Computerized Investing > August 2009

Using the Magic Formula for Investing

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by Cara Scatizzi

Learning to successfully invest in the stock market is simple, according to Joel Greenblatt’s “The Little Book That Beats the Market” (Wiley, 2005). Greenblatt is the founder and a managing partner of Gotham Capital, a private investment partnership. He is an adjunct professor at the Columbia University Graduate School of Business, and holds a B.S. and an MBA from the Wharton School.

Greenblatt wanted to write an investing book his children could read and learn from. The main point Greenblatt makes is that investors should buy good companies at bargain prices—businesses with high return on investment that are trading for less than they are worth.

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E from VA posted over 6 years ago:

Has anyone tried this and what have the results been?

Shane from TN posted over 6 years ago:

The ranking method outlined by Greenblatt is difficult (impossible?) to achieve solely with traditional screening programs. I think exporting results to excel and ranking might be needed as described. The passing company list above only vaguely resembles the high ranking companies that Greenblatt publishes on his website. I encourage those interested in this method to check the screener on Greenblatt's site as a cross-reference.

Walter Prochorenko from NJ posted over 2 years ago:

Makes a lot of sense, but it obviously omits factors such as huge drops in oil and commodity prices as well as foreign influence factors such as declines in economies of other major economic powers like China, Germany, Japan, etc.
However, as a basic tool it is well worthwhile looking into and it sure beats other "magic" stock picking tools by the thousands of other "gurus" out there.

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