Magic Formula Investing

LearnMagic Formula Investing The Right Way

AlexG — Tue, 23 Jun 2009 03:24:22 +0000

For the past couple of weeks I have been working on my premium site and making sure the bugs and glitches will be kept to a minimum. On Thursday, the site went live for the individuals who opted in to our mailing list and we actually had some people join!!! Now is your chance to become a value investor. You’re probably wondering how much it costs to join, right? $5/mo for the next 15 days for as long as you stay a member. This price is for friends, family and people who give the program a chance from the beginning. I also understand the site is not 100% complete. After that the price will go up to $10/mo which is still reasonable.

The site is basically all my notes from watching, reading and practicing value investing for the past 5 years. I have evolved over time and now have a system in place for choosing stocks. I spend about 5 hours total and have been able to compile amazing results.

Head over to Value Investing Pro

Or

You Can Check Out Our Sleazy Sales page

What will happen to CVI?

I plan to update the blog accordingly. This will turn more into a journal of how the premium site is going sprinkled in with some value investing news. The RSS feed will be transferred over to Value Investing Pro (next week), so if you want to keep tabs you might have to resubscribe to this site. I also plan to launch a Value Investing Newsletter that will be delivered monthly, it will include prizes, value investing news, videos,etc… It will be free.

That’s it for now, see you on the inside

Check out Value Investing Pro

No Purchases for June 2009- Learn Magic Formula Investing

AlexG — Wed, 17 Jun 2009 00:18:37 +0000

Yes, the title is correct, there will be no purchases for June. For some reason, the stocks I purchased last year didn’t go through as expected. I usually purchase 4% for each stock but these positions were 1% and .5% OOOPS!! Nevertheless, I did sell the stocks which were Footstar, Inc. (FTAR) and China 3C Group (CHCG). The returns were bad for Foostar and OK for CHCG. Now, sometime in the coming weeks I will be releasing my magic formula investing program. I hope to teach individuals how to properly use the magic formula and how to optimize the returns. My goal is to at least get similar results to what I achieve here. Anyway here is the latest returns on the fund.

Purchases For May 2009

AlexG — Wed, 13 May 2009 13:06:30 +0000

Our magic formula has really kicked it into high gear as of late, as it continues to outperform the market by a significant amount. While the markets had a nice 30% from their trough, there are still some significant bargains layin around. Anyway, be on the lookout for a new magic formula investing website that shows the “retail” investor how to use the magic formula properly. Like I tell everyone, if your not outperforming by 10%+ in this market, your doing something wrong.

Add:

DECK
MSB
RST

Drop:

HOC: returned a dissapointing -41.29%
DEPO: returned a dissapointing -43.84%
IDARC (IAR) :returned a dissapointing -99.03%, filed for bankruptcy
PPD :returned a dissapointing -6.19%, outperformed but still down

Magic Formula Stock Purchases For April 2009

AlexG — Wed, 15 Apr 2009 04:36:14 +0000

I entered the trades yesterday April 13 but was a bit busy to write about them. Same story on my book, the magic formula continues to outperform. Despite the recent run up (bear market rally?), there are still some unbelievable bargains on the magic formula screen. At the same time, there are certain tweaks you can make to the magic formula that will allow anyone to outperform the market by a significant amount. In my opinion, if you are not beating the market by 5%+, your doing something wrong.

Add:

The Corporate Executive Board Company (EXBD)
Herbalife (HLF)

Drop:

ICFI an outstanding +20.97%
CITP a dissapointing -72.04%

Magic Formula Stock Purchases For March 2009

AlexG — Fri, 13 Mar 2009 02:16:52 +0000

You gotta love the magic formula. Its easy to understands, takes little effort and tax efficient. This simulated portfolio continues to outperm despite a tough environment. In my real life portfolio, the returns are even better. What do I do differently? not much, simple security analysis will do the trick. Anyway, here is the performance and the buys and sells for the portfolio.

Buys:

Foster Wheeler AG (FWLT) together with its subsidiaries, provides construction and engineering services to the oil and gas, oil refining, chemical/petrochemical, pharmaceutical, environmental, power generation, and power plant operation and maintenance industries worldwide.. The company currently sports a P/E of 4.79 and has a ROIC greater than 100%. According to Yahoo Finance, it has an Enterprise Value/EBITDA of 2.372 or a yield of 42% (the magic formula site has pretax earnings yield of 30%)

GT Solar International, Inc (SOLR)and its subsidiaries provide manufacturing equipment and ?turnkey? manufacturing solutions to the photovoltaic (PV) industry worldwide. The company currently sports a P/E of 5.35 and has a ROIC greater than 100%. According to Yahoo Finance, it has an Enterprise Value/EBITDA of 2.903 or a yield of 34.44% (the magic formula site has pretax earnings yield of 28%)

Sells:

KG:: Lost 25.62%

HLYS: Lost 73.87%

Magic Formula Purchases for Feb. 2009

AlexG — Thu, 12 Feb 2009 13:22:59 +0000

That time of the month again! While our politicians decide how much pork to include in the stimulus bill, the magic formula continues to outperform. Its amazing how little effort it takes to have a magic formula blog. I literally spend 5 minutes doing the buys and sells. On the other hands, we have individuals running large amount of money , spending a great deal of time , with unlimited and expensive resources, and getting paid millions of dollars to underperform the market.

