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  • Using the Magic Formula With Dividend Stocks [View article]
    For those that are interested the so called "magic" formula is:

    Formula
    Establish a minimum market capitalization (usually greater than $50 million).
    Exclude utility and financial stocks
    Exclude foreign companies (American Depositary Receipts)
    Determine company's earnings yield = EBIT / enterprise value.
    Determine company's return on capital = EBIT / (Net fixed assets + working capital)
    Rank all companies above chosen market capitalization by highest earnings yield and highest return on capital (ranked as percentages).
    Invest in 20-30 highest ranked companies, accumulating 2-3 positions per month over a 12-month period.
    Re-balance portfolio once per year, selling losers one week before the year-mark and winners one week after the year mark.
    Continue over long-term (3-5 year) period

    DUH!
    Jul 15 09:22 am |Rating: 0 0 |Link to Comment
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