What Is Magic Formula Investing? The Joel Greenblatt Systematic Strategy
For centuries, investors have searched for a systematic, foolproof method for finding high quality, undervalued stocks. Many value investing strategies are complex, requiring deep dive financial statement analysis that intimidates the individual investor. But in 2005, hedge fund manager Joel Greenblatt introduced a refreshingly simple, rules based system in his book, The Little Book That Still Beats the Market. He called it Magic Formula Investing.
The premise is deceptively simple: Buy good companies at cheap prices.
The “Magic Formula” is a quantitative value investing strategy that distills a complex analysis into two easy to calculate financial ratios. It aims to automate the difficult process of finding high quality…
