RSS

September 30, 2014

0 Comments

Joel Greenblatt on CNBC Discussing Small and Large Caps

Joel Greenblatt, founder of the Magic Formula and Gotham Funds, appeared on CNBC on September the 23rd to discuss his buy/short sell strategy and mentions large caps in the Russell 1000 (mainly mid to large caps) have better valuations than those of the Russell 2000 in which Joel Greenblatt mentions stocks 1001-3000?

It’s a short video but followers of Joel Greenblatt know he has been using this strategy of buying the “cheapest” stocks and shorting the most “expensive” stocks for the past couple of years. It’s the same strategy he talks about in The Big Secret for the Small Investor which was released in 2011.

I won’t touch upon the names he mentions as short candidates as in previous interviews he mentions he uses leverage when the price moves against him but Greenblatt did mention 3 large caps that according to his research partner , offer value. Raytheon (RTN) is currently a magic formula stock and the other two have previously appeared on the magic formula screen.

Verisign (VRSN)

Earnings Yield: 8.10% Return on Capital : 163.47%

Verisign is interesting considering it has a monopoly in domain registration (.com, .net, .org, etc) but it also has a strong Internet Security and  IT division that delivers strong free cash flow. Warren Buffett’s Berkshire Hathaway has also been accumulating shares of Verisign and now owns roughly 10% of the shares outstanding with an average price of $46.

 

 

Raytheon (RTN)

Earnings Yield:9.30%, Return on Capital: 148.41%

A current magic formula stock along with several defense contractors, Raytheon definitely looks interesting considering the current turmoil in the Middle East.

Towers Watson & Co. (TW)

Earnings Yield: 7.70%  Return on Capital: 104.35%

I can’t remember if Towers was a magic formula or not but it’s current earnings yield is not attractive. From the three stocks, it has the lowest earnings yield and the lowest Return on Capital. It wouldn’t make sense to put money on option C, when option A & B are more attractive. An interesting point, Joel Greenblatt increased his stake in the company by almost 400,000 shares. It’s significant considering he had roughly 30,000 in the first quarter.

Disclosure: None

September 28, 2014

0 Comments

Magic Formula Stocks on the Move 9-28-2014

Each week I track stocks moving in and out of the magic formula screen. The screen that I use is the Top 30 stocks with a market cap of 2 Billion (2000 input)or greater. Here are the movements for the week:

In:

  • Harris Corp. (HRS)
  • Science Applications International Corp. (SAIC)

Out

  • H&R Block (HRB)
  • Starz (STRZ.A)

Disclosure: None

September 23, 2014

0 Comments

Welcome to MF Investor

Welcome to MF Investor!

This blog came about after years of procrastinating and getting my itch for value investing back. Despite not having this blog, I read news and articles on value investing on a daily basis and have come to a conclusion: Wall Street has not changed. Yes, the markets are more global and filled with high frequency trading, but the principles taught by Benjamin Graham in Security Analysis and The Intelligent Investor remain in tact.

And this leads me to Joel Greenblatt’s The Little Book that Beat the Market and its updated version The Little Book that STILL Beats the Market.  It has been the basis for my investing strategy and will continue to be so as long as i’m able to screen for magic formula stocks. I plan to share how I go about using the magic formula  to accommodate my busy work schedule and hopefully you are able to  learn something along the way which is pretty much the goal of this blog. To teach others how to use the magic formula to develop a simple investing strategy that outperforms the market indexes over the long haul.

It’s been a while since I read any value investing book so why not start with The Little Book to get our beak wet on the book that will lay the foundation for the lifespan of this blog.