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Computerized Investing > January/February 2006

The Magic Formula Approach to Stockpicking

PRINT | | | | COMMENTS (7) | A A   Reset

by John Bajkowski

There are many approaches to the selection and analysis of common stocks floating around the investment community, from simple value techniques to complex strategies combining a wide array of technical and fundamental factors. Many investors are initially drawn to intricate techniques, only to discover that basic, but sound, approaches often perform better and are easier to implement and understand.

Joel Greenblatt’s latest book, “The Little Book That Beats the Market” (John Wiley & Sons, Inc., 2006), has created a stir within the financial community because of his simple “magic formula” approach and promise of long-term, low-risk, market-beating performance.

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Discussion

Jw from UT posted over 2 years ago:

So this article is from 5+ years ago. Curious... anyone attempt it back then and how did you perform? (It says give it min of 3 yrs to see results).


Harold from NY posted over 2 years ago:

He has a mutual fund where he use this method.

http://www.formulainvesting.com

http://www.formulainvestingfunds.com/




See also his later book"
The Little Book That Still Beats the Market


Robert from CA posted over 2 years ago:

With due regard for AAII's discretion and expertise, I fail to understand why a six year old article would be rebroadcast to members without presenting any hard, actual data verifying the method. If the method has merit, I would expect performance data to exist. Surely, in the past half dozen years, there was plenty of time to test the methodology. It is unpersuasive to tout the reported method as "magic" using "calculations." Without proof, it's just another investing "pipe dream."

Bob Meehan
4/14/2012
Anaheim CA.


Alan from NJ posted over 2 years ago:

I strongly agree with Robert, above. With so much research to evaluate we certainly do not need yet another, unverified "magic" system to ponder on a lovely Sunday morning. Unworthy of AAII"s standards.


Jean from TN posted over 2 years ago:

I agree with the last two comments.

I feel inundated with such "so-called expert" info. I expected this group to be able to sift through it all.


Donald from MI posted over 2 years ago:

I've been tracking a monthly portfolio of 30 MFI stocks purchased at the beginning of each month since August of last year. You can see how they performed here:
http://dark-liquidity.com/MFI.php


Vincent from ID posted over 2 years ago:

I originally joined AAII in the 80's as I recall? Seems like it was just beginning then? Seems like AAII's approach now is to SELL (FOR $) as many "add on" programs as possible rather than being an association that continually provides all inclusive valuable information and tools to it's membership.
With reguard to this article in particular (and many other similar ones) I agree that it is just one more undocumented pie in the sky wonderful answer to joining in the stock market casino with all the other speculators and market manipulators.


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