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Showing 1-12 of 12 posts in this discussion
Initial post: Aug 14, 2006, 10:02:15 AM PDT
Ted Graham says:
Has anyone see any follow-up studies on this book?

In reply to an earlier post on Oct 4, 2006, 11:34:12 AM PDT
Last edited by the author on Oct 4, 2006, 11:34:46 AM PDT
I tried his fagicmormula ... here are the results to date:

I bought 20 stocks. Two quarters later, i have lost 25 percent of my capital and only 8 of the original 20 stocks are still on his list today!

I wrote asking for an explanation but haven't heard anything. Good Luck!!

In reply to an earlier post on Feb 12, 2007, 10:58:56 AM PST
Hyok Lee says:
Well, two quarters is pretty short term. Can you tell us what has happened since the time of this post? If you've sold your positions, can you tell us what happened to the stocks you've sold?

In reply to an earlier post on Feb 22, 2007, 10:23:26 AM PST
P. Wells says:
An entire chapter of the book is devoted to having patience and faith in the system while you're tanking in the short term. The formula works over many many years, but not necessarily over months.

In reply to an earlier post on Apr 2, 2007, 1:23:45 PM PDT
Last edited by the author on Apr 2, 2007, 1:29:23 PM PDT
The approach you describe is NOT the one recommended in this book! (Maybe that is why he didn't reply). I had a different experience:
1. I started buying 30 stocks as he recommended, buying them a few at a time every couple months, until I had accumulated the position over a year's time. I'm about 80% of the way there now.
2. I won't judge performance until 5 years, as he indicates. He was emphatic that the "magic formula" will continue working even though he has published the "secret", precisely because many will try it but won't have the patience to stick with it when the going gets tough. You seem to be an example of what he predicted.
3. I actually did write him with a question at one point and was pleasantly surprised to receive an answer, since he is obviously a wealthy man who doesn't need to spend time on reader questions. My question made it evident that I had read the book. I also had done a fair bit of online research (Google his name and "magic formula" and you'll get quite a few hits, and you can find notes from presentations he has made to various groups which provide some additional details about his approach, as well as his motivation for writing the book).
4. The fact that 16/20 of your purchased stocks are no longer on the list means nothing about the quality of the original recommendation. It just means they aren't in the top tier anymore. They could have dropped out because: (a) you are using too abbreviated a list [they aren't ranked in order of preference, just alphabetical]; (b) they have advanced and are no longer "cheap"; (c) they may have undergone a reduction in quality (seems unlikely for 16/20 of the list!); (d) they are still good stocks but others are even better and so displaced them in the "top 25" or "top 50" or whatever number you used. The book and website descibes how to use the screening tool and what to do when stocks fall off the list (or stay on it) after the recommended one year hold time.
5. Depending on the minimum capitalization you selected in his website screen, you probably bought a lot of microcap stocks. It shouldn't surprise you that if you buy 20 microcaps all on one day (no diversification over time), you could see significant volatility in the months ahead.
6. Since I started this program, my internal rate of return (as reported by Quicken) between May 2006 and end of March 2007 was 39% (after subtracting commissions, which were substantial on my small test account). I've had a couple stocks tank badly, a couple bigtime winners, and a host of decent performers. BUT--don't take that as meaning anything! Again, you should judge results only after following his program for a few years (i.e., 5).

In reply to an earlier post on Jun 13, 2007, 7:15:16 PM PDT
Last edited by the author on Jun 13, 2007, 7:16:13 PM PDT
Austin Texas says:
i appreciate your post and read the book as you do. I started a portfolio in February 2007 adding about 4 stocks a month. My rate of return in this 5 month period looks like it could annualize north of 20 percent. I don't think this is nearly enough time to make conclusions but the logic and the means of choosing stocks along with the statistics of a portfolio over time make this a strategy worth spending some time with. I will look forward to your results and provide a detailed posting on mine in early 2008.

In reply to an earlier post on Sep 27, 2007, 8:57:02 AM PDT
K. Bradley says:
well, I'm about 2 years in at this time...followed his advice to a T. Bought about 25 stocks...sold the losers around the one year mark to help with tax purposes. Held the winners for just past the 1 year mark, to avoid cap gain taxes. Dollar cost averaged them into my portfolio...did it all, guys. I've gotten trounced by the market. After 2 years, I've seen maybe a 10% return on my stocks while the broad index(I would compare it to the Vanguard Total Stock Index fund) has returned more than 20%.

YES, I understand his points about needing to stick with his program. I guess I have a problem with that...he provides very clear data from the past 17 years where his formula beat the heck out of the market averages EVERY YEAR. No, not only cumulatively. EVERY YEAR. Go look at your book tonight...you'll see. So, I follow his program and I am the only exception in 18 years? Come on...this formula is more about data mining than anything else...IE-what if I came up w/ a "formula" from the last 5 years saying to buy small cap stocks. Sure, the data would certainly support buying small cap stocks....does this give you a "formula?" I don't think so.

Overall, no issue w/ a strategy that buys stocks on the cheap with good returns on capital. Saying a "formula" exists is a bit misleading.

In reply to an earlier post on Nov 14, 2007, 1:25:22 PM PST
www.magic-formula-investing.blogspot.com

In reply to an earlier post on Dec 5, 2007, 1:04:07 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 Dec 5, 2007, 1:04:48 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 Dec 9, 2007, 11:15:31 PM PST
JoBoy46 says:
I think the strategies in Timothy Sykes' "An American Hedge Fund" are much better than those in this book. Granted they're more speculative, but he did turn $12k into $2 million in 4 years--those are the kinds of returns I'd like to have!

In reply to an earlier post on Jan 24, 2008, 8:15:58 PM PST
Jim Ludlow says:
go to his site. he lost it all! easy come easy go.
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Participants:  11
Total posts:  12
Initial post:  Aug 14, 2006
Latest post:  Jan 24, 2008

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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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