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Old 02-22-2018, 03:02 PM   #41
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I agree that longer is better. It's been 608 days. That's all the farther back this particular experiment goes. I do plan to go to 5 years. Probably still not really long enough! Anyway, the first table has those 608 day results, that's as much as I have.
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Old 02-22-2018, 04:03 PM   #42
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Quote:
Originally Posted by sengsational View Post
I agree that longer is better. It's been 608 days. That's all the farther back this particular experiment goes. I do plan to go to 5 years. Probably still not really long enough! Anyway, the first table has those 608 day results, that's as much as I have.
Oh, I apologize. I missed that 608 day column. Sorry.
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Old 04-19-2018, 01:54 PM   #43
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Here's the current bi-monthly transaction result, and the picks for the next batch.

Well, At nearly 39% XIRR, this batch from last April far outstripped the small stock benchmarks, and the S&P. Still far shy of the benchmarks for the entire time span, however. But it's the best showing so far.

371 Days ending 04/19/2018XIRR for Apr 2017 batchXIRR 664 days (all)gain/loss (all)
Magic Formula Picks
38.7%
7.7%
$9991
US Small Cap Value Index (CRSPSCVT)
11.8%
12.1%
$16840
Vanguard Small-Cap ETF (VBR)
11.7%
12.1%
$16807
Vanguard S&P 500 ETF (VOO)
17.3%
16.1%
$22435


TickerExecuted price Execution date XIRR
CRSPSCVT
2121.61
04/13/2017 13:36
11.8%
Benchmark April 2018 Sale
VBR
132.05
04/13/2017 13:36
11.7%
Benchmark April 2018 Sale
VOO
246.29
04/13/2017 13:36
17.3%
Benchmark April 2018 Sale
BBSI
88.93
04/13/2017 13:36
64.8%
April 2018 Sale
MCFT
24.86
04/13/2017 13:36
56.1%
April 2018 Sale
PDLI
2.88
04/13/2017 13:36
38.6%
April 2018 Sale
TVTY
39.92
04/13/2017 13:36
41.5%
April 2018 Sale
UIS
11.27
04/13/2017 13:36
-0.4%
April 2018 Sale
ALL  
38.7%
April 2018 Sale


And today's picks:
TickerExecuted price Execution date
CRSPSCVT
2121.61
04/19/2018 12:16Benchmark
VBR
132.05
04/19/2018 12:16Benchmark
VOO
246.29
04/19/2018 12:16Benchmark
ESRX
73.93
04/19/2018 12:50April 2018 Picks
EVC
5.083
04/19/2018 12:50April 2018 Picks
MSB
24.091
04/19/2018 12:50April 2018 Picks
NTRI
29.08
04/19/2018 12:50April 2018 Picks
PBH
30.592
04/19/2018 12:50April 2018 Picks
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Old 06-21-2018, 03:13 PM   #44
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It's been 2 years since the first picks were posted.

As a reminder, what this thread seeks to test Goldblatt's "Magic Formula" process, as defined in his books "The Little Book that Beats the Market", and "The Little Book that Still Beats the Market".

Starting 2 years ago, stocks from his screen were randomly picked. These random picks continued every 2 months until there were 6 'batches'. Then, as each batch reached the age of one year, it was sold and replaced with other random picks.

So far, I have not proved nor disproved the premise of the books because he claims that it takes at least 3 years and might take 5 years to beat the market with this technique. Also what this thread seeks to test is if, rather than doing it yourself (buying the stocks), could you get the same result by just buying a fund that kind of matches the stocks that his screen picks (I've selected VBR fund and CRSPSCVT index, which have been tracking together very closely).

Below is the current bi-monthly transaction result, and the picks for the next batch.

Results this time show that the small stock benchmarks and the S&P, with around 15% XIRR, beat the picks from a year ago (they got around 10% XIRR). There have sets of picks that were quite disastrous, but this this set has a respectably positive return. The Magic Formula picks still havel a long way to go to catch-up for the entire time span; their return is only about 2/3's of the default S&P 500.


