The Profit and Value strategy differs
from the Magic Formula strategy in its methods of determining value and quality.
Over the next few months I'll be migrating the actively managed portion of my Level3 retirement account
from Magic Formula to the AAII managed SSR and VMQ portfolios.
Not exact matches
There is no
magic formula for authenticity, that piece has to come
from you and your team.
To summarize, here are the tools I use while looking for stock ideas: Value Line (Great info all on one page - great place to hunt for ideas) Morningstar,
Magic Formula, Google Spreadsheets (for screening and watchlists) Spinoffs (I keep a watchlist of spinoffs and research them individually) 13 - F's (I go through a few filings
from value managers I follow) Blogs (Great -LSB-...]
Here are the results of our study comparing the
Magic Formula and Quality and Price strategies for the period
from 1964 to 2011.
The
Magic Formula diverges
from Graham's strategy by exchanging for Graham's absolute price and quality measures (i.e. price - to - earnings ratio below 10, and debt - to - equity ratio below 50 percent) a ranking system that seeks those stocks with the best combination of price and quality more akin to Buffett's value investing philosophy.
Quality and Price is the academic alternative to the
Magic Formula because it draws its inspiration
from academic research papers.
The
Magic Formula is a logical value strategy, it works in backtest, and, most importantly, it seems to work in practice, as this chart
from Formula Investing attests:
Figure 2.5
from the book shows the cumulative performance of the
Magic Formula and the Quality and Price strategies for the period 1964 to 2011.
We'll soon see if the Chef's Table
formula will work its
magic a second time around on chefs like Ana Roš, whose Slovenian restaurant Hiša Franko is located in a small town that doesn't have any produce shops, because all its residents cook with ingredients
from their own gardens.
From no carb, to moderate carb, to high carb, and everything in between, just about every scenario has been marketed and sold to the public as the
magic weight loss
formula.
Dishonored is a sandbox RPG
from Arkane Studios and though it incorporates
magic, stealth and combat, there is no set
formula to completing the game.
Things seem to proceed according to
formula, that is, until Benedict manages to find the
magic ticket, allowing him to pass
from movie - land into the real world.
I began my journey much like a small puppy, bounding
from website to website hoping there was some kind of
magic formula for achieving the quality mark.
After 40 years, we now think of BMW not as a car but instead as a
magic formula made
from our own associations and expectations.
Sparkling with the
magic dust of Renault Sport, this Alliance engine includes cutting edge technologies, demonstrated by the DLC (Diamond Like Carbon) cam followers developed
from Formula One and Variable Valve Timing (VVT).
I tested the «
magic formula»
from Joel Greenblatt for european companies (MSCI Europe as sample)- the result was: no significant return difference between the
magic formula und a simple value strategy.
There's no
magic investing
formula that's revealed after you make your first million, or a network of sophisticated insider trading intelligence that's hidden
from the rest of us.
From 1974 to 2011, that metric outperforms the
Magic Formula by 2.01 %.
While Greenblatt's
magic formula combines earnings yield with the quality ratio ROIC, a more recent study concluded that the
formula derives all its
magic from Earnings Yield and none
from ROIC.
I will eagerly watch how Mr. Greenblatt's «
Magic Formula» works
from a distance.
For major «up» years, it seems that our backtest of the
magic formula are very similar (especially
from a statistical standpoint where the portfolios only have 30 names): 1991, 1995, 1997, 1999, 2001, and 2003.
To summarize, here are the tools I use while looking for stock ideas: Value Line (Great info all on one page - great place to hunt for ideas) Morningstar,
Magic Formula, Google Spreadsheets (for screening and watchlists) Spinoffs (I keep a watchlist of spinoffs and research them individually) 13 - F's (I go through a few filings
from value managers I follow) Blogs (Great -LSB-...]
What might be reasons NOT to do it (besides trying to make a better
Magic Formula or cherry - pick stocks
from it, which for almost all individual investors will turn a good thing bad due to behavioral bias).
This is a bit different
from the way Greenblatt equally weighted both factors in his
Magic Formula.
Thankfully, most investors are more patient than that, but we've heard
from many others who seem to think the Couch Potato strategy is a
magic formula.
I am curious to hear your thoughts regarding the backtesting of the
Magic Formula that you included
from Empirical Finance Blog.
However, I think
from time to time one should try to broaden the horizon and take a step back
from investment book with «
magic formulas» to pick winning stocks to books which try to explain how companies work.
I only buy individual stocks, but whereas I used to pick stocks with research, I now run «The
Magic Formula» screen
from «The Little Book that Beats the Market» by Joel Greenblatt.
the over used ROIC to forecast, how cherry picking stocks
from a screen like the
magic formula will leave you underperforming the market.
Figure 2.5
from the book shows the cumulative performance of the
Magic Formula and the Quality and Price strategies for the period 1964 to 2011.
Here are the results of our study comparing the
Magic Formula and Quality and Price strategies for the period
from 1964 to 2011.
Joel Greenblatt discusses the role that loss aversion plays in deterring investors
from following his «
magic formula».
This makes sense in light of the findings
from Joel Greenblatt's work that shows investors «reliably and systematically» avoid the best performers stocks according to his
Magic Formula.
Interview with Joel Greenblatt http://video.cnbc.com/gallery/?video=3000047297 A bullish interview
from the creator of the «
Magic Formula».
Unfortunately, there is no
magic formula for stopping your dog
from enjoying his recycling behavior.
The
magic formula of Jimbaran bay with its white sand and spread of blue ocean are being a different mark that may be enjoyed
from Golden Tulip Bay View Hotel Bali.
I'd played Finest Hour on PS2 but Modern Warfare sucked me into the series like no shooter has before or since, particularly in terms of the online multiplayer; it's just a shame that the diminishing returns of the later entries in the franchise and the concerted shift
from the
formula of the modern day shooter grounded in realism to the hyper - kinetic, futuristic Michael Bay-esque blockbuster failed, in my personal opinion, to effectively recapture the
magic of the first Modern Warfare title.
Lego Batman 2: DC Super Heroes is the five thousand, six hundredth game in the Lego series, and while little has changed
from game to game, it's safe to say that Traveller's Tales have honed the
magic formula that makes these games so enticing to a fine art.
Dark Souls became popular because of that sense of overcoming impossible odds and while many have tried to copy that series signature style and
formula only the folks at
From Software truly understand how to capture that
magic.
The game is fun, and the ability to incrementally level up your skills and
magic within the framework of a traditional FF job system offers some welcome differences
from the MH
formula.
If only there was a
magic formula available to recover
from an affair.
There is no
magic formula for recovering
from an affair.
There is no
magic formula, but typically the best results come
from some of these search parameters: Small radius of a targeted geo - area, people interested in real estate, people over a certain age you would like to target, and looking into purchase behaviors; getting ready to buy or sell or investing.
We learned everything
from how to find the right property, how to finance, cost vs whether it's a good deal (
magic formula) and the A-Z of doing your first flip.