The MHP (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. A summary of most of my Magic Hat articles can be found on the web page http://www.markcarter.me.uk/money/greenblatt.htm This will allow you to see, at a glance, what shares have been bought and sold in the past, as well as what shares have been rejected from consideration and why.
KCOM is ejected from the portfolio by rotation, having lost about 17%. Its shares fell off a cliff in late November 2016 on the back of poor interim results. Personally, I would have sold the shares on such an announcement, but that’s not how this portfolio operates. The shares have traded sideways since then, so it would not have been a bad idea to sell. I have been itching to eject this share from the portfolio for many months.
EPWN (Epwin Group) joins the portfolio. Epwin Group Plc is a manufacturer of extrusions, moldings and fabricated low maintenance building products, operating in the repair, maintenance and improvement, new build and social housing sectors. I selected it on the basis of Stockopedia’s Greenblatt Magic Formula Screen, eliminated those companies with a StockRank less than 90, and selected the stock with the highest Value score.
The portfolio has done well for itself, with 3 of the 12 shares having more than doubled. In my books, that’s good.