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MagicDiligence (< 20)

Announcing MagicDiligence's own Magic Formula-style Stock Screener!



October 11, 2011 – Comments (0)

MagicDiligence now has its own version of the Magic Formula screen!

Anyone can view 3 pre-built screens for the current day from this page. These 3 screens - the top 50 stocks over 50 million market cap, top 50 over 1 billion, and top 30 over 3 billion - represent a nice cross section of small and larger cap picks.

For members, a full screener tool is also available. Currently this tool is pretty simple to use, very similar to the interface used by Greenblatt's official site. Simply enter in a minimum market cap and select one of the screen sizes (25, 30, 50, 75, or 100 stocks), click and examine the results. The screen will be updated daily with the previous day's closing stock prices, and financial data will be updated every weekend, keeping us at least as up to date as the official screen.

With a functionality virtually identical to the official site, you may ask the question: Why Bother? For several reasons:

Independence. Greenblatt launched Formula Investing to capitalize on the popularity of the Magic Formula strategy, and the official site's redesign a few years ago removed a lot of data in an attempt to further hide the exact methodology used to generate the listings. The next step could always be removing the free, official screen altogether. Having our own screen protects us against that possibility.

Transparency. The MagicDiligence Magic Formula screen lists the exact calculation of adjusted earnings yield and returns on capital. You can even use the Statistics Calculator to see how we come to the exact numbers. The official screen shows none of these things.

Flexibility. Currently, our tool adds current ratio as a measure of financial health. Additionally, you can sort by any column, including earnings yield, return on capital, and current ratio. Entries with qualitative research are linked. In the future, we could combine all kinds of additional data - dividend yield, revenue growth, Piotroski score, etc. - to provide an even more functional screen to MagicDiligence members.

Accuracy. Frankly, there are a number of stocks that, after analysis, I don't believe should be in the official MFI screens. MagicDiligence's results have been thouroughly examined for accuracy where they deviate from the official lists, using my own well-documented formulas for the MFI statistics.

Another question many may ask is: how well does it coorelate to the official listings? The answer is: quite well. The MagicDiligence Screener highlights in pink every stock that is part of one of the 3 official MFI screens tracked by MagicDiligence. In a one-to-one comparison, this is how we stack up (on October 10):

Top 50 over 50 Million: 72% coorelation

Top 50 over 1 Billion: 78% coorelation

Top 30 over 3 Billion: 63% coorelation (although 6 others have been recent official picks)

I have personally examined each and every mismatch and believe that MagicDiligence's results are accurate according to our calculations.

By color-coding the results, users can also see new and potentially interesting Magic Formula-style investments by looking at the entries in white. These are stocks that are not listed on the official screens, but have truly MFI-worthy earnings yield and returns on capital.

I hope you enjoy and find the screener to be useful. Please contact me if you have any problems or suggestions regarding this tool. Enjoy!


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