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Old 06-23-2016, 03:35 PM   #1
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Magic Formula Tracker

For what it's worth, I'm going to attempt to document how the Joel Goldblatt magic formula does against some benchmarks. The first result will be computed in December of 2019 (that's how long he says you need to wait for it to work).

The idea will be for me to pick six dates, about 2 months apart where I "execute trades". So there will be six groups. The first six of these dates will be buys only, where 1/6th of the eventual seed money will be invested evenly over that month's picks. For the rest of these dates, I will document sells from the prior year and document the new buys. The dates will only be approximately 2 months apart.

If a randomly selected stock is already owned (in any except the current group), it will be skipped, and the next randomly selected stock will be substituted. If a randomly selected stock is already owned and in the current group (to be sold), it will not be sold (be kept for another year).

On each of the buy/sell days, I will document what my random selection of that day's magic formula stocks came up to be, and their prices.

I'll also try to keep track of dividends, splits, buyouts, etc. Not sure how good I'll be at documenting that, but I'll give it a try.

TickerExecuted price Execution date  
CRSPSCVT1653.3806/23/2016 14:15Benchmark
VBR106.6806/23/2016 14:15Benchmark
BKE25.7606/23/2016 14:15June 2016 Pick
HSII17.6606/23/2016 14:15June 2016 Pick
INSY12.9206/23/2016 14:15June 2016 Pick
KFY22.5706/23/2016 14:15June 2016 Pick
MSGN16.8106/23/2016 14:15June 2016 Pick
STRA48.2206/23/2016 14:15June 2016 Pick


See you in a few months!
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Old 06-24-2016, 05:38 AM   #2
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Keep us posted!
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Old 06-24-2016, 12:34 PM   #3
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How are you randomly selecting the stocks

If not with a computer doing random, then I would think there would be bias in the selection some way or another...
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Old 06-26-2016, 05:14 PM   #4
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Originally Posted by Texas Proud View Post
How are you randomly selecting the stocks

If not with a computer doing random, then I would think there would be bias in the selection some way or another...
The screen on magicformulainvesting.com gave me a list of 50 stocks that ranked the highest on Goldblatt's valuation technique. I pasted those into a spreadsheet, typed =Rand() in the adjacent column and sorted the list. So, yes, using a computer and applying a mechanical, repeatable process.
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Old 08-17-2016, 11:48 AM   #5
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TickerExecuted price Execution date
CRSPSCVT1705.9908/17/2016 13:20Benchmark
VBR110.0208/17/2016 13:20Benchmark
CALM 42.708/17/2016 13:20August 2016 Pick
DHX 7.1508/17/2016 13:20August 2016 Pick
IQNT 15.3508/17/2016 13:20August 2016 Pick
SYNT 45.208/17/2016 13:20August 2016 Pick
TGNA 21.2708/17/2016 13:20August 2016 Pick
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Old 08-17-2016, 01:40 PM   #6
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Are you recording the prices of your already bought stocks too at this new date?

Might make it easier to compare later on with the benchmark.
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Old 08-18-2016, 05:15 PM   #7
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No, I didn't look-up the prices on the earlier batch. Yesterday was kind of an arbitrary day in the life of the earlier batch anyway. I can generate a "brokerage statement" to mark to market on month end, I suppose.

In my spreadsheet for tracking, I'm "buying" the benchmarks with the same amount of cash I used to initiate the position. So I "own" three sets of share counts. I probably will need to use a historical lookup once a year to "reinvest dividends", adding to share counts.
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Old 09-01-2016, 04:44 PM   #8
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Typed in the prices today, just for fun. It would be nice if this kept happening!

TickerXIRRGain/Loss
Magic Formula Picks43.3%$1283
US Small Cap Value Index (CRSPSCVT)21.4%$682
Vanguard Small-Cap ETF (VBR)20.9%$667

The gain/loss dollar amount assumes that in the June and August buys, $15K was put into VBR, $15K was put into CRSPSCVT and $15K was split evenly among the magic formula picks.
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Old 10-06-2016, 12:43 PM   #9
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TickerExecuted price Execution date
CRSPSCVT1717.3610/06/2016 13:45Benchmark
VBR110.1210/06/2016 13:45Benchmark
CSGS 40.9310/06/2016 13:45October 2016 Pick
KORS 47.4410/06/2016 13:45October 2016 Pick
MPAA 27.9010/06/2016 13:45October 2016 Pick
RGR 56.2810/06/2016 13:45October 2016 Pick
SWHC 25.18910/06/2016 13:45October 2016 Pick

A little early this time since I'm not going to be near the computer when closer to the 2 month interval.

