Comments on: Magic Formula Investing 101

By: DW

DW — Wed, 03 Feb 2010 03:24:06 +0000

“The funny thing about Wall St. is, it is full of idiots who will tell you AIG will go to $30 “because the options say so”. ”

Well… today AIG is worth 1$.

I guess they weren’t idiots after all…

By: Geremy

Geremy — Wed, 04 Mar 2009 20:29:07 +0000

Hey Alex,

What do you do if 1 of your stocks drop for example in 15% (without going up) do you sell it , or wait for the year to end

By: magic formula investing | Money World Channel

magic formula investing | Money World Channel — Fri, 31 Oct 2008 01:54:59 +0000

[...] [...]

By: tag

tag — Tue, 24 Jun 2008 00:37:31 +0000

March 24th, 2008 at 4:03 pm
I sometimes use the formula described in Professor Greenwalds Book ” Value Investing: From Graham to Buffett and Beyond ” But sometimes will rely on a low P/e approach. it has worked for me in the past and chances are it will work for me in the future. The funny thing about Wall St. is, it is full of idiots who will tell you AIG will go to $30 “because the options say so”. Or my favorite bearish argument for AIG, ” I am a retired floor specialist”.
Maybe Greenblatt considers EBITDA as normalized earnings?

Professor Greenwalds book goes into detail about normalized earnings.

might want to use the true graham model next time.. aig hit $30 today. eventually magic math by traders/anals comes to reality. you can not mix a buffy and graham model,, graham buys value and waits until it doubles or more and sells it to buffy who buys it on leverage the same as the re+banks clowns have been doing all the way down.

might want to shift your investing focus to ‘growth’ ,, especially anything growing DESPITE the economy.

By: alexg

alexg — Fri, 20 Jun 2008 01:51:53 +0000

Joseph,
its not my ranking screen. Someone over at Value Investing News provided the link while I was preparing the article. There is a post coming up on selling a stock so stay tuned

By: joseph

joseph — Thu, 19 Jun 2008 18:41:04 +0000

Great article and links. Can you please advise how often you update your ranking screen that is provided.(last was June 14 I believe). what are your thoughts about cashing out portion of the earnings after one year if there any if the stock is still on the buying screens recommendations. thanks

By: alexg

alexg — Fri, 02 May 2008 03:55:39 +0000

Great. You will encounter volatility though, so have patience.

By: Todd

Todd — Wed, 30 Apr 2008 22:09:24 +0000

Ahhhhh….told ya I was scandinavian. Thanks for the correction. I’m starting to track the top 50 (Market Cap 100mil) as of today. I’ll keep ya posted. By the way, how is the portion of your portfolio using this strategy working for you?

By: alexg

alexg — Wed, 30 Apr 2008 18:56:56 +0000

” From Yahoo finance I took the last four quarters of EPS Actual which were .17, .18, .48 and .93. I added them together and divided by 4 to come up with .42 EPS for the last year”

No need to divide. Adding them together would give you EPS for the trailing twelve months.

In the calculator insert 1.76 in Earnings Per Share last 12 months with your estimted growth rate (12.5, and 10% discount” and you should get $29.xx

By: Todd

Todd — Wed, 30 Apr 2008 16:28:24 +0000

Nice article…I have a question tho’. I tried the discounted cash flows calculator and am having problems. I used your example ARO. From Yahoo finance I took the last four quarters of EPS Actual which were .17, .18, .48 and .93. I added them together and divided by 4 to come up with .42 EPS for the last year. I plugged that in the Earning per share (last 12 months) section of the calc. Next I looked up Growth est for next 5 years. 17.5 – 5 = 12.5%. I plugged that in the calc next. for the next 5 years. I put leveling off at 0% like you recommended. I left 10% at the discount rate. Pressed calculate which gave me a result of 6.95 Stock Value per share. This is where I’m confused………you stated “The 12% growth for the next five years and a 10% discount rate would give me an intrinsic value of $28.00. Aeropstale’s 52 week low is $18.xx, providing a 34% margin of safety. How does the $6.95 stock value correlate to the intrensic value of $28? And waht do you mean by “intrensic value”? Looking forward to your response…..go easy on me…..I’m scandinavian…lol.