As stated in an earlier thread, I recently bought The Little Book That Beats the Market by Joel Greenblatt. Greenblatt, in the book, gives an entertaining explanation of Value Investing and says that he has come up with a Magic Formula for determining which companies to invest in.
The website for the book is at Magic Formula Investing. Basically, he takes the company's EBIT(Earnings Before Interest and Taxes) and divides that by Net Working Capital plus Net Fixed Assets. The second component is EBIT divided by Enterprise Value(EV). EV is taken to be the market value of equity plus net-interest-bearing debt. To find MFI stocks, just go to the site, enter in your minimum market cap, and the number of companies to return. The top 25 companies will be high on both scores, RoC and EY.
For tax purposes, Greenblatt suggests buying 5-7 stocks every few months for 1 year, and then selling each stock group 1 year later. For tax purposes, he advocates selling winners a few days before 1 year, and net losses a few days after 1 calendar year.
My current portfolio:
- ASPV $20.10
Who wants to be part of the conclave?