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Magic Formula Investing

In August we began monitoring the performance of the strategy described in Joel Greenblatt's book "The little book that still Beats the Market". The stock screener on the Magic Formula Website is used to select a portfolio of 30 stocks with a market cap of 50 million dollars on the first trading day of each month. Each basket of stocks will be held for a one year period after which they are sold. (The system is designed to maximize after-tax returns for gains to become long-term by holding them for a year, and selling any losses before the one year holding period is reached.)  The performance of each of the monthly basket of stocks is compared to the S&P 500 and Nasdaq indices at the end of each month in the charts below.

At the end of November, the August 1st portfolio shown was down 17.49% compared to the S&P 500 and Nasdaq which were only down -5.61% and -4.82% respectively. The September portfolio is similarly underperforming the market although has recovered after being down 17.26% after the first month.

The October portfolio was beating the market indices handily at the end of November.

The November portfolio also beat the market after the first month.

The stocks held in each portfolio and the current performance can be viewed on the strategies page under the “Magic Formula” link at