February 2009
February 28, 2009 –
Weekly roundup of stocks moving in and out of the Magic Formula Investing screen.
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February 23, 2009 –
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RELATED TICKERS: MDP
, EME
, PCR
Every so often, MagicDiligence compiles a list of Magic Formula stocks sorted by their dividend yield, price-to-sales ratio, and price-to-book ratio for investors that like to use those metrics. The result is a list of attractive value stocks for additional research. Here are the top 10 in each of the three metrics. [more]
February 21, 2009 –
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RELATED TICKERS: ADBE
, NWS
, CSCO
Weekly roundup of stocks moving in and out of the Magic Formula Investing screen.
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(this article contains lists and/or tables that do not format in the CAPS blogging system)
February 20, 2009 –
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RELATED TICKERS: SOHU
, BIDU
, SINA
Note: Sohu.com is not an official Magic Formula stock, but a foreign stock with Magic Formula characteristics as identified by Magic Formula Investing Europe. [more]
February 17, 2009 –
Not long ago, MagicDiligence reviewed Mary Buffett and David Clark's Warren Buffett and the Interpretation of Financial Statements and concluded that, while possibly useful for beginners, experienced stock investors would dismiss the book as simplistic and adding nothing new. The review also mentioned that a good alternative for more experienced investors looking to add to their knowledge is Pat Dorsey's The Five Rules for Successful Stock Investing. Today we'll take a look at that book.
The author, Pat Dorsey, is currently the Director of Equity Research for Morningstar. Morningstar has historically been known for their 5-star scale of mutual fund ratings, but several years ago began applying the same scale to individual stocks. Since Morningstar's focus is on durable competitive advantage, the firm's investing philosophy correlates very well with that of the Magic Formula and of MagicDiligence. That makes the book particularly relevant and much of my stock analysis is based on techniques outlined in it. [more]
February 14, 2009 –
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RELATED TICKERS: ACN
, BR
, VCLK
Weekly roundup of stocks moving in and out of the Magic Formula Investing screen.
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(this article contains lists that do not format in the CAPS blogging system)
February 12, 2009 –
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RELATED TICKERS: HPY
, V
, MC
Heartland Payment Systems (HPY) is a bank card payment processor to many small merchants in the United States, mostly restaurants and retailers. By volume, Heartland is the 6th largest in the U.S., and one of the fastest growing. A credit card processor, for those unfamiliar, provides merchants with the ability to accept credit cards as payments, connecting the card terminal with the card issuer to verify the transaction, then moving the funds from the issuing bank to the merchant's bank account.
As I was researching Heartland, it was well on it's way to being named a Magic Formula Top Buy. Taken as a business, Heartland has it all. A focus on transparent fees, with no hidden charges so typical of the industry, has helped Heartland grab market share from the bigger players like First Data (DATA). Sales have grown at a compounded 20% per year over the last 5 years, and were continuing at a similar rate this year. Cards continue to grow as a form of payment, and this trend is set to continue. Payment processing firms benefit from high switching costs... most businesses are very leery about switching processors once they have one in place. And Heartland is in fine financial shape. Net debt is only about $30 million. Free cash flow is strengthening as the company completes it's in-house processing system rollout. And MFI return on capital has been steady and solid, if not spectacular, at around 40%. With strong growth, moat, and financial standing, Heartland seems to fit the bill as a top notch MFI stock [more]
February 09, 2009 –
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RELATED TICKERS: AZN
, EBAY
, MELI
Magic Formula Investing, as described in Joel Greenblatt's The Little Book that Beats the Market, is a simple strategy, but has some caveats. First, due to the fundamental differences in business model, Greenblatt throws out bank and insurance stocks. Also, and perhaps more frustrating to some investors, is the fact that all foreign based stocks and American Depository Receipts (ADRs) are tossed out as well. The main reason for this is that international accounting standards are, well, not standardized yet and comparing the accounting of foreign firms to domestic ones is not always apples-to-apples. Adding to the complexity is the volatility of exchange rates from foreign currencies to American dollars, further skewing results. Instead of trying to tackle these problems, Greenblatt kept things simple and just discarded them.
For many investors, this makes the strategy less attractive. Virtually every money manager and economics professor has espoused the necessity of owing at least a portion of your portfolio in foreign issues. There are several reasons for this. The main one is that several emerging economies are growing GDP at a much faster rate than the U.S., providing ample organic growth opportunities. Foreign stock mutual funds have outperformed domestic funds in nearly every time frame over the last 15 years, according to Lipper. By not owning foreign stocks, your portfolio is not optimized to take advantage of the growing world economy. [more]
February 07, 2009 –
Weekly roundup of stocks moving in and out of the Magic Formula Investing screen.
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(this article contains lists and or tables that do not format in the CAPS system)
February 05, 2009 –
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RELATED TICKERS: MAXY
, AMGN
Original article [more]
February 02, 2009 –
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RELATED TICKERS: PG
The final entry in the Financial Statements Series, this one lists 10 red flags to look for when examining a company's financial statements. Conversely, the lack of these red flags usually indicates a well-run and transparent company. [more]
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