Magic Formula Tracker

[OldShooter]

... And, as much as it pains me to continue ...

In drug trials they will stop early if the results, whether positive or negative, clearly justify it.

 

[Totoro]

Would be nice if someone from the Greenblatt could comment on these results.

 

[sengsational]

More of the same.

364 Days ending 02/20/2020|XIRR for Feb 2019 batch|XIRR 1336 days (all)|gain/loss (all)
Magic Formula Picks|

-26.2%​

|

-5.5%​

|

-$14977​

|
US Small Cap Value Index (CRSPSCVT)|

6.2%​

|

7.7%​

|

$26345​

|
Vanguard Small-Cap ETF (VBR)|

5.2%​

|

7.8%​

|

$26441​

|
Vanguard S&P 500 ETF (VOO)|

15.8%​

|

15.7%​

|

$57856​

|

FRSH was a cash buy-out in May.

Ticker|Price |Date |XIRR|
CRSPSCVT|

2300.45​

|02/20/2020 10:30|

6.2%​

|Benchmark February 2020 Sale
VBR|

137.73​

|02/20/2020 10:30|

5.2%​

|Benchmark February 2020 Sale
VOO|

311.00​

|02/20/2020 10:30|

15.8%​

|Benchmark February 2020 Sale
ALSN|

44.23​

|02/20/2020 10:30|

-10.1%​

|February 2020 Sale
FNJN|

1.80​

|02/20/2020 10:30|

-44.4%​

|February 2020 Sale
FRSH|

6.45​

|05/28/2019 00:00|

101.0%​

|February 2020 Sale
LTRPA|

6.37​

|02/20/2020 10:30|

-60.3%​

|February 2020 Sale
SYX|

22.72​

|02/20/2020 10:30|

-5.8%​

|February 2020 Sale
ALL|

​

||

-26.2%​

|February 2020 Sale

Ticker|Price|Date|
CRSPSCVT|

2300.45​

|02/20/2020 10:30|Benchmark
VBR|

137.73​

|02/20/2020 10:30|Benchmark
VOO|

311​

|02/20/2020 10:30|Benchmark
CLCT|

24.76​

|02/20/2020 11:00|February 2020 Picks
PINC|

31.43​

|02/20/2020 11:00|February 2020 Picks
PRDO|

17.89​

|02/20/2020 11:00|February 2020 Picks
QMCO|

5.53​

|02/20/2020 11:00|February 2020 Picks
SUPN|

24.02​

|02/20/2020 11:00|February 2020 Picks

 

[sengsational]

Small cap took an horrific beating: the indexes down 30% for the last 12 months. Interestingly, the small caps are now down 5% over the 1392 days (3.8 years). Maybe if someone started this experiment now, the small caps would beat the S&P!

In the last year the good old S&P 500 lost only 2%, and is the only category still showing an increase from when the experiment started.

362 Days ending 04/16/2020|XIRR for Apr 2019 batch|XIRR 1392 days (all)|gain/loss (all)
Magic Formula Picks|

-44.4%​

|

-15.1%​

|

-$38113​

|
US Small Cap Value Index (CRSPSCVT)|

-30.8%​

|

-5.2%​

|

-$15995​

|
Vanguard Small-Cap ETF (VBR)|

-30.9%​

|

-5.2%​

|

-$15966​

|
Vanguard S&P 500 ETF (VOO)|

-2.3%​

|

8.7%​

|

$31543​

|

Here are the details for the picks from 12 months ago:

Ticker|Executed price |Execution date |XIRR|
CRSPSCVT|

1503.77​

|04/16/2020 13:40|

-30.8%​

|Benchmark April 2020 Sale
VBR|

89.64​

|04/16/2020 13:40|

-30.9%​

|Benchmark April 2020 Sale
VOO|

255.21​

|04/16/2020 13:40|

-2.3%​

|Benchmark April 2020 Sale
AEZS|

0.83​

|04/16/2020 13:40|

-80.7%​

|April 2020 Sale
EGY|

0.79​

|04/16/2020 13:40|

-68.1%​

|April 2020 Sale
IMMR|

6.29​

|04/16/2020 13:40|

-31.7%​

|April 2020 Sale
SIGA|

5.45​

|04/16/2020 13:40|

2.0%​

|April 2020 Sale
STRL|

8.28​

|04/16/2020 13:40|

-40.1%​

|April 2020 Sale
ALL|

​

||

-44.4%​

|April 2020 Sale

And the random picks this time:

Ticker|Price|Date|
CRSPSCVT|

1503.77​

|04/16/2020 13:40|Benchmark
VBR|

89.64​

|04/16/2020 13:40|Benchmark
VOO|

255.21​

|04/16/2020 13:40|Benchmark
EBIX|

16.28​

|04/16/2020 13:40|April 2020 Picks
HUD|

4.52​

|04/16/2020 13:40|April 2020 Picks
MLHR|

18.24​

|04/16/2020 13:40|April 2020 Picks
RHI|

39.69​

|04/16/2020 13:40|April 2020 Picks
WHD|

12.05​

|04/16/2020 13:40|April 2020 Picks
AEZS|

.83​

|04/16/2020 13:40|Continue to hold

 

[sengsational]

After 4 years, the fallen angel stocks have done worse than the small stock benchmark, and much worse than the good old S&P 500. Looking back one year, the picks did about the same as the index, while the S&P has shown a nice gain.

