Joel Greenblatt is one of the best investors in the world.
His "Magic Formula" returned 33% per year (!) to shareholders.
Here's what you need to know:
His "Magic Formula" returned 33% per year (!) to shareholders.
Here's what you need to know:
Between 1988 and 2004, Greenblatt's Magic Formula returned 33% (!) per year to shareholders.
But how does it work?
But how does it work?
In essence, The Magic Formula does the following:
1. You buy good companies (high return on capital)
2. Which are cheap (high earnings yield)
1. You buy good companies (high return on capital)
2. Which are cheap (high earnings yield)
Here are the 8 steps for The Magic Formula:
1. Screen for companies with a minimum market cap of $50 million
2 Exclude utility and financial stocks
1. Screen for companies with a minimum market cap of $50 million
2 Exclude utility and financial stocks
3. Determine the companyβs earnings yield
4. Determine the companyβs return on capital
4. Determine the companyβs return on capital
5. Rank all companies by highest earnings yield and highest return on capital (ranked as %)
6. Invest in the 20-30 highest ranked companies for 1 year
6. Invest in the 20-30 highest ranked companies for 1 year
7. Rebalance your portfolio once per year
8. Continue to do this over a long-term period (at least 3-5 years)
8. Continue to do this over a long-term period (at least 3-5 years)
Sounds like a lot of work?
Luckily you can find the best stocks according to The Magic Formula online.
Here is today's list:
Luckily you can find the best stocks according to The Magic Formula online.
Here is today's list:
If you want to learn more about Greenblatt and his Magic Formula, his book is a must read:
If you liked this, you'll love our website.
We've now added all the class notes of his lectures to the Reading Section on our website (> 300 pages).
Soon, we will publish a full article explaining Joel Greenblatt's full investment philosophy.
qualitycompounding.substack.com
We've now added all the class notes of his lectures to the Reading Section on our website (> 300 pages).
Soon, we will publish a full article explaining Joel Greenblatt's full investment philosophy.
qualitycompounding.substack.com
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