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MagicDiligence (< 20)

MagicDiligence vs. Magic Formula in 2011

Recs

10

December 29, 2011 – Comments (0) | RELATED TICKERS: V , PWER.DL.DL

One of the most frequent questions I get is "How do MagicDiligence picks fare against the unfiltered Magic Formula® Investing (MFI) screens?".

It can be a difficult question to answer. While Formula Investing does run a few mutual funds that use the MFI methodology, they include only large cap stocks and do not map very well to the actual screen results from theofficial site, which is usually as much as 75% small-caps. The best way to answer the question is to take the actual "50 stocks over 50 million market cap" list from the MFI site on the day of each recommendation, average their results over a holding period, and compare it to the result of the MagicDiligence pick on that day.

This is the process used to generate the table at the bottom of this article, which displays the average results of the screen vs. the result of the recommendation on the same day. The 28 picks listed were stocks either newly recommended as Top Buys by MagicDiligence, or renewals of previous picks during 2011. The period measured is from the date of recommendation through market close on 12/28.

I'm happy to say that MagicDiligence outperformed the raw screen in 2011 by an average of about 3.7% per pick. 16 of 28 picks (57%) outperformed from the date of recommendation. Our best pick from the year was pick #8 - Visa (V) - which gained 33% vs. the screen's -18.6% showing for a 51.7% outperformance. The worst was pick #10 - Power-One (PWER) - which fell 52.7% vs. a 22% average drop for the screen.

MagicDiligence members can access an expanded version of this article which provides a little more commentary on the individual picks.

The results:

Recommendation,Rec,MFI,Relative
Pick #1,10.1%,-20.9%,31.0%
Pick #2,-22.4%,-21.6%,-0.8%
Pick #3,-24.6%,-18.9%,-5.7%
Pick #4,-2.5%,-24.5%,22.0%
Pick #5,-57.6%,-24.4%,-33.2%
Pick #6,16.5%,-1.3%,17.8%
Pick #7,-2.2%,-19.0%,16.8%
Pick #8,33.1%,-18.6%,51.7%
Pick #9,15.3%,-18.6%,33.9%
Pick #10,-52.7%,-22.0%,-30.7%
Pick #11,-2.9%,-16.9%,14.0%
Pick #12,-28.0%,-17.5%,-10.5%
Pick #13,-14.8%,-9.7%,-5.1%
Pick #14,-13.2%,-14.3%,1.1%
Pick #15,-44.6%,-15.0%,-29.6%
Pick #16,9.3%,-13.4%,22.7%
Pick #17,13.6%,1.9%,11.7%
Pick #18,-3.2%,2.7%,-5.9%
Pick #19,19.2%,4.8%,14.4%
Pick #20,11.8%,5.9%,5.9%
Pick #21,13.8%,12.5%,1.3%
Pick #22,-22.7%,2.4%,-25.1%
Pick #23,4.7%,2.4%,2.3%
Pick #24,25.5%,1.9%,23.6%
Pick #25,-20.9%,-0.8%,-20.1%
Pick #26,9.0%,5.2%,3.8%
Pick #27,4.8%,5.2%,-0.4%
Pick #28,0.2%,3.0%,-2.8%
 

 

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