364 Days ending 06/18/2020|XIRR for Jun 2019 batch|XIRR 1455 days (all)|gain/loss (all)
Magic Formula Picks|

-14.4%​

|

-6.8%​

|

-$20017​

|
US Small Cap Value Index (CRSPSCVT)|

-15.0%​

|

-5.0%​

|

-$15995​

|
Vanguard Small-Cap ETF (VBR)|

-15.0%​

|

-5.0%​

|

-$15966​

|
Vanguard S&P 500 ETF (VOO)|

7.7%​

|

8.3%​

|

$31543​

|

Ticker|Executed price |Execution date |XIRR|
CRSPSCVT|

1815.84​

|06/20/2019 12:00|

-15.0%​

|Benchmark June 2020 Sale
VBR|

108.46​

|06/20/2019 12:00|

-15.0%​

|Benchmark June 2020 Sale
VOO|

286.06​

|06/20/2019 12:00|

7.7%​

|Benchmark June 2020 Sale
GTX|

4.94​

|06/20/2019 12:00|

-68.0%​

|June 2020 Sale
INVA|

13.42​

|06/20/2019 12:00|

-6.7%​

|June 2020 Sale
LGND|

110.97​

|06/20/2019 12:00|

-2.5%​

|June 2020 Sale
MBUU|

51.96​

|06/20/2019 12:00|

35.6%​

|June 2020 Sale
NRT|

3.97​

|06/20/2019 12:00|

-35.1%​

|June 2020 Sale
ALL|

​

||

-14.4%​

|June 2020 Sale

Ticker|Price|Date|
CRSPSCVT|

1815.84​

|06/18/2020 12:38|Benchmark
VBR|

108.46​

|06/18/2020 12:38|Benchmark
VOO|

286.06​

|06/18/2020 12:38|Benchmark
CPRX|

4.48​

|06/18/2020 13:40|June 2020 Picks
NCMI|

3.18​

|06/18/2020 13:40|June 2020 Picks
ODP|

2.33​

|06/18/2020 13:40|June 2020 Picks
SCS|

12.07​

|06/18/2020 13:40|June 2020 Picks
TZOO|

6.92​

|06/18/2020 13:40|June 2020 Picks

 

[Ready-4-ER-at-14]

TY for doing the work to test this. I wonder if this represents a market shift similar to the pre tech wreck days when value was decided more on trends and popularity (volume) rather than earnings , if any still exist anywhere.

I've had trading pattern like the little dipper method where you choose on long term chart and buy on short term dips that worked well till the trend was not trendy.

Re fallen angels I read that life cyles of companies are decreasing rapidly. I forget actual numbers but it was by a magnitude of 3 or 4. Ie say companies live and die in 15 years now, maybe in the 60's they did that in 45-60 years.

Just trying to understand why this is not working as I expected, or if this is still just random probability.. like getting head on a coin flip 5x in a row.

 

[sengsational]

It's my, rather uniformed, opinion that it's the popularity over true value thing. I don't see it changing. The S&P 500 is attracting "too much" capital, but it's got a great track record and it's super easy. Like they used to say "Nobody ever got fired for buying IBM" ( back in the days when the quality and support was unparalleled in the industry). You could almost certainly spend about half as much and get the same thing, but on the tiny chance things didn't work out, you were a bum. And with the S&P or total market approach (which is typically weighted to large issues), you can shrug off any declines with an excuse that you were just doing what "they" said was prudent. Step out of the box, and it's a no-win. You don't keep up and it's "see!" and if you manage to beat the market it's "you just got lucky".

 

[sengsational]

August batch from last year lost a couple of percent, which is in alignment with the small cap value benchmarks, and the S&P 500 surged in the last year.