TickerXIRRGain/Loss 10/06/2016
Magic Formula Picks5.3%$326
US Small Cap Value Index (CRSPSCVT)11.1%$675
Vanguard Small-Cap ETF (VBR)8.0%$492
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Old 10-07-2016, 10:38 AM   #10
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That's a big swing
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Old 10-07-2016, 02:17 PM   #11
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Yeah. The indexes, with all of their diversity, buffered it well, but my small list of stocks didn't fare as well. I never expected a smooth ride, though. It'll probably see far worse days. Hopefully I've got a lot of years to play with it.
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Old 12-15-2016, 02:53 PM   #12
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TickerExecuted price Execution date
CRSPSCVT1905.7912/15/2016 16:00Benchmark
VBR122.1712/15/2016 16:00Benchmark
FPRX 50.4212/15/2016 16:00December 2016 Pick
HPQ 15.4912/15/2016 16:00December 2016 Pick
ICON 9.1912/15/2016 16:00December 2016 Pick
PBI 15.5412/15/2016 16:00December 2016 Pick
SCMP 15.4512/15/2016 16:00December 2016 Pick


TickerXIRRGain/Loss 12/15/2016
Magic Formula Picks24.7%$3430
US Small Cap Value Index (CRSPSCVT)43.0%$5796
Vanguard Small-Cap ETF (VBR)42.9%$5757

Wow. Am I doing this right? Bought VBR on 6/23, 8/17, and 10/6, 139, 136, and 147 shares, respectively, $106.68, $110.02, and $110.12, respectively. Closing today is $122.17.
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Old 12-15-2016, 03:25 PM   #13
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Are you annualizing the rate of return instead of calculating the YTD rate of return? The YTD return for VBR is closer to 21%.
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Old 12-16-2016, 12:39 PM   #14
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Are you annualizing the rate of return instead of calculating the YTD rate of return? The YTD return for VBR is closer to 21%.
Yes, XIRR would be annualized. Still some big numbers. I wish I had every penny in that. Of course 20 20 hindsight. And of course I'm not talking about having all invested on January 1 until today. I'm talking about investing on those three days.
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Old 12-31-2016, 09:50 AM   #15
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These are internal rates of return for buying in June, August, October and December. The earlier bigger XIRR's got watered-down a bit.
TickerXIRRGain/Loss 12/30/2016
Magic Formula Picks15.6%$2588
US Small Cap Value Index (CRSPSCVT)34.5%$5557
Vanguard Small-Cap ETF (VBR)34.4%$5521
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Old 02-23-2017, 01:28 PM   #16
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Here are the random picks for February.

TickerExecuted price Execution date
CRSPSCVT1957.1502/23/2017 13:40Benchmark
VBR124.6702/23/2017 13:40Benchmark
AKRX 21.6302/23/2017 13:40February 2017 Pick
DIN 59.47502/23/2017 13:40February 2017 Pick
GME 25.8202/23/2017 13:40February 2017 Pick
MDCA 8.89502/23/2017 13:40February 2017 Pick
SPOK 19.0902/23/2017 13:40February 2017 Pick

XIRR is over 243 days with a uniform amount added every two months since June. It looks like the magic formula is not keeping up with the indexes.
TickerXIRRGain/Loss 02/23/2017
Magic Formula Picks2.4%$622
US Small Cap Value Index (CRSPSCVT)30.5%$7669
Vanguard Small-Cap ETF (VBR)30.5%$7617

Oh, and ticker SWHC became AOBC. And ticker IQNT got sold to a private equity firm. So since that one was chosen in August and the proceeds were used just now in the February picks, we no longer have a uniform amount in each of the groupings.
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Old 02-24-2017, 07:39 PM   #17
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This shows pricing of the June, August and October picks. There's a lot of diversity in the way these prices move. The max down has been 25% and the max up has been over 50%.
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Old 04-13-2017, 01:52 PM   #18
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Here are the random picks for April:

TickerExecuted price Execution date
CRSPSCVT1894.4404/13/2017 13:36Benchmark
VBR120.2304/13/2017 13:36Benchmark
BBSI 54.2904/13/2017 13:36April 2017 Pick
MCFT 15.8104/13/2017 13:36April 2017 Pick
PDLI 2.0704/13/2017 13:36April 2017 Pick
TVTY 28.0504/13/2017 13:36April 2017 Pick
UIS 11.304/13/2017 13:36April 2017 Pick

That makes six sets of buys, two months apart, just like the book prescribes. From now on, no more additional influx of funds. Every two months holdings that are one year old get sold and a new set gets bought.

XIRR for 294 days:

TickerXIRRGain/Loss 04/13/2017
Magic Formula Picks1.1%$406
US Small Cap Value Index (CRSPSCVT)13.0%$4768
Vanguard Small-Cap ETF (VBR)12.9%$4710
The benchmarks gave back a bunch. The random choices are not doing nearly as well as the benchmarks at this point.
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Old 04-13-2017, 03:32 PM   #19
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I have always found it a bit paradoxical when I see people hawking books and newsletters that claim to disclose the secrets of getting rich in the markets. Seems like a very unlikely gig for anyone who actually knows how to do it.

If there are actually people who know the secret, I think they are lounging on tropical islands being hand-fed peeled grapes and drinking from glasses that have little paper umbrellas sticking out. They are not selling advice. To anyone.
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Old 04-14-2017, 03:49 AM   #20
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This one is a bit different: Greenblatt actually can afford the proverbial hand-fed grapes lifestyle, and then some. His net worth I believe is around 500 million USD.

The magic formula thing is what he sees as a way to give back and teach (he's a professor too). The book sales won't make a difference, and he has no consumer offering. Also: his website is absolutely free.

So I wouldn't be so quick to dismiss him like that.
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