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Greenblatt's Magic Formula 30 Qualifying in UK


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This screen implements the Magic Formula value investing strategy pioneered by hedge fund manager, Joel Greenblatt. It is based on buying 20-30 "good, cheap companies" defined as having the best available combined MFI ranking in terms of Earnings Yield and a Return on Capital.  Greenblatt argues that return on capital is the best determinant of whether a business is a good one or not (companies that can earn a high ROC over time generally have a special advantage that keeps competition from destroying it, such as a unique business model). Earnings yield is his metric for 'cheapness'. Greenblatt believes that stock prices of a firm can experience “wild” swings even as the value of the company stays relatively constant giving investors opportunities to buy low and sell high. To learn more about this strategy please click here »

Picture of Joel Greenblatt

About Joel Greenblatt

Value Investor, founder of Gotham Capital and the Value Investors Club. Author of The Little Book that Beats the Market.


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The Little Book That Still Beats the Market

by Joel Greenblatt

In his best-selling "The Little Book that Beats the Market", Greenblatt espouses MFI as a do-it-yourself version of the approach he used at his fund Gotham Capital (which apparently returned over 40% annualized from 1985 to 2005). 

This screen is based on a UK dataset. It uses the following criteria:

  • Mkt Cap £m > 30
  • Magic Formula Rank > 0
  • Rank ( Earnings Yield % ) < 99%
  • Rank ( ROCE % Greenblatt ) < 99%

Results are sorted by:

  • Magic Formula Rank in ascending order


And limited to the first 30 Results

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Greenblatt's Magic Formula Graphical History in

Returns

Timeframe Screen Returns FTSE 100 Outperformance
1 week 0.42% 2.31% -1.9%
1 month 1.38% 8.81% -7.4%
3 months 1.21% 7.23% -6.0%
6 months 5.87% 18.92% -13.1%
1 year 7.89% 28.95% -21.1%
Since inception 12.40% 27.5% -15.1%
Annualised 8.47%

Risk

Maximum Drawdown-12.69%
Average No. of Holdings24.9
Diversification LevelGood

 Chart based on an equal weighted portfolio of max 25 stocks rebalanced quarterly. Qualifying shares below updated daily. Past performance not indicative of future returns.


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Limited to 30 out of 850 total in

Ticker Name Mkt Cap £m Magic Formula Rank Magic Formula Rank % ROCE % Greenblatt Earnings Yield % RS 6m Sector
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Can't see the share you expect? View this screen as a checklist to find out why.

You should consider the results of any screening process, including this one, as candidates for further research, not as a buy list. Screening helps to narrow a search based on pre-defined criteria. It is not a substitute for independent research reflecting your individual criteria for investing/trading. Please note that the screening criteria used represents Stockopedia's interpretation of the author's investment approach and are not determined or endorsed by the original strategist.



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