Magic Formula Investing

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Dictionary Says

Definition of 'Magic Formula Investing'

A money-making strategy that teaches investors a common-sense method for value investing in the stock market that is designed to beat the market's average annual returns. The Magic Formula strategy is described in the best-selling book "The Little Book That Beats The Market" (1980) by investor and Wharton graduate, Joel Greenblatt.
Investopedia Says

Investopedia explains 'Magic Formula Investing'

Investors can use Greenblatt's online stock screener tool to select 20 to 30 top-ranked companies, based on their earnings yield and return on capital, in which to invest. These will all be large companies, and no financial companies, utility companies or non-U.S. companies will be included.

 

Investors sell the losing stocks before they have held them for one year to take advantage of the income tax provision that allows investors to use losses to offset their gains. They sell the winning stocks after the one-year mark, in order to take advantage of reduced income tax rates on long-term capital gains. Then they start the process all over again.

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'Magic Formula Investing'

  • A Different Magic Formula

    http://stocks.investopedia.com/stock-analysis/2010/A-Different-Magic-Formula-CPB-RAH-CAG-SLE-MKC-K-SJM-GIS-PEP-GMCR0223.aspx
    ... replacing ROIC, Campbell Soup had the lowest Magic Formula ranking followed ... it finished
    middle of the pack using my formula, which is ... Investing is no different ...

  • 4 Cheap "Magic Formula" Stocks

    http://stocks.investopedia.com/stock-analysis/2011/4-Cheap-Magic-Formula-Stocks-JGBO-PETS-RTN-MSFT0428.aspx
    ... be mindful of this when using the magic formula for ideas. ... reading, check out Stocks
    With A Little Magic ... author of "The Business of Value Investing" which will ...

  • Three Ways To View Value Retail

    http://stocks.investopedia.com/stock-analysis/2010/Three-Ways-To-View-Value-Retail-GME-BBY-RCII-PSS-DBRN0901.aspx
    ... Magic Formula Ranking. Company. Return on Capital. Earnings Yield. ... He loves investing
    and is passionate about helping others learn how to put their money to work ...

  • Trader's Corner: Finding The Magic Mix Of Fundamentals And ...

    http://www.investopedia.com/articles/trading/04/090904.asp
    ... During this market, the buy-and-hold approach to investing worked great, but ... is a
    firm believer in the CANSLIM strategy, as this magic formula contains almost ...

  • Retail's Magic Numbers

    http://stocks.investopedia.com/stock-analysis/2009/Retails-Magic-Numbers-LIZ-JNY-RL-LULU-VFC-WMT1120.aspx
    ... place to start - by analyzing retail's magic numbers ... them based on their relative
    importance to the formula. ... He loves investing and is passionate about helping ...

  • Stock-Picking Strategies: GARP Investing | Investopedia

    http://www.investopedia.com/university/stockpicking/stockpicking5.asp
    ... you must analyze companies in relation to their unique contexts (just as you would
    with growth investing). Since there is no magic formula for confirming ...

  • Oshkosh Gets Truckin'

    http://stocks.investopedia.com/stock-analysis/2011/Oshkosh-Gets-Truckin-OSK-IJH-GS-GME-CKH-RSH0606.aspx
    ... stocks at this point in 2011 according to Joel Greenblatt's Magic Formula, which
    focuses ... He loves investing and is passionate about helping others learn how to ...

  • Big Changes Ahead In Waste Management

    http://stocks.investopedia.com/stock-analysis/2011/Big-Changes-Ahead-In-Waste-Management-CVA-AMR-WCN-WM-RSG0223.aspx
    ... effort though. The Magic Formula It is Covanta Holding Corp. (NYSE:CVA),
    however, that may be this trend's best kept secret. Simply ...

  • 4 Reasons To Love Mercer International

    http://stocks.investopedia.com/stock-analysis/2011/4-Reasons-To-Love-Mercer-International-MERC-GLT-TRC-PRST-INMD0308.aspx
    ... IN PICTURES: 9 Simple Investing Ratios You Need To Know. ... Magic Formula Joel Greenblatt's
    formula looks at two things: earnings yield and return on invested ...

  • These Dow Dogs Won't Be Dogs For Long

    http://stocks.investopedia.com/stock-analysis/2010/These-Dow-Dogs-Wont-Be-Dogs-For-Long-PFE-KFT-BAC-GE-VZ-T-JPM-CBY0108.aspx
    ... over the long run there is no secret sauce or magic formula that promises ... now, they
    remain some of most attractive investments for the general investing public ...

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