728 Days ending 06/21/2018XIRR for Jun 2016 batchXIRR 727 days (all)gain/loss (all)
Magic Formula Picks
10.4%
11.1%
$16246
US Small Cap Value Index (CRSPSCVT)
16.6%
14.4%
$22838
Vanguard Small-Cap ETF (VBR)
16.6%
14.4%
$22839
Vanguard S&P 500 ETF (VOO)
15.4%
16.3%
$25903

TickerExecuted price Execution date XIRR
CRSPSCVT
2234.46
06/22/2017 13:25
16.6%
Benchmark June 2018 Sale
VBR
139.12
06/22/2017 13:25
16.6%
Benchmark June 2018 Sale
VOO
253.54
06/22/2017 13:25
15.4%
Benchmark June 2018 Sale
AMCX
65.27
06/22/2017 13:25
19.6%
June 2018 Sale
AMN
60.55
06/22/2017 13:25
65.4%
June 2018 Sale
DLX
67.58
06/22/2017 13:25
-0.7%
June 2018 Sale
HRB
23.45
06/22/2017 13:25
-22.8%
June 2018 Sale
NHTC
23.67
06/22/2017 13:25
-8.1%
June 2018 Sale
ALL  
10.4%
June 2018 Sale

TickerExecuted price Execution date
CRSPSCVT
2234.46
06/21/2018 13:30Benchmark
VBR
139.12
06/21/2018 13:30Benchmark
VOO
253.54
06/21/2018 13:30Benchmark
ACOR
30.00
06/21/2018 13:30June 2018 Picks
IDCC
83.95
06/21/2018 13:30June 2018 Picks
KLAC
110.27
06/21/2018 13:30June 2018 Picks
TUP
40.89
06/21/2018 13:30June 2018 Picks
WDC
81.83
06/21/2018 13:30June 2018 Picks
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Old 06-22-2018, 05:59 AM   #45
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Would be interesting to see what happens in a down market.
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Old 06-22-2018, 11:20 AM   #46
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Paul Merriman advocates a small/large cap "all value" portfolio, but note the higher risk required for the higher return:

https://paulmerriman.com/wp-content/...rns-Update.pdf
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Old 08-16-2018, 03:23 PM   #47
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The August batch beat the market this time, coming in at 37.1% IRR. All 5 were winners. This scheme would need a lot more batches like this to catch up!

364 Days ending 08/16/2018XIRR for Aug 2016 batchXIRR 783 days (all)gain/loss (all)
Magic Formula Picks
37.1%
10.2%
$16652
US Small Cap Value Index (CRSPSCVT)
19.1%
13.8%
$24289
Vanguard Small-Cap ETF (VBR)
19.1%
13.9%
$24315
Vanguard S&P 500 ETF (VOO)
18.7%
17.1%
$30207

There was an early sale due to a buyout (TIME). The cash from that went into the next batch of buying. This batch got all the cash flows associated with it, but the batches can swap funds in cases like this.
TickerExecuted price Execution date XIRR
CRSPSCVT
2261.76
08/17/2017 14:30
19.1%
Benchmark August 2018 Sale
VBR
140.33
08/17/2017 14:30
19.1%
Benchmark August 2018 Sale
VOO
261.47
08/17/2017 14:30
17.1%
Benchmark August 2018 Sale
MD
46.57
08/17/2017 14:30
10.0%
August 2018 Sale
NATH
89.66
08/17/2017 14:30
65.7%
August 2018 Sale
TIME
18.50
02/02/2018 00:00
126.4%
Buyout
TRNC
17.19
08/17/2017 14:30
30.7%
August 2018 Sale
VIAB
30.58
08/17/2017 14:30
6.2%
August 2018 Sale
ALL  
37.1%
August 2018 Sale

Random picks this time:
TickerExecuted price Execution date
CRSPSCVT
2261.76
08/16/2018 13:00Benchmark
VBR
140.33
08/16/2018 13:00Benchmark
VOO
261.47
08/16/2018 13:00Benchmark
AEIS
59.40
08/16/2018 13:30June 2018 Picks
CASA
12.11
08/16/2018 13:30June 2018 Picks
DXC
87.15
08/16/2018 13:30June 2018 Picks
MIK
20.24
08/16/2018 13:30June 2018 Picks
SGH
29.57
08/16/2018 13:30June 2018 Picks
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Old 10-10-2018, 04:01 PM   #48
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The October batch has come in negative; down over 6%. This rather unlucky October batch also was down about 6% last year.

