Value Investing Pro

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I’ve been a bit busy with work and school which have prevented me from updating the site like I would like to, but nevertheless the show must go on.

Thoughts on the market

Even though I might be inactive from  the site, it doesn’t mean I don’t have an  eye on what’s going on. I continue to  look for value stocks and I continue to screen the magic formula on a weekly basis. Now, this is a scary market for a couple reasons. Number one, the market is up a tremendous amount from its March lows (about 65%). I have been saying this for a couple of months and it looks like we been stuck in neutral. Secondly, inflation is creeping up while unemployment doesn’t seem to be picking up.

Magic Formula Investing Experiments

I will be running a couple of experiments on Marketocracy.com and will be reporting on them on the site. I’m convinced the magic formula investing system works, but i’m curious if it could be broken down further and keeping the performance and automation in tact. Speaking of which, i’m starting to believe following the system as its laid out in the book is the best way to go with this.  The problem I run into when waiting for fat pitches to come by is the lack there of fat pitches in a rising markets. This became extremely obvious in the past couple of months as cash became an anchor. One could then make the argument of purchasing selectively on a continuous basis. That seems to work. But, one thing I have noticed is the performance of the stocks that weren’t purchased often outperform chosen stocks.  The perfect example is biotechs, which are often the first stocks to get excluded when considering a purchase due to their volatile nature. Well, these ugly monkeys might be your next double or take-over. What happens is these companies appear on the magic formula screen after a HUGE drop, usually from a blockbuster drug coming off the market, disappointing lab results, analyst downgrades,etc.. But as time goes on, management will often appeal the FDA, get back to the drawing board, discover other drugs, or get taken over. So as the positive news develop, the stock moves up quick and thus might give your portfolio a nice boost.  I’ll go into more detail later in the month as I report the trades, set up the website pages, etc..

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