ll add them to the portfolio using today’s closing prices and post the results tomorrow morning. As of right now, the portfolio is doing pretty good. The investment portion is up over 10% since the portfolio was put together on January 5, 2007. For more information, check out this graphic.

11 thoughts on “Magic Formula Investing Update – 2nd “Purchase””

  1. Oops. I forgot to upload the image. It should work now.

    Yes, that’s correct – a 10.05% return on the invested amount since January 5th, 2007.

  2. Are you investing real money or hypothetical money (virtual trading)? If real money, how much do you think one should allocate toward this experiment?

  3. Knowing JLP, he’ll advocate taking out a second mortgage on your house and putting all of your savings into this plan. 😀 I kid, I kid.

  4. For whatever reason, I have yet to apply the simple principles of the magic formula to my own portfolio. Even after reading the book, understanding the pure logic, and being wowed by Greenblatt’s hypo-historical stats, I continue to allocate my time towards more time-consuming methods.

    If you ever have time, send me your daily closing NAVs of this hypothetical, magic formula portfolio and I’ll peg it to my own time series of my portfolio vs. the S&P and the DJIA. That is, if you don’t mind. In my efforts to beat the market into submission in 2007, I wouldn’t mind seeing how I fare against one application of the formula.


    JG (+7.18% YTD, 03/27/07)

  5. I encourage all to check out the Yahoo Finance Group for Magic Formula Investing. Lots of memebers sharing insight and real results from applying th eprocess. Also lots of useful templates and tools in the files section.

    Happy Investing to All.

  6. I just decided what the hell and put 10K into the MFI system. With $0 commissions at Wells Fargo, I don’t need a large amount to overcome the expenses.

  7. I believe it’s possible to improve the results a lot by doing further research on the companies selected by the formula. One should give special attention to durable competitive advantage. Besides of this, on should factor in the growth rate of a company. Growth in a competitive advantage also creates value!

    Success in investing,
    Hendrik Oude Nijhuis

  8. I created a fake portfolio on Sept. 15,2006 and it is up 24% as of Jully 11,2007. I created another portfolio on Jan. 1,2007 and it is also up 24% as of Jully 11,2007. I invested $181000 in the top 30 stocks on June 29,2007 and the portfolio is valued at $187700 as of Jully 11,2007.One stock is up over 25% and another 18%.

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