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