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MagicDiligence (< 20)

Magic Formula Investing Weekly Roundup 8/21/2011



August 21, 2011 – Comments (2) | RELATED TICKERS: ATVI , FCX , LEA

Magic Formula Investing (MFI), as described by hedge fund manager Joel Greenblatt in The Little Book that Beats the Market, consists of ranking stocks by earnings yield (cheap) and return on capital (quality), adding the rankings together, and buying from the resulting lists. Below are stocks that have moved into, and dropped out of, 3 of the MFI screens used by MagicDiligence:

Entering the 50 over 50 million screen:

Medicines Company (The) (MDCO)
China North East Petroleum Holdings Ltd (NEP)
Oshkosh Corp (OSK)
Protein Design Labs Inc (PDLI)
Strayer Education Inc (STRA)
Unisys Corp (UIS)
Veeco Instruments Inc (VECO)

Dropping out of the 50 over 50 million screen:

Aeropostale Inc. (ARO)
Majesco Entertainment Co (COOL)
GameStop Corp. (GME)
Great Northern Iron Ore Properties (GNI)
Gentiva Health Services Inc (GTIV)
Motorcar Parts of America Inc (MPAA)
Transition Therapeutics Inc (TTHI)

Entering the 50 over 1 billion screen:

Aeropostale Inc. (ARO)
Activision Blizzard Inc (ATVI)
Sotheby's (BID)
Cubist Pharmaceuticals Inc (CBST)
Progress Software Corp (PRGS)
Veeco Instruments Inc (VECO)

Dropping out of the 50 over 1 billion screen:

Deluxe Corp (DLX)
Dun & Bradstreet Corp (The) (DNB)
Gilead Sciences Inc (GILD)
Eli Lilly and Co (LLY)
Lorillard Inc (LO)
Valassis Communications Inc. (VCI)

Entering the 30 over 3 billion screen:

Activision Blizzard Inc (ATVI)
Freeport-McMoran Copper & Gold Inc. (FCX)
Lear Corp (LEA)

Dropping out of the 30 over 3 billion screen:

DeVry Inc (DV)
Lockheed Martin Corp (LMT)
Lorillard Inc (LO)

2 Comments – Post Your Own

#1) On August 21, 2011 at 3:54 PM, XXX222 (< 20) wrote:

I would strongly reccommend against investing in ARO. Their market is based on the 13-17 age demographic whose income is highly dependent on parents. They make expensive cloths. In a rough economy people don't want to show off, especially kids. Plus, there is an underlying fashion trend towards modernistic and minimalistist, not towards the flashy branding that ARO promotes.

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#2) On August 22, 2011 at 10:08 PM, MagicDiligence (< 20) wrote:

It is a difficult industry, no question.  However, I believe ARO plays at the less expensive end of the market.  AEO and especially ANF are the big dollar names.

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