Comments on: Magic Formula Ranking Using Portfolio123

By: tom

tom — Fri, 25 Jul 2008 23:45:33 +0000

just found this post today… was wondering if you ever used the portfolio123 website to backtest a MFI-ish approach and what your results were?

By: Million Dollar Goal » Carnival of Personal Finance #45

Million Dollar Goal » Carnival of Personal Finance #45 — Mon, 24 Apr 2006 04:36:51 +0000

[...] Magic Formula Ranking Using Portfolio123 – An attempt to recreate the Joel Greenblatt’s Magic Formula using Portfolio123. [...]

By: Top Stories on Fat Pitch News - Fat Pitch Financials

Top Stories on Fat Pitch News - Fat Pitch Financials — Sat, 15 Apr 2006 11:52:12 +0000

[...] Magic Formula Ranking Using Portfolio123 [...]

By: Market Participant

Market Participant — Tue, 11 Apr 2006 07:42:54 +0000

I think you are making this too complex. Here’s how I calculate ROC and all that other stuff.

Capital Base = (Assets -(Cash+Acc Payable)) :: This comes from the accounting identity that Assets == Liabilities + Owners Equity. Cash on hand isn’t an asset involved in operations, and unpaid bills arent really capital that has been contributed to the company.

NOPAT = Income from Operations – Tax paid = Net Operating Profits after tax:: This represents all the Profits that can be distributed to providers of capital (I.e shareholders and lenders).

NOPAT/Capital Base == Return on Capital == Income available for capital providers/Assets used in operations

Enterprise Value == Book Value of Debt + Mkt Value of Equity – Cash :: This is what it would cost you own the company with other claims on it. NOPAT/EV == Economic P/E

Approximate Cost of Capital == Interest Expense + Book value of Equity*(5 Year
AA Bond Yield*SQRT(3))

NOPAT/(Approximate Cost of Capital) should be > 1.

By: Magic Formula Portfolio123 Screener - Fat Pitch Financials

Magic Formula Portfolio123 Screener - Fat Pitch Financials — Sun, 09 Apr 2006 03:18:58 +0000

[...] In addition to ranking stocks by the two factors in the Magic Formula, there are several criteria that Joel Greenblatt has developed to screen out companies before any ranking occurs. [...]

By: Weekend Reading List - Fat Pitch Financials

Weekend Reading List - Fat Pitch Financials — Sat, 08 Apr 2006 12:26:04 +0000

[...] News : Saturday, April 8th, 2006 « Magic Formula Ranking Using Portfolio123 [...]

By: George

George — Fri, 07 Apr 2006 18:12:54 +0000

Ric -
The Portfolio123 website automatically meshes together the two rank ordered lists. I set the two ranks to be equal weight and the website does the rest. There is no need for Excel. If I was using a standard screening tool on a free site, I would have to do it in Excel but this is not needed in Portfolio123.

By: Ric Denton

Ric Denton — Fri, 07 Apr 2006 15:49:30 +0000

Very nice piece of work. I was going to try to do something similar in using the AAII Stock Investor Pro Software. From what you have done, I am sure you realize you will need to take the two rank ordered lists of stocks, one list for each factor, and mesh them together using (likely) a macro from Excel. This is easy to do. Once you get the correlation with the Magic Formula, it opens the door to expand the list to up to say 300 stocks or so. There could be value in doing this, at which point one could do some subfiltering to see if any improvements are possible.

By: George

George — Fri, 07 Apr 2006 02:34:00 +0000

I’ll be posting my correlation with the MFI website in my next post. This post was getting rather long, so I decided to split up the discussion over several posts.

By: chet

chet — Fri, 07 Apr 2006 01:39:42 +0000

what is your % correlation with the MFI website?

By: Anonymous

Anonymous — Thu, 06 Apr 2006 20:42:17 +0000

Magic Formula Ranking Using Portfolio123…

My attempt to replicate Joel Greenblatt’s Magic Formula Ranking system using Portfolio123….