366 Days ending 08/17/2020|XIRR for Aug 2019 batch|XIRR 1515 days (all)|gain/loss (all)
Magic Formula Picks|

-1.8%​

|

-5.4%​

|

-$16724​

|
US Small Cap Value Index (CRSPSCVT)|

-1.5%​

|

2.4%​

|

$8849​

|
Vanguard Small-Cap ETF (VBR)|

-1.4%​

|

2.5%​

|

$9130​

|
Vanguard S&P 500 ETF (VOO)|

11.4%​

|

13.9%​

|

$59892​

|

Ticker|Executed price |Execution date |XIRR|
CRSPSCVT|

1971.24​

|08/15/2019 15:00|

-1.5%​

|Benchmark August 2020 Sale
VBR|

117.25​

|08/15/2019 15:00|

-1.4%​

|Benchmark August 2020 Sale
VOO|

310.62​

|08/15/2019 15:00|

11.4%​

|Benchmark August 2020 Sale
BBY|

111.13​

|08/15/2019 15:00|

77.4%​

|August 2020 Sale
EEX|

2.85​

|08/15/2019 15:00|

-68.8%​

|August 2020 Sale
FIZZ|

65.93​

|08/15/2019 15:00|

57.9%​

|August 2020 Sale
JW-A|

34.40​

|08/15/2019 15:00|

0.0%​

|August 2020 Sale
LEE|

1.00​

|08/15/2019 15:00|

-50.8%​

|August 2020 Sale
ALL|

​

||

-1.8%​

|August 2020 Sale

Ticker|Price|Date|
CRSPSCVT|

1971.24​

|08/17/2020 10:50|Benchmark
VBR|

117.25​

|08/17/2020 10:50|Benchmark
VOO|

310.62​

|08/17/2020 10:50|Benchmark
LEU|

16.36​

|08/17/2020 10:50|August 2020 Picks
ENDP|

3.18​

|08/17/2020 10:50|August 2020 Picks
FOXA|

25.46​

|08/17/2020 10:50|August 2020 Picks
REGI|

40.10​

|08/17/2020 10:50|August 2020 Picks
VNDA|

11.66​

|08/17/2020 10:50|August 2020 Picks
|

.00​

|08/17/2020 10:50|August 2020 Picks

 

[sengsational]

The batch picked last year at this time beat the small cap index, but not the mighty S&P 500.

376 Days ending 10/13/2020|XIRR for Oct 2019 batch|XIRR 1572 days (all)|gain/loss (all)
Magic Formula Picks|

12.8%​

|

-4.5%​

|

-$14642​

|
US Small Cap Value Index (CRSPSCVT)|

-2.3%​

|

2.3%​

|

$8849​

|
Vanguard Small-Cap ETF (VBR)|

-2.2%​

|

2.5%​

|

$9730​

|
Vanguard S&P 500 ETF (VOO)|

22.7%​

|

13.4%​

|

$60558​

|

A couple of winners this time that were bigger than the losers.

Ticker|Executed price |Execution date |XIRR|
CRSPSCVT|

2016.89​

|10/03/2019 14:00|

-2.3%​

|Benchmark October 2020 Sale
VBR|

119.24​

|10/03/2019 14:00|

-2.2%​

|Benchmark October 2020 Sale
VOO|

322.43​

|10/03/2019 14:00|

22.7%​

|Benchmark October 2020 Sale
ARNA|

84.56​

|10/03/2019 14:00|

82.2%​

|October 2020 Sale
VIAC|

27.35​

|10/03/2019 14:00|

-25.9%​

|October 2020 Sale
JAZZ|

152.52​

|10/03/2019 14:00|

20.8%​

|October 2020 Sale
PCOM|

10.18​

|10/03/2019 14:00|

-10.1%​

|October 2020 Sale
REZI|

11.75​

|10/03/2019 14:00|

-12.2%​

|October 2020 Sale
ALL|

​

||

12.8%​

|October 2020 Sale

And the random picks to check on next year at this time:

Ticker|Price|Date|
CRSPSCVT|

2016.89​

|08/17/2020 10:50|Benchmark
VBR|

119.24​

|08/17/2020 10:50|Benchmark
VOO|

322.43​

|08/17/2020 10:50|Benchmark
DLHC|

9.19​

|10/13/2020 13:30|October 2020 Picks
LFVN|

13.45​

|10/13/2020 13:30|October 2020 Picks
MCK|

151.20​

|10/13/2020 13:30|October 2020 Picks
WSTG|

22.55​

|10/13/2020 13:30|October 2020 Picks
WW|

24.92​

|10/13/2020 13:30|October 2020 Picks
|

.00​

|10/13/2020 13:30|October 2020 Picks

 

[sengsational]

4 1/2 Years into the 5 year data tracking experience. The likely final results have been obvious for some time. The small caps had no chance against the S&P 500. And using the the magic formula screen did worse than the small cap benchmark, pretty much universally for all time periods. It does make me wonder, though, can the companies in the S&P, with a 12% GCR in the last 4.5 years really be that much better than the small caps that had a 2% CGR? I think it's probably due to the popularity of index funds providing a constant demand for those shares.

It would be interesting to see how many times the small cap index actually beat the large caps. Every time I've looked, there was always someone saying how logical it was that small caps would do better, but they never did.

