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Magic hat blog

Proforma

Proforma: The MHP (Magic Hat Portfolio) on Stockopedia (http://www.stockopedia.com/fantasy-funds/magic-hat-463/) is an experiment by me to see if a human can improve on a mechanical Greeblatt Magic Formula screen. I am trying to weed out "mistakes" that I feel the screening commits: unseasoned companies, scams, foreign companies (particularly Chinese), fishy accounting, and statistical quirks. Apart from that, I am agnostic as to the sector the company operates in, although I will try to avoid heavy concentration in any one sector. I will mostly apply "Strategic Ignorance", by which I mean that I wont try to be clever in my stockpicking. My picking will be mostly mechanical. A summary of transactions can be found at https://blippy.github.io/money/greenblatt.htm As of January 2020, I have adjusted my strategy a little. Instead of selecting stocks from the Greenblatt Screen, I will select them from Stockopedia's Screen Of Screens, and look for a StockRank (TM) in the 90's. I won't rule out selecting something from the Greenblatt Screen, though. With the boilerplate now out the way, let's move on to the actual content ...

Archives

2020

7 Dec VLX in, JET2 out
5 Nov SOM stays in
5 Oct WYN in, TMG out
7 Sep IGG in, DMGT out
5 Aug FXPO stays in
6 Jul MGNS stays in
5 Jun CTO stays in
4 May PAY stays in
6 Apr BATS in, SCS out
3 Mar SLP in, COST out
6 Feb CGS in, BKG out
6 Jan NXR in, ERM out

2019

5 Dec DTG reduced
6 Mov SOM stays in
7 Oct TMG stays in
5 Sep DMGT in, RMG out
5 Aug FXPO stays in
5 Jul MGNS stays in
5 Jun CTO stays in
6 May PAY stays in
5 Apr SCS stays in
5 Mar COST stays in
5 Feb BKG stays in
8 Jan ERM in, BATS out

2018

  • 2018-11-05 SOM stays in
  • 2018-10-06 TMMG in, CCT out
  • 2018-09-03 RMG in, HVN out
  • 2018-08-06 FXPO stays in
  • 2018-07-05 MGNS in, LSL out
  • 2018-06-01 CTO in, EPWN out
  • 2018-05-06 PAY in, WIN out
  • 2018-04-05 SCS in, RM. out
  • 2018-03-05 DFS out, COST in
  • 2018-02-05 BKG in, STY out
  • 2018-01-05 BATS SPO in, XLM out
  • 2017

  • 2017-12-05 DTG stays in
  • 2017-11-07 SOM stays in
  • 2017-10-05 CCT stays in
  • 2017-09-05 HVN stays in
  • 2017-08-07 FXPO in, IBST out
  • 2017-07-05 LSL in, MCGN out
  • 2017-06-05 EPWN in, KCOM out
  • 2017-05-04 WIN stays in
  • 2017-04-05 RM. stays in
  • 2017-03-06 DFS in, IHG out
  • 2017-02-06 STY in, LAM out
  • 2017-01-05 XLM in, ERM out
  • 2016

  • 2016-12-06 DTG stays in
  • 2016-11-07 SOM in, GSK out
  • 2016-10-05 CCT stays in
  • 2016-09-08 HVN in, CRE out
  • 2016-08-06 IBST in, AIR out
  • 2016-07-06 MCGN stays in. I was on holiday, so there is no blog article for this month
  • 2016-06-06 KCOM in, QRT out
  • 2016-05-06 WIN stays in
  • 2016-04-05 RM stays in
  • 2016-03-07 IHG in, FLYB+PRES out
  • 2016-02-01 LAM increased, SHOS sold, DTG reduced
  • 2016-01-05 ERM in, KAZ+INDV out, DTG trimmed

    2015

  • 2015-12-04 DTG stays in
  • 2015-11-05 GSK in, ITE out
  • 2015-10-05 CCT in, LRM out
  • 2015-09-03 CRE in, CNCT out
  • 2015-08-05 AIR in, NPT out
  • 2015-07-02 MCGN in, XCH out
  • 2015-06-03 QRT in, HNT out
  • 2015-05-05 WIN stays in
  • 2015-04-13 RM stays in
  • 2015-03-05 FLYB+PRES in, IRV out
  • 2015-02-04 LAM+SHOS in, REDD out
  • 2015-01-06 KAZ+INDV in, DGO out

    2014

  • 2014-11-05 ITE in, Median EY: 16.5%. Rejected: JSI Chinese
  • 2014-10-06 LRM in, SMWH out. Median EY: 20.5%
  • 2014-09-05 CNCT in. BSY out. median EY: 17.1%
  • 2014-08-06 NPT in. Median EY: 18%.
  • 2014-07-05 WIN in, RB out. Rejected: CTEK Chinese, INM anomalous, RMG anomalous, QPP fishy.
  • 2014-06-06 HNT in, IMT out.
  • 2014-05-06 XCH in, MJW out.
  • 2014-04-07 RM in, MRW out. Rejected: FLYB anomalous
  • 2014-03-05 IRV in, BA out.

    05-Oct-2012 Lecture notes

    A good business has high returns on tangible capital (after-tax EBITA/(net PP&E + W/c)) i.e. ROTC well above 10%.

    Greenblatt looks for where upside is 5X downside - big potential gains, limited losses. Fore example, price is 40, downside is 35, upside is 65+ (down 5, up 25). Focus on best opportunities - only own 5-8 stocks at one time, and hold for 1-5 years, i.e. only invests in one or two stocks per year.

    Be patient. He seldom adds to positions if they decline - buy right first time, because there are no do-overs.

    xlink


    Valueprax's Review of Quantitative Value

    Valueprax presents a review of the book that tries to improve on the Magic Formula.

    xlink

    Links to other sites

    Unclassified

  • Columbia University Videos - series of 6 videos from 2005/6 (Alternative link)
  • Graham and Doddsville - my synopsis of of Greenblatt's comments on the newsletter published around Oct 2012.
  • How to beat the Magic Formula Article on Greenbackd. Added 18-Dec-2012
    Author:  Mark Carter
    Created: 10-Oct-2012
    Updated: 05-Jan-2021