Measured on a day-by-day basis of measurement (described here), our Spells performed well in 2016, with all 4 beating the S&P 500 by a substantial margin:
Magic Recipe Spell: +22.90%, exceeding the S&P 500 by 4.38%.
Deep Value Spell: +36.07%, exceeding the S&P 500 by 17.55%.
Quality Growth Spell: +22.83%, exceeding the S&P 500 by 4.31%.
Star List Spell: +37.14%, exceeding the S&P 500 by 18.62%.
You can see how the spells developed over the course of the year in the chart below. Note that we first launched them on February 19th of last year, so the performance is from that point:
For much of the year, the Quality Growth Spell was the best performer by a good margin, but you can see in the charts how the election results turned things around dramatically. The Deep Value Spell, full of beaten down energy stocks, soared, while Quality Growth, full of technology and healthcare stocks, dove.
Note that we measure these based on a daily performance basis! We fully acknowledge that it is almost impossible for an individual investor to rebalance daily, and that picking stocks from our Spells has a wide range of potential outcomes depending on which stocks one chooses and how often they are balanced. MagicDiligence makes no recommendations on portfolio size or frequency of rebalancing! The purpose of the Spells (and the Spell Caster tool) is to unearth stocks that are statistically "interesting" based on value, growth, and efficiency criteria against the rest of the market. Which ones you pick for research or investment, and how you trade them, is up to you.Magic Recipe Details
The Magic Recipe Spell, which is our approximation of Joel Greenblatt's Magic Formula strategy, did well, up 22.9% on a daily measure.
When examining the results, one thing that struck me about the Spell was the amount of consistency. A full 14 stocks - 28% of the total positions - were in the screen for all 216 trading days it was refreshed. 3 other stocks appeared for over 200 days, and 27 more were in it for over 100 days. All told, only 120 unique stocks appeared in the Magic Recipe Spell for the entire year, which isn't really that much turnover for a 50 stock screen.
We were able to uncover some solid performers for the year. Here were the top 5 - the performance shown is the stock's return from its first appearance in the Spell (shown) through the end of the year:
1) InterDigital (NASDAQ:IDCC): up 93.24% (2/19)
2) Thor Industries (NYSE:THO): up 92.35% (2/19)
3) Virgin American (NASDAQ:VA): up 85.10% (2/19)
4) MKS Instruments (NASDAQ:MKSI): up 80.03% (2/19)
5) Ubiquiti Networks (NASDAQ:UBNT): up 77.30% (2/19)
Here's to successful investing in 2017! Happy New Year!