And this time around, no different: the S&P did great, small caps were ok (at least in the plus column), and the picks from last December, a significant loss.

375 Days ending 12/21/2020|XIRR for Dec 2019 batch|XIRR 1641 days (all)|gain/loss (all)
Magic Formula Picks|

-8.3%​

|

-0.3%​

|

-$1122​

|
US Small Cap Value Index (CRSPSCVT)|

4.5%​

|

2.2%​

|

$8849​

|
Vanguard Small-Cap ETF (VBR)|

4.5%​

|

2.4%​

|

$9730​

|
Vanguard S&P 500 ETF (VOO)|

12.4%​

|

12.8%​

|

$60558​

|

Ticker|Executed price |Execution date |XIRR|
CRSPSCVT|

2361.62​

|12/16/2019 15:30|

4.5%​

|Benchmark December 2020 Sale
VBR|

139.59​

|12/16/2019 15:30|

4.5%​

|Benchmark December 2020 Sale
VOO|

337.15​

|12/16/2019 15:30|

12.4%​

|Benchmark December 2020 Sale
BRBR|

24.04​

|12/16/2019 15:30|

14.6%​

|December 2020 Sale
HCC|

19.16​

|12/16/2019 15:30|

-6.0%​

|December 2020 Sale
HI|

36.98​

|12/16/2019 15:30|

12.3%​

|December 2020 Sale
LXRX|

3.46​

|12/16/2019 15:30|

-31.6%​

|December 2020 Sale
PTN|

0.44​

|12/16/2019 15:30|

-45.6%​

|December 2020 Sale
TUSK|

4.11​

|12/16/2019 15:30|

136.1%​

|December 2020 mark
ALL|||

-8.3%​

|December 2020 Sale

Might as well run the random picker again:

Ticker|Price|Date|
CRSPSCVT|

2361.62​

|12/21/2020 12:00|Benchmark
VBR|

139.59​

|12/21/2020 12:00|Benchmark
VOO|

337.15​

|12/21/2020 12:00|Benchmark
APT|

12.42​

|12/21/2020 12:00|December 2020 Picks
CHRS|

16.96​

|12/21/2020 12:00|December 2020 Picks
EME|

88.20​

|12/21/2020 12:00|December 2020 Picks
RPRX|

44.59​

|12/21/2020 12:00|December 2020 Picks
VGR|

11.85​

|12/21/2020 12:00|December 2020 Picks
TUSK|

4.11​

|12/21/2020 12:00|December 2020 mark

 

[sengsational]

A buyout gave one of the magic formula picks closed out this month a big gain, but magic formula over the entire span is growing at under half the rate of small cap indexes.

364 Days ending 02/18/2021|XIRR for Feb 2020 batch|XIRR 1700 days (all)|gain/loss (all)
Magic Formula Picks|

134.5%​

|

4.4%​

|

$17982​

|
US Small Cap Value Index (CRSPSCVT)|

15.1%​

|

9.4%​

|

$44753​

|
Vanguard Small-Cap ETF (VBR)|

15.3%​

|

9.5%​

|

$45129​

|
Vanguard S&P 500 ETF (VOO)|

17.7%​

|

16.3%​

|

$85755​

|

Ticker|Executed price |Execution date |XIRR|
CRSPSCVT|

2646.81​

|02/20/2020 11:00|

15.1%​

|Benchmark February 2021 Sale
VBR|

155.60​

|02/20/2020 11:00|

15.3%​

|Benchmark February 2021 Sale
VOO|

359.34​

|02/20/2020 11:00|

17.7%​

|Benchmark February 2021 Sale
CLCT|

92.00​

|02/20/2020 11:00|

287.0%​

|February 2021 Sale
PINC|

33.53​

|02/20/2020 11:00|

7.9%​

|February 2021 Sale
PRDO|

13.32​

|02/20/2020 11:00|

-25.6%​

|February 2021 Sale
QMCO|

8.49​

|02/20/2020 11:00|

53.6%​

|February 2021 Sale
SUPN|

29.23​

|02/20/2020 11:00|

21.8%​

|February 2021 Sale
ALL|||

134.5%​

|February 2021 Sale

Ticker|Price|Date|
CRSPSCVT|

2646.81​

|02/18/2021 15:30|Benchmark
VBR|

155.6​

|02/18/2021 15:30|Benchmark
VOO|

359.34​

|02/18/2021 15:30|Benchmark
ASO|

25.21​

|02/18/2021 15:30|February 2021 Picks
GIB|

77.34​

|02/18/2021 15:30|February 2021 Picks
GTXMQ|

7.14​

|02/18/2021 15:30|February 2021 Picks
IRWD|

9.34​

|02/18/2021 15:30|February 2021 Picks
UONEK|

1.69​

|02/18/2021 15:30|February 2021 Picks

Here's a graph of the balances for the S&P, Small Cap, and Magic Formula. Looking better for the latter than it's ever been.

