{"id":43807,"date":"2013-11-05T10:22:49","date_gmt":"2013-11-05T15:22:49","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=43807"},"modified":"2013-11-05T10:22:50","modified_gmt":"2013-11-05T15:22:50","slug":"familar-names-on-the-magic-formula-list","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/11\/05\/familar-names-on-the-magic-formula-list\/","title":{"rendered":"Familar Names on the Magic Formula List"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a><\/p>\n

I\u2019m always a little skeptical of any stock market screen called a \u201cmagic formula,\u201d but I do like to consult Joel Greenblatt\u2019s screener<\/a> by that name from time to time.<\/p>\n

Greenblatt, who made the screen famous in his book The Little Book that Beats the Market<\/i> <\/a><\/strong>ranks stocks using two criteria:<\/p>\n

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  1. Valuation, as measured by the earnings yield (defined by Greenblatt as EBIT \/ Enterprise Value)<\/li>\n
  2. Profitability, as measured by Greenblatt\u2019s preferred metric, Return on Capital<\/li>\n<\/ol>\n

    There is really nothing \u201cmagical\u201d about it.\u00a0 It\u2019s simply a screen that looks for highly-profitable companies trading at cheap prices.\u00a0 And good analyst can use the list as a starting point for further research.<\/p>\n

    With that said, I want to highlight a handful of well-known stocks that made the cut on the screen this week:<\/p>\n\n\n\n\n\n\n\n\n
    \n

    Company<\/strong><\/p>\n<\/td>\n

    		Ticker<\/strong><\/td>\nPrice date<\/strong><\/td>\nMost Recent Financials<\/strong><\/td>\n<\/tr>\n
    Apple<\/td>\n\n

    $<\/span>AAPL<\/a><\/p>\n<\/td>\n

    		\n

    10\/30\/2013<\/p>\n<\/td>\n

    		\n

    9\/30\/2013<\/p>\n<\/td>\n<\/tr>\n

    Cisco Systems<\/td>\n\n

    $<\/span>CSCO<\/a><\/p>\n<\/td>\n

    		\n

    10\/30\/2013<\/p>\n<\/td>\n

    		\n

    7\/31\/2013<\/p>\n<\/td>\n<\/tr>\n

    Coach Inc<\/td>\n\n

    $<\/span>COH<\/a><\/p>\n<\/td>\n

    		\n

    10\/30\/2013<\/p>\n<\/td>\n

    		\n

    9\/30\/2013<\/p>\n<\/td>\n<\/tr>\n

    Microsoft<\/td>\n\n

    $<\/span>MSFT<\/a><\/p>\n<\/td>\n

    		\n

    10\/30\/2013<\/p>\n<\/td>\n

    		\n

    9\/30\/2013<\/p>\n<\/td>\n<\/tr>\n

    \n

    Smith & Wesson<\/p>\n<\/td>\n

    		\n

    $<\/span>SWHC<\/a><\/p>\n<\/td>\n

    		10\/30\/2013<\/td>\n\n

    7\/31\/2013<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

    As you might expect from any list of stocks on a value screens, all of these companies have \u201cissues.\u201d\u00a0 We all know that Apple\u2019s growth is slowing and that its product lineup isn\u2019t as innovative as it was under Steve Jobs.\u00a0 Cisco and Microsoft have had a hard time adjusting to the mobile era.\u00a0 Coach is struggling from weakness in its core market, \u201caspirational\u201d middle-class American women.\u00a0 And Smith & Wesson is facing slower sales in the years ahead, as a lot of would-be buying was forward by fears of new government gun control.<\/p>\n

    Yet all of these companies are wildly profitably, all have very low debt and very little risk of financial distress, and all but Smith & Wesson pay a respectable and growing dividend.<\/p>\n

    As you rebalance your portfolio in the final months of 2013, give the Magic Formula stocks a look.\u00a0 Over any reasonable investment time horizon, \u201ccheap and profitable\u201d is a winning combination.<\/p>\n

    Sizemore Capital is long CSCO and MSFT. This post first appeared on TraderPlanet<\/a>.<\/p>\n

    Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management.\u00a0<\/em>Click here<\/em><\/a><\/strong>\u00a0<\/strong>to receive his\u00a0<\/em>FREE 8-part investing series that will not only show you which sectors will soar but\u00a0also which stocks will deliver the highest returns. The series starts\u00a0November 5 and\u00a0includes a FREE copy of his\u00a02014 Macro\u00a0Trend Profit Report.<\/em><\/i><\/p>\n

    This article first appeared on Sizemore Insights as Familar Names on the Magic Formula List<\/a><\/p>\n

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