What is Return on Invested Capital? (ROIC) - Magic Formula Portfolio | Ep. 2

The Magic Formula Investing strategy relies heavily on the return on invested capital metric. But what is return on invested capital? ROIC aims to measure how much money a business returns from its own invested capital. Simply put, it is a measure of business quality. However, like any metric, it doesn't tell the whole story. This Magic Formula Portfolio series should provide some useful data on Joel Greenblatt's magic formula strategy in real time. We will see if such a high emphasis on return on invested capital is warranted, even if stocks make the list only from short term ROIC spikes. I will add $500 to the magic formula stock portfolio every month, and I will remove any stocks that are removed from the list each month. This should allow us to see the magic formula strategy performance in today's investing environment.

MAGIC FORMULA HOLDINGS

M1 FINANCE

FREE STOCKS

MORE FREE STUFF

FOLLOW ME FOR MORE CONTENT!
-TikTok: @jackduffley

#magicformula #stocks

Timestamps
0:00 - M1 Finance Magic Formula Series
2:31 - Magic Formula Performance Tracker Sheet
3:21 - Current Magic Formula Stocks (Pharma Stock Bias?)
3:47 - What is Return on Invested Capital?
9:16 - Portfolio Changes
10:31 - Copy the Magic Formula Portfolio on M1 Finance
11:30 - Last Month's Magic Formula Performance
12:27 - Magic Formula Stock Screener
13:57 - Return on Invested Capital (ROIC) Summary

_________________________________________________

Disclaimer:
This channel, and any communication stemming from it, while hopefully informative, should not be taken as financial or legal advice. Viewers should retain their own legal counsel or financial expert(s) before making their own decisions. If you need legal advice, please contact an attorney directly. If you need financial advice, please contact a Certified Public Accountant or a Certified Financial Planner or other licensed professional. You should assume all links posted above are affiliate links. I am an Amazon affiliate.

[Neil.Denize]

This is great idea for a series mate, I heard you mention it the other day on the podcast. It will be interesting to follow how it goes over the next year or two.

[themoneyflare]

Interesting experiment. I don't know much about the method but based on what you described I'm not a huge fan. Seems to be too highly concentrated in pharmaceuticals and I generally don't like these very inflexible rules-based styles of investing with no emphasis on macro or technical factors. It also assumes markets move on fundamentals which is not always true especially in this environment. Although I do expect value to outperform going forward so maybe the method will work well! I really don't know much about it so maybe I'm completely wrong. I'll be interested to see the results.

[RuurdvdZ]

Why do you remove the ones that are no longer on te list afther a month. You sould keep them for a year before you remove them, just dont add anymore if they are no longer on te list.