Magic Formula Investing - results after 2 years
First blog post ever: I convinced myself I really needed to document my Magic Formula experience through CAPS.
After reading Joel Greenblatt's book The Little Book That Beats the Market, I decided to dedicate a portion of my (after-tax) portfolio to using the magic formula investing strategy. I maintain 30 stocks at one time (purchasing and selling 5 stocks every other month) from a magic formula screen of 30 stocks over $50 million market cap. I do not pick the stocks randomly, which may or may not be detrimental to my results. But this month marks 2 full years into MFI, and it has been a roaring success.
My overall 2-year return as of today is 30.4% compared to -21.4% for the S&P 500 had I invested all that money in a S&P 500 index fundat the beginning of Jan 2008...or +9.2% for the S&P 500 if I invested at the same times and dollar amounts as when I first bought into the magic formula stock. Either way, I am crushing the S&P 500 for the past 2 years. The comparsion to the -21.4% is probably more accurate, because I had all the money up front and would have just stuck it into a index fund and let it rideif I were not using the MFI strategy.
Details of all the stocks I bought and sold are below in a Google Doc - sorted by return. (I couldn't find an easy way to paste a clean table here) Sold positions are grayed out. I also have the results organized by purchase group, to show return as time passes.
I intend to continue to update this blog as well as make some magic formula CAPS picks to help document rationale and results. If nothing else, at least I can come back to it 5 years from now and try to figure out "What the hell was I thinking?"