370 Days ending 10/10/2018XIRR for Oct 2016 batchXIRR 838 days (all)gain/loss (all)
Magic Formula Picks
-6.8%
7.1%
$12277
US Small Cap Value Index (CRSPSCVT)
5.8%
12.7%
$24289
Vanguard Small-Cap ETF (VBR)
5.9%
13.0%
$24990
Vanguard S&P 500 ETF (VOO)
13.2%
15.9%
$30776

The small cap value also has fallen away significantly from the S&P 500 in the last couple of months.
TickerExecuted price Execution date XIRR
CRSPSCVT
2178.80
10/05/2017 15:06
5.8%
Benchmark October 2018 Sale
VBR
134.44
10/05/2017 15:06
5.9%
Benchmark October 2018 Sale
VOO
260.50
10/05/2017 15:06
13.2%
Benchmark October 2018 Sale
ABC
92.61
10/05/2017 15:06
11.5%
October 2018 Sale
AGX
42.69
10/05/2017 15:06
-34.8%
October 2018 Sale
GHC
572.98
10/05/2017 15:06
-0.4%
October 2018 Sale
IPG
22.64
10/05/2017 15:06
10.2%
October 2018 Sale
NLS
13.32
10/05/2017 15:06
-22.3%
October 2018 Sale
ALL  
-6.8%
October 2018 Sale

Random picks this time included one OTC issue (CJREF), which I've never seen come up before.
TickerExecuted price Execution date
CRSPSCVT
2178.8
10/10/2018 11:46Benchmark
VBR
134.44
10/10/2018 11:46Benchmark
VOO
260.5
10/10/2018 11:46Benchmark
CJREF
3.32
10/10/2018 11:46October 2018 Picks
FTSI
12.37
10/10/2018 11:46October 2018 Picks
NKTR
50.37
10/10/2018 11:46October 2018 Picks
SRNE
3.71
10/10/2018 11:46October 2018 Picks
STX
44.02
10/10/2018 11:46October 2018 Picks
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Old 10-10-2018, 04:46 PM   #49
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Considering reversion to the mean, I'm amazed that this "Magic Formula" can be this far from the indexes at 2+ years. It is rather magical, just not in the direction you want!

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Old 10-11-2018, 09:42 AM   #50
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Well, we're not done yet.

If it consistently underperforms, we also have a winning strategy btw.
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Old 10-11-2018, 10:11 AM   #51
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Well, we're not done yet.

If it consistently underperforms, we also have a winning strategy btw.


Just my luck, it would start 'working' then!

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Old 10-11-2018, 11:00 AM   #52
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Goldblatt was clear that it would take at least 3 years, and maybe 5. That's not saying I'm not skeptical, because I am. I've always been, which is why I'm trying to settle the matter as best I can through this thread. But we still have a while to go.


I think the reason it's lagging is that the equities market has been so strong since the start of the experiment. The stocks from the filter are already beaten down, so they might distinguish themselves by not going down as much if the whole market takes a beating. Of course that's a sad way to "beat the market", but that point was made stronger in the second edition, where he said beating the market doesn't always mean making a good return.


Bottom line take away so far for me is that luck has a lot to do with it. If I could start over, I'd do three separate experiments and see how widely they diverged.
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Old 10-11-2018, 11:26 AM   #53
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Goldblatt was clear that it would take at least 3 years, and maybe 5. ....
That seems odd. Why would an approach take "at least three years"? Sure, a certain strategy might do better in a certain market phase (bull, bear, flat, or other condition), but why couldn't that phase happen right at the start of the experiment? I'm having trouble with that.


