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.
STY (Styles and Wood) leaves the portfolio by rotation, even though it still qualifies in the Greenblatt screen. It has a Stockopedia StockRank of only 68. So I wanted to eject it. Homebuilding and Construction Supplies company BKG (Berkley Group) enters the portfolio as it has a rank of 98, and is also a Greenblatt candidate.
I am quite happy with the way that the portfolio has been going. A healthy chunk of outperformance is due to the last year, though. I was reading a blog from Woodford the other day, and I get the feeling that value shares are well-placed compared to momentum. If that is correct, then we could still see a significant outperformance by Magic Hat over the year, given that it is tilted towards value.
The market has taken quite a pasting recently, and I have drawn a support line. I think we’re due for a bounce tomorrow, given the heavy recent drawdown. We shall see. How things will pan out over the year, I’m not so sure. The market has had a good innings, so maybe we’re due for a down year this year.
I see on Stockopedia’s site that the S&P 500 is down 4.1%. Really? I’m astounded. It seems that only two of the stocks ended up on the day. Someone is having a laugh. The sell-off seems overdone in the short-term.
Stay safe out there.
@EricUKinvestor informed me yesterday that SPO is trying to sell itself. Since the MHP is not really a special situations fund, I decided to replace SPO with BATS (Brit American Tobacco). It should be a fairly safe investment.