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06-23-2016, 03:35 PM
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#1
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Moderator
Join Date: Oct 2010
Posts: 10,622
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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.
Ticker | Executed price | Execution date | |
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CRSPSCVT | 1653.38 | 06/23/2016 14:15 | Benchmark | VBR | 106.68 | 06/23/2016 14:15 | Benchmark | BKE | 25.76 | 06/23/2016 14:15 | June 2016 Pick | HSII | 17.66 | 06/23/2016 14:15 | June 2016 Pick | INSY | 12.92 | 06/23/2016 14:15 | June 2016 Pick | KFY | 22.57 | 06/23/2016 14:15 | June 2016 Pick | MSGN | 16.81 | 06/23/2016 14:15 | June 2016 Pick | STRA | 48.22 | 06/23/2016 14:15 | June 2016 Pick |
See you in a few months!
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06-24-2016, 05:38 AM
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#2
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Thinks s/he gets paid by the post
Join Date: May 2014
Location: Utrecht
Posts: 2,650
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Keep us posted!
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06-24-2016, 12:34 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Posts: 17,194
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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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06-26-2016, 05:14 PM
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#4
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Moderator
Join Date: Oct 2010
Posts: 10,622
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Quote:
Originally Posted by Texas Proud
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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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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08-17-2016, 11:48 AM
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#5
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Moderator
Join Date: Oct 2010
Posts: 10,622
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Ticker | Executed price | Execution date | |
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CRSPSCVT | 1705.99 | 08/17/2016 13:20 | Benchmark | VBR | 110.02 | 08/17/2016 13:20 | Benchmark | CALM | 42.7 | 08/17/2016 13:20 | August 2016 Pick | DHX | 7.15 | 08/17/2016 13:20 | August 2016 Pick | IQNT | 15.35 | 08/17/2016 13:20 | August 2016 Pick | SYNT | 45.2 | 08/17/2016 13:20 | August 2016 Pick | TGNA | 21.27 | 08/17/2016 13:20 | August 2016 Pick |
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08-17-2016, 01:40 PM
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#6
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Thinks s/he gets paid by the post
Join Date: May 2014
Location: Utrecht
Posts: 2,650
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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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08-18-2016, 05:15 PM
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#7
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Moderator
Join Date: Oct 2010
Posts: 10,622
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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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09-01-2016, 04:44 PM
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#8
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Moderator
Join Date: Oct 2010
Posts: 10,622
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Typed in the prices today, just for fun. It would be nice if this kept happening!
Ticker | XIRR | Gain/Loss |
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Magic Formula Picks | 43.3% | $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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10-06-2016, 12:43 PM
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#9
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Moderator
Join Date: Oct 2010
Posts: 10,622
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Ticker | Executed price | Execution date | |
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CRSPSCVT | 1717.36 | 10/06/2016 13:45 | Benchmark | VBR | 110.12 | 10/06/2016 13:45 | Benchmark | CSGS | 40.93 | 10/06/2016 13:45 | October 2016 Pick | KORS | 47.44 | 10/06/2016 13:45 | October 2016 Pick | MPAA | 27.90 | 10/06/2016 13:45 | October 2016 Pick | RGR | 56.28 | 10/06/2016 13:45 | October 2016 Pick | SWHC | 25.189 | 10/06/2016 13:45 | October 2016 Pick |
A little early this time since I'm not going to be near the computer when closer to the 2 month interval.
Ticker | XIRR | Gain/Loss 10/06/2016 |
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Magic Formula Picks | 5.3% | $326 | US Small Cap Value Index (CRSPSCVT) | 11.1% | $675 | Vanguard Small-Cap ETF (VBR) | 8.0% | $492 |
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10-07-2016, 10:38 AM
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#10
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Thinks s/he gets paid by the post
Join Date: May 2014
Location: Utrecht
Posts: 2,650
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That's a big swing
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10-07-2016, 02:17 PM
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#11
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Moderator
Join Date: Oct 2010
Posts: 10,622
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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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12-15-2016, 02:53 PM
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#12
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Moderator
Join Date: Oct 2010
Posts: 10,622
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Ticker | Executed price | Execution date | |
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CRSPSCVT | 1905.79 | 12/15/2016 16:00 | Benchmark | VBR | 122.17 | 12/15/2016 16:00 | Benchmark | FPRX | 50.42 | 12/15/2016 16:00 | December 2016 Pick | HPQ | 15.49 | 12/15/2016 16:00 | December 2016 Pick | ICON | 9.19 | 12/15/2016 16:00 | December 2016 Pick | PBI | 15.54 | 12/15/2016 16:00 | December 2016 Pick | SCMP | 15.45 | 12/15/2016 16:00 | December 2016 Pick |
Ticker | XIRR | Gain/Loss 12/15/2016 |
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Magic Formula Picks | 24.7% | $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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12-15-2016, 03:25 PM
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#13
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Dryer sheet aficionado
Join Date: Dec 2015
Posts: 27
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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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12-16-2016, 12:39 PM
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#14
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Moderator
Join Date: Oct 2010
Posts: 10,622
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Quote:
Originally Posted by 23window
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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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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12-31-2016, 09:50 AM
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#15
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Moderator
Join Date: Oct 2010
Posts: 10,622
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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.
Ticker | XIRR | Gain/Loss 12/30/2016 |
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Magic Formula Picks | 15.6% | $2588 | US Small Cap Value Index (CRSPSCVT) | 34.5% | $5557 | Vanguard Small-Cap ETF (VBR) | 34.4% | $5521 |
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02-23-2017, 01:28 PM
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#16
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Moderator
Join Date: Oct 2010
Posts: 10,622
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Here are the random picks for February.
Ticker | Executed price | Execution date | |
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CRSPSCVT | 1957.15 | 02/23/2017 13:40 | Benchmark | VBR | 124.67 | 02/23/2017 13:40 | Benchmark | AKRX | 21.63 | 02/23/2017 13:40 | February 2017 Pick | DIN | 59.475 | 02/23/2017 13:40 | February 2017 Pick | GME | 25.82 | 02/23/2017 13:40 | February 2017 Pick | MDCA | 8.895 | 02/23/2017 13:40 | February 2017 Pick | SPOK | 19.09 | 02/23/2017 13:40 | February 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.
Ticker | XIRR | Gain/Loss 02/23/2017 |
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Magic Formula Picks | 2.4% | $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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02-24-2017, 07:39 PM
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#17
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Moderator
Join Date: Oct 2010
Posts: 10,622
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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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04-13-2017, 01:52 PM
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#18
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Moderator
Join Date: Oct 2010
Posts: 10,622
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Here are the random picks for April:
Ticker | Executed price | Execution date | |
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CRSPSCVT | 1894.44 | 04/13/2017 13:36 | Benchmark | VBR | 120.23 | 04/13/2017 13:36 | Benchmark | BBSI | 54.29 | 04/13/2017 13:36 | April 2017 Pick | MCFT | 15.81 | 04/13/2017 13:36 | April 2017 Pick | PDLI | 2.07 | 04/13/2017 13:36 | April 2017 Pick | TVTY | 28.05 | 04/13/2017 13:36 | April 2017 Pick | UIS | 11.3 | 04/13/2017 13:36 | April 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:
Ticker | XIRR | Gain/Loss 04/13/2017 |
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Magic Formula Picks | 1.1% | $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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04-13-2017, 03:32 PM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 10,308
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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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04-14-2017, 03:49 AM
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#20
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Thinks s/he gets paid by the post
Join Date: May 2014
Location: Utrecht
Posts: 2,650
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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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