The Magic Hat portfolio on Stockopedia
(http://www.stockopedia.com/fantasy-funds/magic-hat-463/) is an experiment by me to see if a human can improve on a mechanical Greeblatt Magic Formula screen. I am trying to weed out “mistakes” that I feel the screening commits: unseasoned companies, scams, foreign companies (particularly Chinese), fishy accounting, and statistical quirks. Apart from that, I am agnostic as to the sector the company operates in, although I will try to avoid heavy concentration in any one sector. I will mostly apply “Strategic Ignorance”, by which I mean that I wont try to be clever in my stockpicking. My picking will be mostly mechanical.
There were two candidates for ejection this month: BSY (British Sky Broadcasting) and SMWH (WH Smith). BSY had a slightly lower Magic Formula score than SMWH. Also, some back-of-the-envelope calculations suggested to me that BSY was much closer to my estimate of its intrinsic value than was SMWH. So out it goes.
BSY returned 27.8% over its holding period since Feb 2012. The Footsie returned 16.1% over the same period. Not bad, but not outstanding, either.
Added to the portfolio was CNCT (Connect), which is a distributor formerly named Smith News. I have not much else to say, as the selection was mainly about the numbers.
The median earnings yield for the shares selected by Stockopedia for the Greenblatt screen was 17.1%. This is a slight reduction from last month, which was at 18%. All of the earning’s yields were at least 10%, however. This suggests to me that the market is offering good odds.
We shall see.
Happy investing to you all.
Mark Carter's blog 