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.
EPWN (Epwin) leaves the portfolio by rotation, having lost 33% during its year in the portfolio. Its Stockopedia StockRank is 95, so for all I know, it’s still a good stock to hold. Its share price to free cashflow is approaching 10, and debt looks reasonable, so it may be in quite good value territory is the price goes down much more.
Construction and Engineering company CTO (T Clarke) enters the portfolio, having net cash, a P/FCF of 7.3, and a StockRank of 94. Looks good. It seems to have wafer-thin profit margins, which might put people off.
Well, that’s me for the month. The portfolio change is a little earlier than usual, because I’m taking a much-undeserved holiday to Majorca. Take care, and stay safe out there.