Investing using the Magic Formula - March 2024

In summary, here's the update for March 2024:

1- January 2022: Invested $5K in 5 stocks.
2 - One of the stocks, BDSI, got acquired so ended up with 4 after liquidation.
3 - April 2022: Invested $5K plus the proceeds from BDSI in 6 stocks.
5 - July 2022: Invested $5K in 5 stocks.
6 - October 2022: Invested $5K in 5 stocks.
7- Continue to avoid Consumer Cyclical, Retail, and Healthcare sectors.
8 - Current portfolio contains 20 stocks.
9 - February 2023: Kept 2 stocks and sold 2 stocks from the January 2022 tranche. Invested proceeds from sale in 2 new stocks.
10 - May 2023: Kept 1 stock and sold 5 stocks from the April 2022 tranche. Invested proceeds from sale in 5 new stocks.
11 - August 2023: Kept 1 stock and sold 4 stocks from the July 2022 tranche. Invested proceeds from sale in 4 new stocks.
12 - November 2023: Kept 1 stock, and sold 4 stocks from the October 2022 tranche. Invested proceeds from sale in 4 new socks. Focused on technology stocks for better returns after poor results primarily from healthcare stocks.
13 - March 2024: Sold all stocks from the February 2023 tranche. Invested proceeds from sale in 3 new stocks. Started implementing D/E ratio check to avoid companies in bad financial situation after having one company go bust and lose all money.

Overall performance to date : Magic Formula -4.04%% vs S&P500 9.61%%

Please leave any questions or feedback below!

[abhijitbaner]

I have been investing in Magic Formula with good returns; I do 2 things - first I fix my min to billion $$$ companies & look at 50 stocks. From that 50 I look into the cash flow, profit & revenue; I like to see a straight line growth in these without much ups & downs (yes, I am risk averse) & choose only those that I like. Sometimes it is 15 sometimes it is 25'ish.
Second, once the list is fixed, I go into details & study these companies in great details trying to understand the business model - how they make money, who their competitors are, what their competitive advantage is etc. (just like a new CEO). The second step is quite subjective & I end up choosing somewhere between 7-10 stocks after this process of elimination.
Started this process while doing my MBA some 20 years back. I have never invested in TSLA or NVDA like stocks; beating the conventional market. Thru' Great Recession & COVID. It works, every year.

[QuantCompounding]

nice update! i think you should do this for at least 5 years to get some meaningful data. we’re at a similar point in our magic formula journey and i plan to keep going for a decade if possible 👌

[andreasjarl]

Thanks for the video, I hope you continue with the magic formula. Personally I would try to make as few adjustments as possible and I would not look at sectors for instance. I think the strength of the formula is to make you buy what is not popular (i.e. the sectors you do not want to buy). If you want to diversify, it is better to do it with multiple portfolios and/or strategies.

[baq]

I was about to start with the Magic Formula, but it doesnt look as good as I thought. How is it going now man? Hopefully its going uphill! I’ll continue reading books and need a better understanding before I enter the market. The book from Joel Greenblatt still thought me some valuable lessons.