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Joel Greenblatt's MAGIC FORMULA Screen for Indian Stocks with Additional filtering for Quality.
#Thread
4th Upd -16Aug2020
Added HOW TO USE Magic Formula & some more updates, so do read till end.
#MagicFormula #Stocks #Indianstocks #JoelGreenblatt
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#Thread
4th Upd -16Aug2020
Added HOW TO USE Magic Formula & some more updates, so do read till end.
#MagicFormula #Stocks #Indianstocks #JoelGreenblatt
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Magic formula =Good Stocks
@Attractive
Price
Higher Earnings Yield = Undervalued Stock
Higher ROIC/ROCE= Better Quality
Rank stocks on ROIC/ROCE (1 for Highest ROIC/ROCE)
Rank on Earning Yields (1 for Highest EY)
SUM the Ranks
RE-RANK on Combined score (1 for Lowest)
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@Attractive
Price
Higher Earnings Yield = Undervalued Stock
Higher ROIC/ROCE= Better Quality
Rank stocks on ROIC/ROCE (1 for Highest ROIC/ROCE)
Rank on Earning Yields (1 for Highest EY)
SUM the Ranks
RE-RANK on Combined score (1 for Lowest)
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Additonal Filtering -
Good ROCE/ROIC over a period of time. Min 22%.
Attractive Earnings Yield > 10YrGSec(5.85%).
Good Operating Cash Flow over a period of time.
Good Asset turnover ratio/Management Efficiency.
Stable Promoter holding.
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Good ROCE/ROIC over a period of time. Min 22%.
Attractive Earnings Yield > 10YrGSec(5.85%).
Good Operating Cash Flow over a period of time.
Good Asset turnover ratio/Management Efficiency.
Stable Promoter holding.
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Eliminated Financials & Utilities Stocks
Eliminated Stocks with too much fluctuation in Year on Year (YOY) Qrtrly Sales & Profit Growth(<-150% combined)
Took ROIC & ROCE & listed both rankings combined with Earnings Yield. Choose either as per your comfort.
Explanation -
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Eliminated Stocks with too much fluctuation in Year on Year (YOY) Qrtrly Sales & Profit Growth(<-150% combined)
Took ROIC & ROCE & listed both rankings combined with Earnings Yield. Choose either as per your comfort.
Explanation -
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ROIC = Net Operating Profit After Tax(NOPAT)/Invested Capital
= Return from Core Business
= Profitability relative to capital actually invested
ROCE = Net Operating Profit(EBIT)/Capital Employed
= Profitability relative to total capital employed
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= Return from Core Business
= Profitability relative to capital actually invested
ROCE = Net Operating Profit(EBIT)/Capital Employed
= Profitability relative to total capital employed
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Scope of ROCE is more extensive than ROIC.
ROCE is pre-tax measure while ROIC is post-tax measure.
Capital employed = Share capital + Reserves + Borrowings
Invested Capital = Capital employed - Non-operating assets (like Cash or Cash equivalents)
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ROCE is pre-tax measure while ROIC is post-tax measure.
Capital employed = Share capital + Reserves + Borrowings
Invested Capital = Capital employed - Non-operating assets (like Cash or Cash equivalents)
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Earnings Yield = Net Operating Profit(EBIT) / Enterprise value.
How to Use Magic Formula ?
As per Greenblatt - Invest in Top 30 with 2-3 positions each month over a year
Each year, Re-balance Portfolio
Re-balancing Explanation ->
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How to Use Magic Formula ?
As per Greenblatt - Invest in Top 30 with 2-3 positions each month over a year
Each year, Re-balance Portfolio
Re-balancing Explanation ->
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Sell off losers one week before the year-term ends (Tax-loss harvesting)
Sell off winners one week after the year mark (Long term gain Tax-harvesting)
Repeat for 5 - 10 yrs.
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Sell off winners one week after the year mark (Long term gain Tax-harvesting)
Repeat for 5 - 10 yrs.
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Please refer Previous Series Update in below link -
12Jul2020
https://twitter.com/Coolfundoo/status/1284374250267312128?s=20
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12Jul2020
https://twitter.com/Coolfundoo/status/1284374250267312128?s=20
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Google Drive Shared link of
JG Greenblatt Magic Formula - 16Aug2020 https://drive.google.com/file/d/1etz0zFyxCTOMBIQZAaw3v8DTZL0T1vm7/view?usp=sharing
JG Greenblatt Magic Formula - 16Aug2020 https://drive.google.com/file/d/1etz0zFyxCTOMBIQZAaw3v8DTZL0T1vm7/view?usp=sharing
@gargdranil You can study this JG Magic formula #thread for another alternative strategy.
