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Post Your Real Returns Here


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Showing 1-19 of 19 posts in this discussion
Initial post: Jan 9, 2007 5:05:04 AM PST
Gadgester says:
Come on, guys, let's post your real-world returns here from following the methodology in this book. Especially if you rated this book 4 stars or more.

To start, I have 22 stocks picked from his website. The portfolio has been disastrous, especially with the recent steep drop in MOT (Motorola). Currently I'm down by about 15% (DJIA has returned about 20% in the same time period). As you can see, I'm not a happy camper at all.

Post your returns here. Please, don't fake things up.

In reply to an earlier post on Apr 2, 2007 1:35:51 PM PDT
You can see my more detailed post in the "Follow-up Studies" section. However, between May 2006 and end of March 2007 Quicken shows my internal rate of return after commissions to be 39%. I'm happy with that! But don't judge the method on a short-term basis or if you don't follow his recommendations on time and stock diversification.

BTW, it would be more helpful if you would post the start/end time of your "test" for which you are reporting returns.

I didn't buy MOT, but did get a couple other lemons in my portfolio that have lost >50%. But these were more than made up for by the many winners.

In reply to an earlier post on May 2, 2007 5:45:10 AM PDT
Gadgester says:
Today is May 2, 2007. Since my initial posting a couple of retail stocks in my "magic formula" (man, someone's got to sue the guy for this over-hyped name) portfolio has boosted the overall return, but I'm still flat to slightly down since I started the portfolio a year ago. In the meantime, the Dow has gone through the roof (again). I guess I'm just super unlucky? FYI I use his website to pick the stocks with market cap $500mm or more (lower cap stocks have serious liquidity problems and you could get killed on the spread). I then use MSN MoneyCentral's Stock Scouter to help me pick from Greenblatt's top 25 list.

In reply to an earlier post on Aug 1, 2007 10:28:25 AM PDT
Gadgester says:
8/1/07: took a huge loss on VCI which I bought a year ago. also took a moderate loss on TBL. of the 7 "magic formula" stocks I bought a year ago, 6 were down as of 7/31/07.

In reply to an earlier post on Dec 5, 2007 9:13:20 AM PST
Last edited by the author on Dec 5, 2007 1:03:49 PM PST
B. Joseph says:
I bought 5 stocks on 1/9/06 (EGY, JAKK, FORD, ISSC, CALL) and 7 stocks on 3/6/06 (KG, GBEL, INTX, IVII, LII, PNCL, PWEI).

On 5/9/06 bought PLAY, WLDA, VPHM, RAIL, WON, UNTD, KFY.
On 7/9/06 bought SCC, ALDA, DLX, MTEX, ORCT, ELOS.
On 9/19/06 bought ASPV, BVF, CVCO, WNR, LRW, OVTI.

All stocks of equal dollar value. Total return as of 9/22/07 was 21% vs. 16% for the S&P.

In reply to an earlier post on Jan 5, 2008 4:17:49 PM PST
I recently read the book and want to try the formula. I am completely new to the concepts and basics of the stock market. I have a couple of doubts though.

1) When you buy stocks - it means buying some shares of that particular company? correct? I'm confused b/w shares and stocks...
2) I don't want to and frankly I can't start by making a huge investment in the formula. So can I start with lets say investing a small amount $250 every other month (similar to what you indicated you have done)?
3) Also, looking at rates for buying and selling on various trading sites - I was kind of worried with the transaction expense.....wonder if you can share your experience.

Amit

In reply to an earlier post on Jan 6, 2008 6:39:21 AM PST
B. Joseph says:
1. You buy shares of the specific company. Shares are also called equities or stocks.
2. You can set up a brokerage account, say Scott Trade. They charge about $7-8 per trade. So if you plan on investing $250 every other month, say 5 stocks for $50 each, the transaction costs itself will eat up your return. So I would guess you will need to invest a mininum of $5000 every other month to make it worthwhile.

