By The Sizemore Letter<\/u><\/p>\n
Last month, I ran a screen of \u201cMagic Formula\u201d stocks<\/a><\/strong> from hedge fund guru Joel Greenblatt<\/a>\u2019s<\/strong> screener.<\/p>\n I recommend you read the original piece<\/a><\/strong> because I explain what the Magic Formula is and how it works.\u00a0 But for the sake of simplicity, I can summarize it like this:\u00a0 the Magic Formula is a list of highly-profitable companies trading at cheap valuations.\u00a0 <\/b><\/p>\n The list isn\u2019t fool-proof, of course, and it is subject to lag times in information.\u00a0 For example, profitability (based on Greenblatt\u2019s favorite metric, return on capital) is based on the most recent quarterly filings, and a lot can change from quarter to quarter.<\/p>\n So, the Magic Formula screen should be viewed as a great starting<\/i> point for your investment research and as a great fishing pond for potential value plays.\u00a0 But you shouldn\u2019t assume that every stock on the list is a bargain.<\/p>\n With that said, I re-ran the screen for August with the same parameters as July: top 30 Magic Formula stocks with a market cap of $1 billion or more.<\/p>\n We have several familiar names that have been on the list off and on for the past several years\u2014Microsoft (<\/span>MSFT<\/a>)<\/span>, Cisco (<\/span>CSCO<\/a>)<\/span> <\/b>and Lorillard (<\/span>LO<\/a>)<\/span>,<\/b> for example.\u00a0 Dell (<\/span>DELL<\/a>)<\/span>,<\/b> which\u2014as I noted last month\u2014is tied up in a fight for control of the company between founder Michael Dell and a group of sharesholders led by Carl Icahn<\/a>, also made the cut.<\/p>\n On a list of 30 names, 25 were unchanged from July.\u00a0 But we did have five subtractions and five new additions:<\/p>\n