 

[sengsational]

This might be a first in 1756 days of the experiment: the batch bought one year ago beat all indexes. In the past year, the small cap value index beat the S&P 500, which is also something new. The percentage increases in the last year are huge (the S&P is up 50% and the picks more than doubled). I guess this is due to buying low during the covid selloff.

365 Days ending 04/15/2021|XIRR for Apr 2020 batch|XIRR 1756 days (all)|gain/loss (all)
Magic Formula Picks|

122.2%​

|

3.6%​

|

$15087​

|
US Small Cap Value Index (CRSPSCVT)|

92.2%​

|

11.2%​

|

$57400​

|
Vanguard Small-Cap ETF (VBR)|

92.6%​

|

11.3%​

|

$57721​

|
Vanguard S&P 500 ETF (VOO)|

52.1%​

|

17.3%​

|

$97431​

|

Ticker|Executed price |Execution date |XIRR|
CRSPSCVT|

2884.78​

|04/16/2020 13:40|

92.2%​

|Benchmark April 2021 Sale
VBR|

168.84​

|04/16/2020 13:40|

92.6%​

|Benchmark April 2021 Sale
VOO|

381.18​

|04/16/2020 13:40|

52.1%​

|Benchmark April 2021 Sale
EBIX|

29.86​

|04/16/2020 13:40|

86.2%​

|April 2021 Sale
HUD|

7.70​

|04/16/2020 13:40|

133.3%​

|April 2021 Sale
MLHR|

43.78​

|04/16/2020 13:40|

141.8%​

|April 2021 Sale
RHI|

78.31​

|04/16/2020 13:40|

106.7%​

|April 2021 Sale
WHD|

29.37​

|04/16/2020 13:40|

149.0%​

|April 2021 Sale
AEZS2|

1.12​

|04/16/2020 13:40|

37.2%​

|April 2021 Sale
ALL|

​

||

122.2%​

|April 2021 Sale

The replacement picks:

Ticker|Price|Date|
CRSPSCVT|

2884.78​

|04/15/2021 11:30|Benchmark
VBR|

168.84​

|04/15/2021 11:30|Benchmark
VOO|

381.18​

|04/15/2021 11:30|Benchmark
HOLX|

76.29​

|04/03/2021 11:30|April 2021 Picks
LEGH|

19.01​

|04/03/2021 11:30|April 2021 Picks
SAGE|

75.35​

|04/03/2021 11:30|April 2021 Picks
WTRH|

2.80​

|04/03/2021 11:30|April 2021 Picks
GTXPF|

5.25​

|04/03/2021 11:30|Reorg exercised

 

[sengsational]

Five Years

The experiment started 6/23/2016, so in a few days, it will be five years of running. The IRR of all the Magic Formula transactions is 7.7% as of today. That doesn't sound too horrible, but the same money in the S&P500 was 16.6%. The Magic Formula didn't even keep up with the small cap index, which attained 10.8% over the span.

So the Magic Formula did not meet the claim Joel Greenblatt makes in "The Little Book That Still Beats the Market". The claim is that if you buy five stocks from his screen every two months and hold each for one year, and keep that up for five years, you will beat the market.

Was it different this time? There's probably a lot of possible reasons why it didn't work this time. Maybe it will take longer, but it seems unlikely to ever catch-up.

That being said, lately, the scheme has been picking-up steam; the purchases made in the throws of the Covid scare have had some great returns, true for this set of picks. Twice in a row now, the random picks from one year ago beat the small cap and broad market indexes.

363 Days ending 06/16/2021|XIRR for Jun 2020 batch|XIRR 1818 days (all)|gain/loss (all)
Magic Formula Picks|

68.3%​

|

7.7%​

|

$36133​

|
US Small Cap Value Index (CRSPSCVT)|

59.3%​

|

10.8%​

|

$57400​

|
Vanguard Small-Cap ETF (VBR)|

59.3%​

|

10.9%​

|

$57721​

|
Vanguard S&P 500 ETF (VOO)|

35.8%​

|

16.6%​

|

$97431​

|

The details for the most recent sales:

Ticker|Executed price |Execution date |XIRR|
CRSPSCVT|

3025.58​

|06/18/2020 13:40|

59.3%​

|Benchmark June 2021 Sale
VBR|

177.07​

|06/18/2020 13:40|

59.3%​

|Benchmark June 2021 Sale
VOO|

390.26​

|06/18/2020 13:40|

35.8%​

|Benchmark June 2021 Sale
CPRX|

5.76​

|06/18/2020 13:40|

28.7%​

|June 2021 Sale
NCMI|

5.01​

|06/18/2020 13:40|

67.7%​

|June 2021 Sale
ODP|

47.89​

|06/18/2020 13:40|

106.6%​

|June 2021 Sale (10x rev split)
SCS|

14.61​

|06/18/2020 13:40|

24.9%​

|June 2021 Sale
TZOO|

14.61​

|06/18/2020 13:40|

112.1%​

|June 2021 Sale
ALL|

​

||

68.3%​

|June 2021 Sale

Forging ahead anyway: Picks to sell a year from now:

