No Cash = Wait For Better Opportunities

When I decided to go with a 100% magic formula portfolio I made a commitment to find solid undervalued business with the idea to be 100% invested near the market bottom. So far the decision has been correct (knock on wood!). I based that decision on the idea that later on I would have to sell great stocks selling at average prices (BNI, PG) for great stocks selling at great prices (BA , and the stock to be named below).

Top 25

When I went on a buying spree, most of the stocks were ranked in either the top 50 or top 100 stocks with a minimum market cap of 2000 million. This was fine as I wanted to be 100% invested. Now that I am 100% invested, the only stocks I will consider purchasing are stocks ranked in the top 25 for companies with a minimum market cap of 50 or 2000 million (they usually overlap in between).

PG last man (woman?) standing

I purchased PG on June 30 as the stock price hit $60. I thought then it was TOO cheap and would provide some safety as consumers will not stop buying detergent. I plan to sell PG if another opportunity comes around or the stock hits $80 (my target price).

Buying Forest Laboratories (FRX)

According to Yahoo Finance, Forest Laboratories, Inc., together with its subsidiaries, develops, manufactures, and sells branded and generic forms of ethical drug products, and non-prescription pharmaceutical products. FRX currently appears on the magic formula screen for the top 25 companies with a minimum market cap of 2000 million. According to magicformulainvesting.com, FRX currently sports a 12% pre tax earnings yield and a ROIC greater than 100%. Calculating the numbers by hand, I get an earnings yield of 12.35 % and ROIC of 45%

Bruce Berkowitz Owns It

I had no idea. While checking out its P/E I found this story link stating Bruce Berkowitz owns FRX.  This by no means influenced my decision to purchase FRX but its great to know great minds think alike

Disclaimer: I own PG and BA, have limit order for FRX and have sell order on BNI