Magic Hat Portfolio: CRE in, CNCT out

My Magic Hat fantasy fund, which is mostly mechanical, is on Stockopedia: http://www.stockopedia.com/fantasy-funds/magic-hat-463/ Its goal is too achieve above capital returns greater than the FTSE350 and Magic Formula screen using a portfolio of about 12 shares selected from Stockopedia’s Greenblatt Screen. It relies on “strategic ignorance”, which means that I do not put much thought into company fundamentals. Historical archives can be found here:
http://www.markcarter.me.uk/money/greenblatt.htm

Both the Magic Hat and Greenblatt screen have done significantly better than the FTSE 350 over the last 1 and 2 years. The Footsie is down 8.5% over 2 years, which may come as a surprise to some. The market has experienced a correction since late April this year. We have not had a bear market for some time.

CNCT (Connect) leaves the fund as it’s year is up. CRE (Creston) replaces it. “Creston PLC is a United Kingdom-based marketing communications company, which delivers a range of digital technology-based marketing solutions to blue-chip clients”. It is fully listed, and is in the Media & Publishing industry. It has a PE of 10.6, and a yield of 3.08%. It has a Stockopedia Value score of 84, Quality of 84, and Momentum of 99, giving it an overall StockRank of 99. Looks good.

Remember, the Magic Hat is largely a mechanical portfolio selected from candidates within the Greenblatt screen. It is an exercise to see if human input can improve on the results. The results are largely the same, although the Magic Hat fund has far less volatility, despite having far fewer shares.

I think investors can improve their odds by staying away from foreign companies and companies that do not pay a dividend. I also think you stand a better chance with non-AIM companies. Look at the momentum ranks, too. There’s a few on there with momentum ranks of 10 or less. You should treat these companies with a high degree of suspicion.

Once such company is (IBPO) iEnergizer, which runs call centres. It has a momentum score of 0. It has a market cap of £36m, and an Enterprise Value of £95m. That is terrible gearing. It is listed on AIM – naturally – and does not pay a dividend. Despite increasing revenues from $35m in 2010 to $141m in 2015, its net profit has gone from $119m to $6m. The shares have lost nearly 86% since floatation. Pretty ropey old garbage, by the looks, and best avoided.

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About mcturra2000

Computer programmer living in Scotland.
This entry was posted in Magic Formula Investing. Bookmark the permalink.

One Response to Magic Hat Portfolio: CRE in, CNCT out

  1. Mike Rawson says:

    Hi Mark,

    I’ve submitted this post to the UKFinanceOver30 sub-reddit.

    Going forward I plan to track the Magic Hat portfolio on there. Hope that’s OK.

    https://www.reddit.com/r/UKFinanceOver30/

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