Bob Misko

Exploring Joel Greenblatt’s Magic Formula for Picking Value Stocks

I have followed Joel Greenblatt for a few years. His first book, "How to Become a Stock Market Genius", was by far most informative than the "Magic Formula" (corney title but good book). Arn't we all looking for good companies at a cheap price? Isn't that the name of the game?
I have developed a similar screen that I use to sort these companies out. It focuses on FCF to EV and adds growth as a factor. Value is created by the ROIC being higher than the cost of capital. I also look for stocks with EBITDA margins either high (and likely to stay there) or improving.
There are a few others, but that is the jest of it. Good hunting!