Does Magic Formula investing still work?
Magic Formula did substantially better than the market – up to 152.3% better. The best ranked Magic Formula investing companies all substantially outperformed the market which returned only 30.54% over the same 12 year period.
Is Magic Formula Investing free?
The Magic Formula stocks are available for free in Joel Greenblatt’s website, MagicFormulaInvesting.com.
How do you use magic formula investing?
Buy two to three positions each month in the top 20 to 30 companies, over the course of a year. Each year, rebalance the portfolio by selling off losers one week before the year term ends. Sell off winners one week after the year mark. Repeat the process each year for a minimum of five to 10 years or more.
How do you calculate magic formula?
This is how the two Magic Formula investing ratios are calculated:
- Return on invested capital (ROIC) = EBIT / (net working capital + net fixed assets).
- Earnings yield = EBIT / Enterprise value.
- Substantially better than the market – only +30.5%
- Best combination +783% was Momentum.
How does the magic formula work for investing?
In it’s most naked form, the Magic Formula is described by Greenblatt as a long-term investment strategy designed to help investors buy a group of above-average companies but only when they are available at below-average prices. Here is the formula courtesy of wikipedia.
What can an investment calculator do for You?
Whether you’re considering getting started with investing or you’re already a seasoned investor, an investment calculator can help you figure out how to meet your goals. It can show you how your initial investment, frequency of contributions and risk tolerance can all affect how your money grows.
Do you need to register for magic formula?
You need to register in order to use the stock screener. If you have received the activation code via email, you can enter it here to activate your account. Enter two simple stock selection criteria and MagicFormula will select top stocks for your investment portfolio.
What was the CAGR of the magic formula?
The Magic Formula is famous for returning a 30% CAGR. From 1988 to 2004, it did achieve a 30.8% return, but the CAGR has declined significantly. No strategy can sustain a CAGR of 30%. Although the backtest in the book only provides data up to 2009, I wouldn’t count on 2010-2012 results showing vast out-performance.
https://www.youtube.com/watch?v=2pE8c4zUVCQ