Ticker|Price|Date|
CRSPSCVT|

2884.78​

|04/15/2021 11:30|Benchmark
VBR|

168.84​

|04/15/2021 11:30|Benchmark
VOO|

381.18​

|04/15/2021 11:30|Benchmark
LB|

64.99​

|06/16/2021 11:30|June 2021 Picks
MNDO|

3.19​

|06/16/2021 11:30|June 2021 Picks
QDEL|

110.46​

|06/16/2021 11:30|June 2021 Picks
TPRFF|

4.93​

|06/16/2021 11:30|June 2021 Picks
VYGR|

4.80​

|06/16/2021 11:30|June 2021 Picks

 

[ProspectiveBum]

The experiment started 6/23/2016, so in a few days, it will be five years of running. The IRR of all the Magic Formula transactions is 7.7% as of today. That doesn't sound too horrible, but the same money in the S&P500 was 16.6%. The Magic Formula didn't even keep up with the small cap index, which attained 10.8% over the span.

So the Magic Formula did not meet the claim Joel Greenblatt makes in "The Little Book That Still Beats the Market". The claim is that if you buy five stocks from his screen every two months and hold each for one year, and keep that up for five years, you will beat the market.

I had not followed this thread, but appreciate you doing the legwork. Based on your findings, I’ll continue to stick with my broad-based index funds.

 

[sengsational]

I had not followed this thread, but appreciate you doing the legwork. Based on your findings, I’ll continue to stick with my broad-based index funds.

Probably a good idea, especially if doing this kind of trading isn't something you find "fun".

I was going to quit at this point (five years), but I've got it down to a reasonably short amount of time to run the numbers, so I'll keep going until I get sick of it, or find something more interesting to do that takes the place of it.

The small cap for the past year have been on fire, with 45% return, while the S&P was not bad at 24%. The random picks for the magic formula came in above the S&P, but well below the small cap indexes:

372 Days ending 08/24/2021|XIRR for Aug 2020 batch|XIRR 1887 days (all)|gain/loss (all)
Magic Formula Picks|

27.7%​

|

7.4%​

|

$36011​

|
US Small Cap Value Index (CRSPSCVT)|

45.3%​

|

10.3%​

|

$57400​

|
Vanguard Small-Cap ETF (VBR)|

45.8%​

|

10.5%​

|

$58293​

|
Vanguard S&P 500 ETF (VOO)|

24.1%​

|

16.0%​

|

$98085​

|

The details for the 27% return on the August picks:

Ticker|Executed price |Execution date |XIRR|
CRSPSCVT|

2958.32​

|08/17/2020 10:50|

45.3%​

|Benchmark August 2021 Sale
VBR|

172.54​

|08/17/2020 10:50|

45.8%​

|Benchmark August 2021 Sale
VOO|

411.72​

|08/17/2020 10:50|

24.1%​

|Benchmark August 2021 Sale
LEU|

24.51​

|08/17/2020 10:50|

48.7%​

|August 2021 Sale
ENDP|

2.65​

|08/17/2020 10:50|

-16.2%​

|August 2021 Sale
FOXA|

36.96​

|08/17/2020 10:50|

46.4%​

|August 2021 Sale
REGI|

49.57​

|08/17/2020 10:50|

23.1%​

|August 2021 Sale
VNDA|

16.01​

|08/17/2020 10:50|

36.5%​

|August 2021 Sale
ALL|||

27.7%​

|August 2021 Sale

And the random picks for the upcoming 12 months:

Ticker|Price|Date|
CRSPSCVT|

2958.32​

|08/24/2021 12:30|Benchmark
VBR|

172.54​

|08/24/2021 12:30|Benchmark
VOO|

411.72​

|08/24/2021 12:30|Benchmark
BGFV|

23.10​

|08/24/2021 12:30|August 2021 Picks
CTRN|

80.73​

|08/24/2021 12:30|August 2021 Picks
DPW|

2.45​

|08/24/2021 12:30|August 2021 Picks
FLGT|

92.07​

|08/24/2021 12:30|August 2021 Picks
ONEW|

42.45​

|08/24/2021 12:30|August 2021 Picks

 

[ERD50]

...

I was going to quit at this point (five years), but I've got it down to a reasonably short amount of time to run the numbers, so I'll keep going until I get sick of it, or find something more interesting to do that takes the place of it. ....