In reply to an earlier post on Mar 3, 2008 10:08:18 AM PST
For Real says:
I began a little over a year ago and so far my portfolio (21 stocks) is down about 13%... Can anyone help me do better???

In reply to an earlier post on May 2, 2008 6:27:38 AM PDT
Gadgester says:
Bought KG (King Pharma) a year ago for $22; it was one of the top picks on magicformula's website. Today it's trading at $9. Also lost big on ABC, another top magicformula pick. This thing does NOT work!

In reply to an earlier post on May 2, 2008 11:59:20 AM PDT
B. Joseph says:
You need to follow the formula to the letter, you need to do this over 3-5 years, and you will not be successful every single year.

In reply to an earlier post on May 23, 2008 6:59:20 AM PDT
D. Regan says:
I am new too.
You have to educate yourself everyday.
I joined AAII and Betterinvesting both require a small annual fee but have great websites and montthy publications for new investors.
You will find a lot of investing books are very wordy and tough to read, one best that is not too hard to get thru that i recommend to everyone is " Buffettology"
A good website to go to for beginners information is "Investopedia.com"
A way to start investing without a lot of money is thru a Dividend reinvestment play that some of the companies have available. Its call " drip"
Hope this helps. Good luck!

In reply to an earlier post on May 26, 2008 6:08:10 PM PDT
J. McAuliffe says:
I am curious how your portfolio is doing now, and how long you have been holding? As the book says it make take 2,3, 5 years to see the returns they talk about. Also, after a year what did you sell and what did you pick up?

In reply to an earlier post on Oct 22, 2008 4:34:44 AM PDT
B. Joseph says:
My returns for 2006-07 has been posted here earlier.

Returns for 2007-08: On 1/07 bought VRGY, CAW, CRYP EPIQ. On 3/07 bought FCX, FDG, LRCX, TCK, BBSI. On 5/07 bought BPT, GNI, FTO, IVAC, PPD, AVCI. On 7/07 bought DPZ, PBT, VALU, ICFI. On 9/07 bought VPHM, RDYN, USMO, FTD. On 10/07 bought PCU, AXCA, GIB, DLX. Total return as of 10/10/08 was -3.7% vs. -35% for the S&P.

In reply to an earlier post on Dec 22, 2008 10:17:37 AM PST
[Deleted by the author on Dec 22, 2008 10:18:19 AM PST]

Posted on Feb 18, 2011 8:11:48 AM PST
Gadgester says:
I have to say I was just really unlucky, or at least I think luck was a factor behind my big losses using the "magic formula." I followed the strategy from 2006 to 2008, when I lost my job. According to the updated edition of the book, there, on p. 155, the "magic formula" universe had a good year in 2006, flat in 2007, down almost 40% in '08, and almost doubled in '09. So between the time I started following the strategy in '06 and when I sold most of my holdings for cash in mid-2008, the theoretical portfolio was probably flat. But I had a double-digit negative total return, I think somewhere south of -25%. I now have a couple stocks left in the portfolio; they dropped so much in price that it wasn't even worth selling them, and still not.

Does anyone want to offer me some comforting words? :)

In '09 I put my whatever spare cash I had in index funds, mixing domestic and foreign, and I think I did almost as well as the "magic formula," without the stress, the need to track buy/sell dates, and any worries over taxes or how to enter a large number of trades manually into tax software without errors...

Really hope to hear from other Amazon readers of the book who followed the strategy and who's willing to be honest about sharing their results... thanks.

