Yes agree.
Cool. All the best .
Yes agree.
Cool. All the best .
I am following the steps as mentioned by @Ahmed_Madha above in his blog. He has shared a google sheet on his blog which is more or less my portfolio as well because i read the book and started this experimental portfolio around the same time.
And use Screener.in to apply the required ROCE and EY filters.
Additionally, i added a filter to remove stocks with pledged promotor holding.
I saw one guy on twitter named CoolFundo xxxx, he posts the magic formula screens. you can get some inspiration from that as well
Based on Ahmed blog also from Joel book ,the return they got by introducing any additional filter apart from standard portfolio was less .
So i think its good to go with standard screener RoCE + EY
Ahmed had published an excel sheet here Joel Greenblattâs Magic Formula in the Indian context â Does it work? â Financial Tales
It was based on FY 2019-2020 Results
I tried to recreate it using screener. I expected at least 80% would match. However there very little overlap between his findings & my results
(I used screener to scrape data for verification so I donât have to use any expensive dataset right now)
Below is the way how I scrapped & applied the formula. Can somebody let me know where I am doing wrong?
(I know there are few assumptions, but I thought the result should match at least 75% to Ahmedâs which did not)
Created the Screen for MarketCap more than 250Cr. (MoreThan250MarketCap - Screener)
( I know its based on current Price. but I am taking top 250 companies & there could be change of 20-30 companies compared to FY19-20)
(Hoped to match or having near to Top 250 results that of Ahmedâs)
Sorted by Current Market Cap
Picked top 250 companies
Went to each company Screener page
The Formula used
Now How I calculated each component
EBIT = Profit Before Tax + Interest
Net Working Capital = Trade Receivables + Inventories - Trade Payable
Net Fixed Assets = Fixed Assets - Intangible Assets
Enterprise Value = Current Market Value - NetDebt
i.e. Enterprise Value = (OutstandingShares*3rdJul2020 Price) + (Borrowings - Cash)
(3rd July Price was taken as Ahmed mentioned 3rd July Price on the sheet he shared or his exercise was on that date)
Some of the companies were skipped based few criteria
After this standard procedure of sorting was applied.
Only 10-11 companies matched to that of Ahmedâs list. So I am not sure if I did correct thing.
If somebody can point out the issue in above logic, that will be great.
Few questions:
Earnings Yield
and EBIT
are already with screener.in. Is there a reason why youâre calculating it on your own?EBIT * 100 / (Working capital + Net block )
?Thanks for the commetnsâŚ
screener.in already has Earnings Yield and EBIT. Just search for them using "Add ratio to tableâ and/or âColumnsâ.
Curious to know about results of your back testing.
Hey guys, did you figure this out? How best to rebalance?
I have a more complex setup, I buy a batch of 2 stocks per month, have been doing this since June 2021. As per the formula, this first batch will have to be sold next month. As of today, the first batch is trading at a profit of 35% and I am wondering how best to reallocate the initial capital plus profits. Any practical suggestions?
Hey hi Nikunj,
I reinvest the whole proceeds + new capital into the next batch.
Alternatively, you can choose one of the below
a) Take the profit and invest only the old capital
b) Take the profit and invest the old capital plus add new capital (monthly amount)
c) Invest only new capital, transfer the sale proceeds (profit + old capital) to bank and enjoy it
Whatâs your batch size? In my case, itâs 2 stocks per month. And if I reinvest profit/loss plus capital into the same batch next cycle, I will potentially end up with a non-equal weighted portfolio. For eg,
Batch 1 Jun 2020, 2 stocks, 50k each, as of June 2021 profit 50% i.e. capital + profit = 150000
Batch 2 July 2020, 2 stocks, 50k each, as of Jul 2021 loss 10%, i.e i.e. capital - loss = 90000
Now when I reinvest Batch 1 capital + profit in 2 new stocks in June 2021, each of my stock gets 75k
And, when I reinvest Batch 2 capital - loss in 2 other new stocks in July 2021, each of my stock gets just 45k.
And this contradicts the magic formula where invested capital is supposed to be equal in each stock. I am aware this is due to batch buying instead of single buying, I wonder if others see this as a problem or not?
Regards
Yogi
my batch size is 3 stocks. and whenever there is loss, I top it up and make it equal.