In magic Formula need some solution


#1

what should we do if with In few days after selling a stock, the same stock came into screener with combination of roic and earning yeild? Should we avoid or buy again?

Example:
On 01-01-2017 I bought a share of abc company because it came to the no 1 rank using magic formula of joel greenblatt. After one year 01-01-2018 I sold the stock with 30% loss. When again I searched for magic formula stock to buy again I find that abc company is no 1 rank according to magic formula. At that situation what should we do?? buy it once gain or avoid it and go for the 2nd rank stock?


#2

All the companies listed in that Magic formula screener are dabba stocks, why would you even burn your hands again?


#3

A little learning is a dangerous thing, get some education on investing principles, I am live example of Magic Formula Investor and handsomely gained 24% YOY( from year April 2012 till July 2018) returns till now. Magic Formula is a wonderful tool but you have to know the usage of the tool properly. It’s based on buying wonderful companies at a fair price (value investing strategy), sometimes it takes times to show its potential, you cannot get a baby in a month by impregnating 9 women.


#4

There is a valid reason why they call it “dumb money”, This is one such example.


#5

I understand. But till now I got the answer what I asked here? Can you help me by giving the naswer of my question?


#6

For that I want to know whether you are following exact method of Mr. Greenblatt as he described in his book? For magic formula to work you have select at least 15 to 20 stocks on the basis of return on capital and earnings yield. One secret I want to share here is by using magic formula I identified two multibaggers stocks :grinning: ( slightly I changed/modified one component of that formula and boomed I got my multibagger stock).


#7

Yes, I followed the formula define in his book.I buy 2 stocks every month and sell 2 stocks every month.I also remove high debt and high pledged stocks. My question is

Example:
On 01-01-2017 I bought a share of abc company because it came to the no 1 rank using magic formula of joel greenblatt. After one year 01-01-2018 I sold the stock with 30% loss. When again I searched for magic formula stock to buy again I find that abc company is no 1 rank according to magic formula. At that situation what should we do?? buy it once gain or avoid it and go for the 2nd rank stock?


#8

Sorry you are not following the strategy proper way. As in the book Mr. Greenblatt says you should make a portfolio of upto 30 stocks based on criteria and then sell losers just before the completion of the year and sell winners after a year completion to get taxation benefits. Based on 2 stocks portfolio it’s highly risky proposition. Also don’t expect all stocks will perform uniformly, some stocks may give negative return and some stocks may give positive return but overall portfolio should perform well. Also don’t think magic formula has something “magic” in it. :grinning:.


#9

Also I beg you perdon, can you clarify which stock you mean by ABC company? ABC India(it should not be as the price almost flat in that time period) or Aditya Birla Capital(it should not be as it wasn’t available on 01.01.2017).


#10

I think he means BSE stock


#11

I think you did not read my post properly. I told I buy 2 stocks every month and sell 2 stocks every month. I always have 12*2=24 stocks in my port.And abc company is just an example just a symbol not original company. Till now I did not get my answer.:pensive:
First one year I only bought 2 stocks each month.
after one year there is total 24 stocks. now I sold 2 stocks which I bought 1 year ago and again buy 2 new stocks.
But still now no body is answer the situation what should I do?
Example:
On 01-01-2017 I bought a share of abc company because it came to the no 1 rank using magic formula of joel greenblatt. After one year 01-01-2018 I sold the stock with 30% loss/profit. When again I searched for magic formula stock to buy again I find that abc company is no 1 rank according to magic formula. At that situation what should we do?? buy it once gain or avoid it and go for the 2nd rank stock?


#13

In such a case you have to look deeper into that particular stock, if there is any changes in its fundamentals or business model you may consider dump it and go for second rank stock, otherwise you can continue with the stock.


#14

Thanks. This the information I want for.