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Senin, 26 Maret 2018

Magic formula investing is an investment technique outlined by Joel Greenblatt that uses the principles of value investing.

Methodology>




Joel Greenblatt: "The Little Book that Beats the Market" | Talks at Google - Joel Greenblatt is a managing partner of Gotham Capital, a hedge fund that he founded in 1985 and Gotham Asset Management, a manager of hedge funds and long/short mutual funds. He is the former...

Greenblatt suggests purchasing 30 "good companies": cheap stocks with a high earnings yield and a high return on capital. He touts the success of his magic formula in his book 'The Little Book that Beats the Market', Joel Greenblatt ISBN 0-471-73306-7, citing that it does in fact beat the S&P 500 96% of the time, and has averaged a 17-year annual return of 30.8%

Formula

  1. Establish a minimum market capitalization (usually greater than $50 million).
  2. Exclude utility and financial stocks.
  3. Exclude foreign companies (American Depositary Receipts).
  4. Determine company's earnings yield = EBIT / enterprise value.
  5. Determine company's return on capital = EBIT / (net fixed assets + working capital).
  6. Rank all companies above chosen market capitalization by highest earnings yield and highest return on capital (ranked as percentages).
  7. Invest in 20â€"30 highest ranked companies, accumulating 2â€"3 positions per month over a 12-month period.
  8. Re-balance portfolio once per year, selling losers one week before the year-mark and winners one week after the year mark.
  9. Continue over a long-term (5â€"10+ year) period.

See also


10 Magic Formula Canadian Stocks
10 Magic Formula Canadian Stocks. Source : www.forbes.com

  • Piotroski F-Score

References


Return on assets ROA - Finding Banks That Are Profitable
Return on assets ROA - Finding Banks That Are Profitable. Source : www.valuewalk.com

External links


140+ Investing & Trading Resources - Tools, Blogs and More. | Dr ...
140+ Investing & Trading Resources - Tools, Blogs and More. | Dr .... Source : www.drwealth.com

  • Official website

Why You Should Take Joel Greenblatt's 'Magic Formula' Stocks Seriously
Why You Should Take Joel Greenblatt's 'Magic Formula' Stocks Seriously. Source : www.forbes.com

 
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