Investment Strategy of Joel Greenblatt: The Magic Formula Approach
Crushing the Market with Greenblatt's Magic Formula Investing
Learn how to outperform the market like a boss with Joel Greenblatt's magical investing approach! This badass strategy, detailed in his book "The Little Book That Beats the Market", has got street cred for consistently raking in the big bucks.
Here's the lowdown:
- Steer clear of companies with a market cap less than $50 million.
- No utilities or financial stocks allowed. No ADRs (American Depositary Receipts) for foreign companies. Stick to primary U.S. exchange listed companies.
- Scan for a company's earnings yield (EBIT / enterprise value).
- Check the company's return on capital (EBIT / (net fixed assets + working capital)).
- Sort the stocks by both highest earnings yield and highest return on capital percentage.
- Buy 2-3 positions a month on average for the following year from the top-ranked stocks. Aim for a portfolio of 20-30 stocks.
- Rebalance the portfolio annually, dumping losing stocks a week before the one-year mark and winners a week later.
- Step back and start over again.
- Repeat this process for a minimum of 5 years or even up to a decade to reap the benefits.
Greenblatt's Magic Formula Investing system smokes the S&P 500 96% of the time in the data analyzed, with an average annual return of 30.8% over a period of 17 years[1]. If you play your cards right, a $10,000 investment could balloon to approximately $1.3 million using this strategy[2].
This investing formula is all about creating a value index with the stocks of great companies – great because they're a killer deal when it comes to their return on capital. Greenblatt is a legend in the investing world, so if you wanna dabble in the world of high finance and walk away with a million, this is the system for you[1].
Grab Greenblatt's book and turn your pennies into fortunes with the Magic Formula Investing system. Your future self will thank you[3].
References:[1] https://www.investopedia.com/terms/m/magicformula.asp[2] https://www.investopedia.com/terms/p/portfolio.asp[3] https://www.amazon.com/Little-Book-That-Still-Beats/dp/159184792X[4] https://brooklineinvestor.com/magic-formula-eliminates-transition-uncertainty-after-2007-2009-crisis/[5] https://www.fool.com/investing/2014/08/28/an-overview-of-joel-greenblatts-magic-formula-inves.aspx
Embracing a frugal lifestyle can help save money for investing, as one aims to amass a substantial portfolio for implementing Greenblatt's Magic Formula Investing strategy effectively. Following the system's principles closely in finance management can provide a solid foundation for profiting from this remarkable investing approach.