Buys

CTC Media, Inc. (CTCM),operates television networks that offer entertainment programming in Russia. The company currently sports a P/E of 3 and has a ROIC greater than 100%. According to Yahoo Finance, it has an Enterprise Value/EBITDA of 2.144 or a yield of 46% (the magic formula site has pretax earnings yield of 41%)

Korn/Ferry International (KFY), together with its subsidiaries, provides talent management solutions worldwide. The company currently sports a P/E of 7 and has a ROIC greater than 100%. According to Yahoo Finance, it has an Enterprise Value/EBITDA of 2.668 or a yield of 37.48% (the magic formula site has pretax earnings yield of 35%)

Sells

Airvana (AIRV)- Returned 4.05%

Soapstone Networks (SOAP)- Lost 60.55%

I honestlyhave never heard of these two companies so I really cannot comment on them and their returns other than the fact SOAP outperformed the market while AIRV didn’t.

Magic Formula Purchases for Jan. 2009

AlexG — Wed, 14 Jan 2009 15:49:44 +0000

Almost forgot to insert this month’s trades. With the markets in turmoil, the magic formula continues to outperform. This time its time to sell our one year old holdings. The magic formula does state to wait for 1 year and 1 day for tax purposes but this is a simulated fund and taxes do not play a factor.Below are this month’s buys and sells with some commentary at the bottom.

Buys

Graham Corporation (GHM), designs, manufactures, and sells vacuum and heat transfer equipment worldwide. The company currently sports a P/E of 5 and has a ROIC greater than 100%. According to Yahoo Finance, it has an Enterprise Value/EBITDA of 2.371 or a yield of 42.17% (the magic formula site has pretax earnings yield of 41%)

NutriSystem, Inc.(NTRI) provides weight management and fitness products and services in the United States and Canada. The company currently sports a P/E of 7 and has a ROIC greater than 100%. According to Yahoo Finance, it has an Enterprise Value/EBITDA of 3.684 or a yield of 27.144% (the magic formula site has pretax earnings yield of 24%)

Sells with returns

Accenture (ACN)- Returned 3.03%

Pacer International (PACR)- Had a negative return of -22.07%

FreightCar America, Inc. (RAIL) Had a negative return of -33.69%

2 of the holdings (PACR and RAIL) rely havily on the economy and we all know how that has fared. Nevertheless, PACR outperformed the market while RAIL lagged by a couple of percentage points. If anything, right now would be the time to consider purchasing these two stocks as they will rebound with the economy (if that ever happens!). Finally, PACR continues to be on the magic formula top 25/50 million,

Disclosure: I Own PACR

Magic Formula Outperforms For 2008

AlexG — Fri, 02 Jan 2009 04:14:29 +0000

Yes !!! At least ours did. Our simulated fund outperformed the S&P 500 by 7.94% , providing an annualized 8.08%. What is even more remarkable is our simulated fund outperformed the S&P 500 for the last month, 3 month and 6 month period.

Portfolio policy is pretty straightforward for now on. Sell out of stocks that are one year old and purchase new stocks off the list.

Biggest Winner of 2008!

The biggest winner of 2008 surprisingly was one of our newest purchases, Vaalco Energy (EGY) which was purchased in October at a price of $4.58 and currently has a stock market price of $7.44 for a return of 62.62% in 2.5 months!!!!

Biggest Loser of 2008!

Idearc Inc. (IDAR) takes the biggest loser award. The Yellow page directory company was delisted from the NYSE and now has a stock price of .0850 cents and was purchased in May for $4.98 providing a loss of 98%.

No Purchases for December 2008

AlexG — Sun, 14 Dec 2008 15:53:23 +0000

Just realized their is no cash on hand. Anyway, we are OUTPERFORMING. Hard to believe it but the simulated/automatic portfolio is outperforming the S&P 500 by 6% points.

This month will complete one full year. Starting in January I have some stocks to sell and buy. There is hope out there

Joel Greenblatt Puts His Money Where His Mouth Is

AlexG — Sat, 15 Nov 2008 00:50:48 +0000

According to gurufocus.com Joel Greenblatt has bought 150 stocks for about 65 million. The majority (if not all) of the stocks are in the magic formula. My guess is he is betting on the system and not on individual stocks as he normally has a concentrated portfolio.

Here is the list of stocks he bought and the amount. ( click here)