Quote:
Originally Posted by sengsational View Post
... Bottom line take away so far for me is that luck has a lot to do with it. If I could start over, I'd do three separate experiments and see how widely they diverged.
There you go. And I would hope that if you ran three experiments, at least one of them would beat the market over the time frame of the experiment. But where would that leave you? What actionable item could you take from that (sorry for the MegaCorp speak!)

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Old 10-11-2018, 11:39 AM   #54
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If the three we're highly divergent and generally not beating risk adjusted returns, then the action would be to avoid the magic formula. If the results were more tightly grouped, then that would say luck had less to do with it and 30 issues is enough. If grouped and ahead of the appropriate index, then the scheme "worked" and luck was not a large factor.



As to the 3 to 5 years, I think it is indeed a way to allow the scheme to run in various market conditions, but since I got the book from the library, I can't see exactly what he said about it.
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Old 10-11-2018, 12:05 PM   #55
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That seems odd. Why would an approach take "at least three years"? ...
Doesn't seem odd to me. Consider:

  1. Over any relatively short period, the performance of a diversified portfolio approximates a random walk.
  2. Over any relatively long period of time (maybe 5+ years) a diversified portfolio will exhibit a slight bias towards growth, something approximating the market's overall bias as observed in many decades of history.

So the longer he waits, the more likely it is that the market will bail him out regardless of what "magic" is in the portfolio. Smart strategy.
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Old 12-14-2018, 02:36 PM   #56
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The December batch came in just a tiny bit positive, ahead of the small cap indexes for past 12 month span. The 1.4% just happened to match the overall performance of the scheme since inception. Pretty sad state of affairs, making only 1/10th of the amount the index made over the 903 days since the start of the experiment.

We are half way through the experiment (5 years is about 1800 days). This scheme would have to really up it's game to come close to any of the benchmarks! I have very little confidence that this scheme is going to "beat the market".

The small cap indexes took a beating in this span compared to the S&P 500; they've diverged more than any earlier 12 month span that I've tracked (on the order of 15% this time, whereas the worst we've seen is 7% or 10% or something before).
365 Days ending 12/14/2018XIRR for Dec 2016 batchXIRR 903 days (all)gain/loss (all)
Magic Formula Picks
1.4%
1.4%
$2481
US Small Cap Value Index (CRSPSCVT)
-5.8%
11.5%
$24289
Vanguard Small-Cap ETF (VBR)
-5.7%
11.9%
$24990
Vanguard S&P 500 ETF (VOO)
8.5%
14.5%
$30776

Here are the details for closing out the 12 month positions:
TickerExecuted price Execution date XIRR
CRSPSCVT
1957.83
12/14/2017 14:25
-5.8%
Benchmark December 2018 Sale
VBR
120.74
12/14/2017 14:25
-5.7%
Benchmark December 2018 Sale
VOO
240.24
12/14/2017 14:25
8.5%
Benchmark December 2018 Sale
CNCE
13.75
12/14/2017 14:25
-47.6%
December 2018 Sale
DISCA
28.05
12/14/2017 14:25
39.2%
December 2018 Sale
SP
28.26
12/14/2017 14:25
-26.7%
December 2018 Sale
USNA
121.49
12/14/2017 14:25
68.6%
December 2018 Sale
UTHR
108.51
12/14/2017 14:25
-19.8%
December 2018 Sale
ALL  
1.4%
December 2018 Sale

Here are the random picks this time:
TickerExecuted price Execution date
CRSPSCVT
1957.83
12/14/2018 14:00Benchmark
VBR
120.74
12/14/2018 14:00Benchmark
VOO
240.24
12/14/2018 14:00Benchmark
EAF
12.04
12/14/2018 14:00December 2018 Picks
HEAR
16.40
12/14/2018 14:00December 2018 Picks
NANO
28.39
12/14/2018 14:00December 2018 Picks
PETS
22.99
12/14/2018 14:00December 2018 Picks
TUSK
19.38
12/14/2018 14:00December 2018 Picks
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