Magic Formula Update – First “Purchase” of 2008

January 9, 2008

I told you last week that I was going to make the first purchase for the portfolio this week. I was actually going to do this on Monday but was too busy. Here are the adjustments I made to the portfolio today:

I sold the first group of stocks that were purchased for the portfolio on January 5, 2007:

FreightCar America Inc
Aspreva Pharmaceuticals Corp
Freeport-McMoran Copper & Gold Inc.
OmniVision Technologies Inc
Fording Canadian Coal Trust

Including dividends, these positions netted $3,405 to be reinvested.

I then ran the screen on, which gave me the following stocks:

Holly Corp (HOC)
Perini Corp (PCR)
Korn/Ferry International (KFY)
Heidrick & Struggles International Inc (HSII) – Struggles? I’m not sure I like that name, LOL!

I then split the $3,405 evenly among those 5 stocks:

Magic Formula Portfolio - January 2008 Update

Now we’ll sit back and watch and see how these stocks perform. So far the Magic Formula is down 9.20% in 2008.

Here are the links to the rest of the Magic Formula posts:

A Look at Magic Formula Investing

Magic Formula – Portfolio Update

Magic Formula Investing Update – 2nd “Purchase”

Magic Fomula Portfolio April Update

Magic Formula Portfolio May Update

Magic Formula Portfolio July Update

Magic Formula Portfolio August Update

Magic Formula Portfolio October Update

A Not-So-Good Year For the Magic Formula – A review of 2007’s performance.

9 responses to Magic Formula Update – First “Purchase” of 2008

  1. You sales and purchases of individual stocks are interesting. That said, I think perhaps it would be a bit more prudent to take that $3k and invest in a broad based mutual fund and then set up an auto invest program to dollar cost average over the years. You might do better rather than buying and selling a small dollar value of indivual equities each year.

  2. Spokane Al,

    True enough. But,… this is an experiment.

  3. Hey JLP, I really like this series. It’s nice to the the magic formula in action. This is an approach I have been very interested in. I’ll probably end up like the commenter suggested above and just index, but hopefully I’ll have some play money to do things like this one day.

  4. Curious to see how the magic formula turns out…always skeptical of such predictors though..

  5. I started 16 months ago buying 6 stocks every 2 months for 10 months since September 2006. I’ve been selling and buying new ones after holding them for about a year. So far, I am down 10% overall. The strategy is supposed to be long-term so short-term results are not supposed to mean anything.

  6. Thanks for sharing your experiment, I just read the book recently and am very much interested in the subject matter. It ‘ll be interesting to see how your experiment plays out in year two. Good luck and keep the updates coming.

  7. You’re welcome. After a year, I sold the ones that disappeared from the top 25. The ones sold gained 33%. Overall, the highest gain was 24% around August. As I said, overall right now including the ones sold, it’s down 10%. The ones I’m still holding are down 18%. The book said the mix never lost money in any three-year period. Hope these averages work out. My minimum was $50 million and small stocks have been hammered. By buying 30 stocks, the attempt is to mirror the averages. The issue is that stocks are cheap for a reason (hopefully it’s not all due to the cockroach theory where if there’s one, there’s probably hundreds more). So I’m betting on the averages per the book working out with good companies regaining their value.

  8. Any updates. I am finishing the 5 Little books. They are good reads but differ in some concepts. I would love to see if you had any comments of the other books.

  9. Dave in Vancouver April 17, 2008 at 5:59 pm

    Ray I hope you keep posting your results. I started today with 4 purchases. I think I will try 25 to 30 purchases over the next year, at 4k each. I will follow the formula for 4 years from today. I will not put any more money in until I have good gains. When I look at the stocks, it looks scary, but that keeps everyone from trying it.