I hope you feel motivated to continue. I appreciate the real life test of one of these "systems". It just confirms my understanding that if something like this worked, it would soon be discovered and arbitraged away.

But I'd bet it's just a random walk, sometimes ahead, sometimes behind. I'm actually surprised it's done this poorly, and expect that in some other time frame, it would also outperform by this amount as well.

-ERD50

 

[sengsational]

... in some other time frame, it would also outperform by this amount as well.

Yeah, I think the time frame has a big impact. We've had a strong S&P 500 in the last 5 years, despite a few wiggles. I haven't compared various periods of small stock performance as compared to large cap over the times covered in Goldblatt's books, so just a gut feeling. If it wasn't "kinda fun", I wouldn't bother, but I like doing it.

 

[sengsational]

With the batch started about one year ago, the small cap indexes were very strong, similar to the previous August batch. The five picks from one year ago didn't keep up with the index, but managed to stay in the plus territory.

I found a bug in the formulas for benchmarks from the initial 6 roll-in purchases. I corrected it, but it didn't make much difference to the statistics.

348 Days ending 10/14/2021|XIRR for Oct 2020 batch|XIRR 1938 days (all)|gain/loss (all)
Magic Formula Picks|

6.6%​

|

7.3%​

|

$37235​

|
US Small Cap Value Index (CRSPSCVT)|

46.5%​

|

11.2%​

|

$61858​

|
Vanguard Small-Cap ETF (VBR)|

47.1%​

|

11.2%​

|

$62093​

|
Vanguard S&P 500 ETF (VOO)|

29.4%​

|

17.1%​

|

$105611​

|

Ticker|Executed price |Execution date |XIRR|
CRSPSCVT|

3031.67​

|10/13/2020 13:30|

46.5%​

|Benchmark October 2021 Sale
VBR|

176.04​

|10/13/2020 13:30|

47.1%​

|Benchmark October 2021 Sale
VOO|

406.46​

|10/13/2020 13:30|

29.4%​

|Benchmark October 2021 Sale
DLHC|

14.24​

|10/13/2020 13:30|

54.7%​

|October 2021 Sale
LFVN|

7.01​

|10/13/2020 13:30|

-47.8%​

|October 2021 Sale
MCK|

203.36​

|10/13/2020 13:30|

35.7%​

|October 2021 Sale
WSTG|

27.99​

|10/13/2020 13:30|

27.4%​

|October 2021 Sale
WW|

18.88​

|10/13/2020 13:30|

-24.2%​

|October 2021 Sale
ALL|

​

||

6.6%​

|October 2021 Sale

The new random picks:

Ticker|Price|Date|
CRSPSCVT|

3031.67​

|10/14/2021 15:30|Benchmark
VBR|

176.04​

|10/14/2021 15:30|Benchmark
VOO|

406.46​

|10/14/2021 15:30|Benchmark
FKWL|

6.14​

|10/14/2021 15:30|October 2021 Picks
LIFZF|

29.54​

|10/14/2021 15:30|October 2021 Picks
OVID|

3.66​

|10/14/2021 15:30|October 2021 Picks
SNBR|

85.46​

|10/14/2021 15:30|October 2021 Picks
SWBI|

21.69​

|10/14/2021 15:30|October 2021 Picks

 

[sengsational]

Almost broke even with the picks from 12 months ago, whereas the broader market and small cap indexes all did well.

