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.
RM leaves the portfolio by rotation. It has a Stockopedia stock rank of 97, and passes four of their screens. If I held in my real-life portfolio, I would not be in any rush to ditch it.
Furniture company SCS enters the portfolio. It appears on the Greenblatt screen, has a stock rank of 99, price to free cashflow of 3.8, and net cash. Its EV/EBITDA is 1.5, which is extraordinarily low. After the fiasco that was DFS in the portfolio, there’s no way that I would be bold enough to say that this one can’t miss. Still, it looks a good bet. Let’s hope the whole economy doesn’t crash, or some-such.
The MHP has underperformed the FT350 over a 1 week and 1 month period, but has beaten it handsomely over longer timeframes. My personal portfolio seems to have taking a right caning this year, so let’s hope I’m not reduced to eating cold dogfood.
Stay safe out there.
Mark Carter's blog 