Posted on May 18, 2011 6:47:27 AM PDT
Last edited by the author on May 9, 2013 10:14:51 AM PDT
34%. I first bought stocks using the magic formula at the end of 2007. It's about 3.5 years later, now, and my annualized return on that account so far is 34%. I pay $7 per trade through Scottrade. I did start with an investment amount that was large enough to not be eaten up by trading fees, and I think it would be extremely difficult to use this formula with a small account. I generally hold about 21 stocks, simply because the number divides evenly by three. I tend to make adjustments 3 times per year rather than the 4 times per year suggested in the book, but that's the only real difference between what I do and what the book says. I do some very basic company research before buying the stock, just to make sure the price isn't low because CNN just announced that the CEO stole all the company's money and fled to Tahiti. And I also try to make sure my entire portfolio doesn't lean too heavily toward a particular sector (ex: pharmaceutical). Those are really the only ways my own brainpower comes into play; Basically, I just follow the plan. This self-managed portfolio has significantly outperformed our other portfolios managed by fidelity and vanguard. I do not "fiddle" with the account on the inbetween days. If one of the stocks is tanking, I let it tank. I have been surprised at how may tanking stocks manage to rebound within the year. Over the last several years, a handful of tanking stocks did not rebound, and I took a loss on those sales. However, those losses were more than made up for by other stocks in the portfolio that did quite well. And an overall, annualized return of 34% is..."quite satisfactory."

Update May 2013: I'm still using the formula. My annualized return over the last 5.5 years is approximately 20%, now. I have grown more socially conscious about what stocks I buy. I do not, for instance, buy stock in cigarette-manufacturing companies. Perhaps my returns suffer from this a wee bit; I don't know. But I'm happy with my good karma, and my returns are still totally amazing. Again, that 20% is an *annualized* return. Overall, my investment has more than doubled. You can compare these numbers to the annualized returns for the S&P or the Dow, which I believe are coming in somewhere in the ballpark of 3% for this same time period. Thank you Mr. Greenblatt. We are grateful for your insight, and we will try to pay it forward.

Posted on Aug 26, 2013 5:56:42 PM PDT
G. Estrada says:
I have lost a lot. A lot.

Posted on Feb 18, 2014 8:46:40 AM PST
Last edited by the author on Feb 18, 2014 8:49:22 AM PST
Dave O says:
According to Quicken, since staring with MF in 10/1/2007, my IRR has been 16.09%. However, last year, I redirected about 2/3 of my investments into the Formula Investing's FNSAX fund (now converted into Gotham Fund's GENIX). Including that portion of the investment also, my IRR goes up to 17.20%. I would add (and recommend) that early on I subscribed to Magic Diligence dot Com. That site takes stocks from the Magic Formula screen and then performs due diligence on the companys to make sure they are not in the screen for the wrong reason. They also provide company updates and early-sell recommendations if a company has gotten to the point where the additional potential returns no longer make it wise to hold the stock for the full year (basically that the stock is at full value). I have been fairly happy with the recommendations from that site. I found them originally after following a link that was something like "why bad company's get into magic formula" listing five examples. My first set of stock picks before reading the article had all five examples! For example, Heely Skates that were in a post-fad failure. Idearc that was spun off with a ton of debt load (and was a dead business anyway - yellow pages), etc. Both of these companies were in the magic formula screen, neither had any prospect of recovery, and both were screened out with the research of magic diligence dot com. If you are thinking to try this approach, definitely check out that site as a guideline for which stocks to buy within the strategy. As I mentioned above, I also recently started purchasing the mutual funds that are designed to follow the strategy. Mostly because I believe the author has "secret sauce" that is not in his book, but that he applies to money that he directly manages. I was curious to see how these funds would perform next to a direct stock-selection approach. So far, so good, but I'm curious to see if the new GENIX fund performs in proportion to its very high expense ratio.

In reply to an earlier post on Feb 18, 2014 9:07:08 AM PST
B. Joseph says:
I have money in GARIX which is Gotham's Absolute Return Fund.
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Participants:  11
Total posts:  19
Initial post:  Jan 9, 2007
Latest post:  Feb 18, 2014

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The Little Book That Still Beats the Market
The Little Book That Still Beats the Market by Joel Greenblatt (Hardcover - September 7, 2010)
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