Greenblatt Magic Formula Improved!

Olivier Dambrine 16 Feb 2016

We're proud to announce a significant improvement to our magic formula. By tweaking the calculations of enterprise value, excess cash, net fixed assets and net working capital, we have been able to achieve a much closer match with what's presented on the official site.

Magic formula US

Why use valueSignals instead of the general magic formula screen?

We've been supporting the magic formula since early 2010 and it's still one of our most popular screens. But you might be wondering why you need ValueSignals if there's a site like (MFI) that provides the ranking of the top 30/50 stocks for free.

Here's why:

  • MFI returns the list sorted in alphabetical order, leaving out the additional (but crucial!) details. They don't tell you the global score and ranking, neither do they show you the ROC or Earnings Yield for each company. A company like Argan, for instance, ranks high, but this is because they have an exceptionally high ROC of 1042%. You probably want to zoom in to this company before you invest in it. But there are plenty more companies like this in Greenblatt's list, and you probably want to remove them from the selection. In the ValueSignals screener, you can easily get rid of the company by setting a top ROC threshold of, for instance, 200%.
  • MFI doesn't allow you to set additional filters. One of the recommendations Greenblatt makes in his 'little book that still beats the markets' is to make the data more robust by, for instance, filtering out companies with a P/E lower than 5. It's effortless to add this filter to the ValueSignals screener. In fact, we added it as a standard setting in our magic formula template. The list published on the MFI site does contain stocks with a P/E of less than 5 or even negative, but it doesn't say which ones.
  • MFI only provides a list for 1 country, the United States. ValueSignals on the other hand covers more than 65 markets in 40 countries.
  • Finally, ValueSignals allows you to combine the Greenblatt Magic Formula with another momentum, value, or quality factor or a composite factor. Combining it, for instance, with the 6-month price index reduces the likelihood of picking a value trap. Or by combining it with the Piotroski F-Score, you can avoid the 'dogs with poor prospects.

We're convinced we had the best Magic Formula screener available, but it just got a lot better. Join today and see it in action! (We have a 10-day money-back guarantee)