365 Days ending 12/10/2021|XIRR for Dec 2020 batch|XIRR 1995 days (all)|gain/loss (all)
Magic Formula Picks|

-0.3%​

|

4.9%​

|

$24411​

|
US Small Cap Value Index (CRSPSCVT)|

26.1%​

|

10.9%​

|

$62408​

|
Vanguard Small-Cap ETF (VBR)|

26.7%​

|

11.0%​

|

$62603​

|
Vanguard S&P 500 ETF (VOO)|

24.7%​

|

17.9%​

|

$117647​

|

Ticker|Executed price |Execution date |XIRR|
CRSPSCVT|

3042.64​

|12/21/2020 12:00|

26.1%​

|Benchmark December 2021 Sale
VBR|

176.63​

|12/21/2020 12:00|

26.7%​

|Benchmark December 2021 Sale
VOO|

431.49​

|12/21/2020 12:00|

24.7%​

|Benchmark December 2021 Sale
APT|

5.22​

|12/21/2020 12:00|

-59.1%​

|December 2021 Sale
CHRS|

17.09​

|12/21/2020 12:00|

0.8%​

|December 2021 Sale
EME|

125.78​

|12/21/2020 12:00|

44.9%​

|December 2021 Sale
RPRX|

37.89​

|12/21/2020 12:00|

-14.4%​

|December 2021 Sale
VGR|

15.28​

|12/21/2020 12:00|

36.1%​

|December 2021 Sale
TUSK|

2.01​

|12/21/2020 12:00|

-91.1%​

|December 2021 Sale

ALL|

​

||

-0.3%​

|December 2021 Sale

Ticker|Price|Date|
CRSPSCVT|

3042.64​

|12/10/2021 00:00|Benchmark
VBR|

176.63​

|12/10/2021 00:00|Benchmark
VOO|

431.49​

|12/10/2021 00:00|Benchmark
AVIR|

8.02​

|12/10/2021 00:00|December 2021 Picks
BDSI|

2.61​

|12/10/2021 00:00|December 2021 Picks
CODX|

8.51​

|12/10/2021 00:00|December 2021 Picks
STZHF|

29.86​

|12/10/2021 00:00|December 2021 Picks
SURF|

5.48​

|12/10/2021 00:00|December 2021 Picks
|

.00​

|12/10/2021 00:00|December 2021 Picks

 

[OverThinkMuch]

Earlier you had one stock get removed from the stock market, and had cash waiting for the next period. One way to avoid the cash drag in that scenario is to make 6 picks each month, with the 6th being an alternate. If a stock gets acquired, the 6th pick steps in immediately to take over.

Have you compared the characteristics of these Magic Formula stocks to VBR? For example, do they have lower P/E and P/B ratios? Or smaller market caps? It might be interesting to see them compared, to find out how this group lost against the market.

 

[sengsational]

The average amount of cash is very small because if something does get liquidated (pretty rare) in one of the 6 batches, I don't wait to reinvest it in the original batch, but instead just reinvest it the next time there's a buy/sell in any batch (which is every 2 months). And although money can move from batch to batch, I do the XIRR on each position within the batch for the year, so it's still measured properly.

I compare to both VBR and US Small Cap Value Index (CRSPSCVT). Those have proven to track very closely, as one might expect. Have a look at the first table I post ever month for how those indexes compare to the random picks from this scheme.

One thing I think might explain why this scheme used to work, and now it doesn't is the relative popularity of index funds over time. Although VBR was created in 2004, I wonder how popular it was then, versus now. Same with 'total market' types of funds. Large cap indexes attracted a lot of capital before the "little book" was published, but I have a feeling that the same can't be said for small cap. So over the time after the second version of the book was published and now, I wonder if the small cap market became more efficient (or just inflated due to indexers "having to buy" as more capital was added).

 

[sengsational]

Last year's picks beat the indexes at 42% IRR. Still lagging horrifically, though, at 3.5% vs 10% for the small cap value comparison. The closed positions are coming in at 7%.

369 Days ending 02/22/2022|XIRR for Feb 2021 batch|XIRR 2069 days (all)|gain/loss (all)
Magic Formula Picks|

41.7%​

|

3.5%​

|

$17652​

|
US Small Cap Value Index (CRSPSCVT)|

12.9%​

|

10.1%​

|

$59819​

|
Vanguard Small-Cap ETF (VBR)|

12.8%​

|

10.2%​

|

$60115​

|
Vanguard S&P 500 ETF (VOO)|

16.0%​

|

15.6%​

|

$102865​

|

Ticker|Executed price |Execution date |XIRR|
CRSPSCVT|

2991.02​

|02/18/2021 15:30|

12.9%​

|Benchmark February 2022 Sale
VBR|

172.61​

|02/18/2021 15:30|

12.8%​

|Benchmark February 2022 Sale
VOO|

399.31​

|02/18/2021 15:30|

16.0%​

|Benchmark February 2022 Sale
ASO|

34.71​

|02/18/2021 15:30|

37.2%​

|February 2022 Sale
GIB|

82.90​

|02/18/2021 15:30|

7.1%​

|February 2022 Sale
GTX|

7.07​

|02/18/2021 15:30|

-1.0%​

|February 2022 Sale
IRWD|

10.88​

|02/18/2021 15:30|

16.3%​

|February 2022 Sale
UONEK|

4.27​

|02/18/2021 15:30|

150.1%​

|February 2022 Sale
ALL|

​

||

41.7%​

|February 2022 Sale

Random Picks:

Ticker|Price|Date|
CRSPSCVT|

2991.02​

|02/22/2022 10:44|Benchmark
VBR|

172.61​

|02/22/2022 10:44|Benchmark
VOO|

399.31​

|02/22/2022 10:44|Benchmark
AGEN|

2.57​

|02/21/2022 00:00|February 2022 Picks
LJPC|

4.17​

|02/21/2022 00:00|February 2022 Picks
MED|

176.95​

|02/21/2022 00:00|February 2022 Picks
TLYS|

12.94​

|02/21/2022 00:00|February 2022 Picks
ZUMZ|

44.44​

|02/21/2022 00:00|February 2022 Picks