ValuePickr Forum

Joel Greenblatt's Magic Formula

Does anybody know if we can create a screener for Joel Greenblatt’s “Magic Formula”? The magic formula is extensively talked about in his book “The Little Book that beats the Market”. It’s about taking the top 1000 companies and ranking them based on their Earnings Yield. A company with the best earnings yield will be ranked 1 and the one with worst will be ranked 1000. Now rank the same 1000 companies based on RoC such the the company with highest RoC will have rank of 1 and so on. Once you have the two rank list ready, we need to add the two ranks for each company in the list and arrive at the final ranking. One could consider the top 20 or 30 companies from this final ranking.

Madhu,

Check the http://www.screener.in/.

This is created by Ayush:) and his brother and you can create your own custom criteria.

Check this magic formula link -

http://www.screener.in/screens/59/Magic%20Formula/

Hi Madhu,

Here is one site

http://www.valueinvestingindia.com/#vii=5_min:100_max:250_currency:true

I had one more but at present not working. I have written to the author of the site and hopefully look forward to his positive reply.

Here is the site I was speaking about. Its an excellent site and easy to use. The prices are updated regularly and linked to ICICI DIRECT.

http://wispym.com/stocks

Hi,

I just wanted to know if you would be interested to share your views and opinions on Magic Formula with Money Today. I am looking for inputs from people who have used Joel Greenblatt’s methodology for investing in stocks…

You can get in touch with me on Shoaib.Zaman(at)gmail(dot)com

The magic formula is not applicable as of today for all sectors, its very dependant on the positioning and usually when you run a scan you end up with small cap and relatively unknown names, need to be double sure when taking a call on such things. I’ll give you an example: I found Ushdev International Limited one day and had to do so much on that as I realised it was a heavily indebted company with regular dividend payouts in the metal sector. Watta combination. The stock never moved from that day rill today, and in a global commodity bust, when can it move?

Well that is the reason why Greenblatt asks you to 1) Choose a certain market cap as a criteria and 2) Asks you to make sure the portfolio is diversified. Given 30 stocks which he suggests, its a good level of diversification.