5 Magic Formula Stock Picks for 2008

The following five companies appeared using a minimum market capitalization of 256 million returning 100 stocks. All five companies have pretax earnings yield of at least 10% and high pretax return on capital.

Accenture Ltd. (ACN) is a leading management consulting, technology services, and outsourcing company. Recently, Accenture was named one of Morningstar’s Three Top Value Creating Stocks. With a pretax earnings yield of 15% and pretax return on capital greater than 100%, Accenture represents great value.

American Eagle Outfitters Inc. (AEO) a retailing company, engages in the design, marketing, and sale of clothing in the United States and Canada. American Eagle has projected growth rate of 15% for the next 3-5 years. Currently, the stock trades at a P/E of 10. American Eagle Outfitters currently has pretax earnings yield of 18% and pretax return on capital of 75-100%.

Jackson Hewitt Tax Service Inc (JTX) provides computerized preparation of federal, state, and local individual income tax returns in the United States.Jackson Hewitt is expected to grow earnings 20%+ for the next 3-5 years. Currently, Jackson has an earnings yield of 10% and pretax return on capital greater than 100%. The stock trades at a P/E of 16 and a forward P/E of 11.

McGraw-Hill Companies Inc. (MHP) provides information services and products to the education, financial services, and business information markets worldwide.McGraw-Hill currently has a pretax earnings yield of 12% and pretax return on capital greater than 100%. The stock has a P/E of 13.

Pacer International Inc (PACR) operates as a non-asset based logistics provider in North America.With the U.S economy slowing down (and possibly heading into a recession), mr.market is dropping freight stocjks down. Pacer currently has a pretax earnings yield of 18% and pretax return on capital greater than 100%. Pacer currently has a P/E of 8 with a P/E of 7.

Disclaimer: I do not own any of the stocks mentioned above. Due your own due dilligance before investing any money.