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It would not be unfair to call Joel Greenblatt the modern-day Benjamin Graham. He has gained considerable recognition owing to his Magical Formula for Investing. He is the founder of Gotham Capital. Gotham Capital is one of the hedge funds with impressive returns over the years. Greenblatt has not kept his investment style a secret. He has authored 3 books explaining his investment philosophy. These books are: "You Can Be a Stock Market Genius," "The Little Book That Beats the Market" and "The Big Secret for the Small Investor."

The first two of his publications gained fanatical popularity. His basic philosophy is encapsulated by the Magical Formula. This very philosophy is highlighted in all of his publications. Recently, after rigorous research Joel Greenblatt updated his magic formula of quantitative research. We have discussed this in our article Joel Greenblatt’s Magic Formula on Steroids. Here are his top 25 Magic Formula stocks in his latest 13F filing:

Company

Ticker

Value (x1000)

Activity

Return Since June

SPDR S&P 500 ETF TR

SPY

28797

NEW

-11%

TERADYNE INC

TER

11542

484%

-19%

GAMESTOP CORP NEW

GME

10239

393%

-22%

DELL INC

DELL

9812

410%

-11%

GT SOLAR INTL INC

SOLR

9404

606%

-27%

VEECO INSTRS INC DEL

VECO

8878

740%

-25%

MICROSOFT CORP

MSFT

8406

450%

-3%

INTERDIGITAL INC

IDCC

8185

405%

86%

CUBIST PHARMA

CBST

7791

111%

-9%

SANDISK CORP

SNDK

7680

488%

-8%

CAREER EDUCATION

CECO

7542

437%

-23%

RAYTHEON CO

RTN

7396

425%

-18%

EMCOR GROUP INC

EME

7382

333%

-19%

ITT EDUCATIONAL SERV

ESI

7305

380%

-5%

AEROPOSTALE

ARO

7205

360%

-32%

LAM RESEARCH CORP

LRCX

7137

394%

-13%

FOREST LABS INC

FRX

7075

187%

-13%

NEUSTAR INC

NSR

7061

221%

-8%

APOLLO GROUP INC

APOL

7017

469%

3%

KLA-TENCOR CORP

KLAC

6858

363%

-10%

CISCO SYS INC

CSCO

6788

827%

3%

CEPHALON INC

CEPH

6678

199%

0%

IMPAX LABORATORIES

IPXL

6678

446%

-23%

MEDICIS PHARMA

MRX

6445

96%

-4%

LENDER PROCESSING SVCS

LPS

6419

414%

-13%

During the second quarter of 2011, Joel Greenblatt purchased SPDR S&P 500 ETF TR (SPY). He bought 218,211 shares of SPY with an average price of $131.92. SPY is valued at $28.79 million in his 13F portfolio. Since the end of June, SPY has lost 11%. Fund managers temporarily invest in index funds until they pick their stocks and build their positions. Before the first quarter of 2011, Ken Fisher had 1.3 million shares of SPY. However, during the first quarter ending March, he reduced it by 97.5% (view Ken Fisher’s top stock picks).

Interdigital Inc (IDCC) is Joel Greenblatt’s 8th largest holding. He owns around 200 thousand shares of IDCC. The company gained 86% since the end of June. Another investor who purchased IDCC at the perfect time is Robert Rodriguez. Robert Rodriguez and Steven Romick’s First Pacific Advisors added Interdigital Inc to their 13F portfolio during the second quarter (take a look at Robert Rodriquez’s stock picks).

KLA Tencor Corp (KLAC) lost 10% since the end of June. Joel Greenblatt has been quite bullish about KLAC during the first two quarters of 2011. In the first quarter he increased KLAC by 148%. Now in the second quarter, he further increased his holdings by 363%. As of now, he owns $6.85 million worth of KLAC. Jean-Marie Eveillard’s First Eagle Investment Management has the largest stake in the company. First Eagle Investment Management has around $3 million shares of KLAC.

Joel Greenblatt has managed to beat the market once again with his magic formula. These stocks lost 8.4% since the end of June vs. 10.5% loss for the SPY. We suggest investors follow Joel Greenblatt’s investment moves closely if they want to beat the market.

Source: Joel Greenblatt's Top 25 Magic Formula Stocks