Value Investing Pro » MAGIC FORMULA SCREEN

Magic Formula Stocks On The Move 11-14-09

Alex Garcia — Sat, 14 Nov 2009 15:02:11 +0000

Each week I track which stocks are moving in and out of the top 30 from the Magic Formula Screen. This screen in ran for companies with a minimum market cap of 50.Here are the moves for the week ended 11-14-09 on the top 30 list.
Top 30/50 Million:

In:

Continucare Corporation (CNU)
The Corporate Executive Board Company (EXBD)
Immunomedics, Inc. (IMMU)
Infinity Pharmaceuticals, Inc. (INFI)

Out:

Cubist Pharmaceuticals, Inc (CBST)
i2 Technologies, Inc. (ITWO)
Oncothyreon Inc. (ONTY)
Pervasive Software, Inc. (PVSW)

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Magic Formula Stocks On The Move 11-7-09

Alex Garcia — Sat, 07 Nov 2009 15:46:41 +0000

In:

Argan, Inc. (AGX)
Comfort Systems USA, Inc (FIX)
Cubist Pharmaceuticals, Inc. (CBST)
Lorillard, Inc (LO)
Synta Pharmaceuticals Corp. (SNTA)

Out:

BigBand Networks, Inc. (BBND)
The Corporate Executive Board Company (EXBD)
DivX, Inc. (DIVX)
Net 1 UEPS Technologies, Inc. (UEPS)
Verisk Analytics, Inc (VRSK)

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7 Magic Formula Health-Care Stocks

Alex Garcia — Wed, 30 Sep 2009 04:10:41 +0000

Throughout the years, certain trends develop within the Magic Formula Investing system that one takes notice of. For example, when earnings season arrives, there are more stocks moving in and out of the magic formula screen. Another trend that arises is the number of magic formula stocks that appear when a whole sector is under pressure, in this case the health-care sector.

It’s important to first understand why these stocks are under pressure. Unless you have been living in a cave in recent months, there are several initiatives to get a government sponsored health care plan under way which could potentially change the way the sector conducts business. Profitability would decrease, a new competitor would be in town (the government), etc.. There are simply too much uncertainty surrounding the sector. And one thing that Wall Street does not like is uncertainty. So in return, we have opportunity.

Magic Formula Screen Used

Market Capitalization: 50 Million

Ranks: Top 30

Date: 9/27/09

Magic Formula Health-care Stocks

Amedisys, Inc. (AMED)- Home health-care. A multir-egional provider of home health care nursing services recently saw its stock tank in early September as it saw 2 executives leave the company simultaneously. Shortly after, the company reaffirmed 2009 guidance of EPS coming in between $4.75 -$4.90. Amedysis has historically traded at a high teens multiple.

3 Magic Formula Bio-techs

If there’s one thing you can bet on, the Magic Formula is never short on bio-techs. Magic formula stocks come and go, but bio-techs are always hold their own. I have always considered bio-techs a lottery ticket and have never paid too much attention to them. Thus, the commentary on them is close to zilch.

Questcor Pharmaceuticals (QCOR)- No comment.

Cytokinetics (CYTK)- Biotech. Cytokinetics only interests me due to the huge run it has had in the past 3 months. It’s stock is up about 80% on results from a Phase II clinical trial. Move on.

Matrixx Initiatives, Inc. (MTXX)- Stock dropped from $19 —-> $5, will. It’s a 55 million dollar market cap with $22 million in cash. The stock tanked after the FDA ruled its core product causes more harm than it does good. It doesn’t seem as if the company has anything in the works, move on.

3 Magic Formula Drug Manufacturers

Drug manufacturers generally have a more established portfolio of drugs and is currently developing or looking to acquire drugs from smaller firms such as biotechs. I depend heavily on Morningstar and ValueLine for doing research on these types of companies. The one thing I focus on exclusively is the pipeline and where is it headed. I’m not necessarily looking for a top of the line pipeline as I would have to pay a premium for it, but situations arise where management is taking the proper steps in terms of acquisitions, drug developments, partnerships,etc.. to offset upcoming expiration s on blockbuster drugs. Pfizer (PFE), a magic formula stock, is the perfect example, but you” have to do your own research.

Endo Pharmaceuticals Holdings Inc. (ENDP)- Drug manufacturer. The company focuses exclusively on Pain and has several leading drugs in the area that allows it to control costs and cross sell its products. Most of its patents expire in 2012-2015 but I haven’t come across anything (maybe because I haven’t done anymore research) that demonstrates the company has a plan for the upcoming expiration’s.

Forest Laboratories (FRX)- Drug Manufacturer. Baby Pfizer as I like to call it. Where Pfizer might lose 50% of revenues when Lipitor expires, Forest is looking at an 80% haircut due to Lexapro expiring in 2012. The company is currently a cash cow. Forest is producing about $290 million dollars in free cash flow/ quarter and has $9/share in cash. I wasn’t too fond of the company until it was brought to my attention on the Gurufocus forum. Shortly after, I started digging into the company and I started to get an idea of where management is headed.

Pain Therapeutics, Inc (PTIE)- Drug manufacturer. No comment as I have yet to dig deeper.

Other Magic Formula Health-care Stocks

These stocks appear on other magic formula screens and might merit further research.

AmerisourceBergen Corporation (ABC)

IMS Health’s (RX)

McKesson Corporation (MCK)

Cardinal Health, Inc (CAH)

Eli Lilly and Company (LLY)

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Stocks On The Move 9.26.09

Alex Garcia — Sat, 26 Sep 2009 14:47:42 +0000

In:

China Education Alliance, Inc. (CEU)
The McGraw-Hill Companies, Inc. (MHP)
World Fuel Services Corporation (INT)

Out:

Amedisys, Inc. (AMED)
Cytokinetics, Incorporated (CYTK)
2 Technologies, Inc. (ITWO)

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Creating A Magic Formula Screen With Google Finance

Alex Garcia — Mon, 14 Sep 2009 04:22:12 +0000

Here’s a little secret, I spend most of my online time on a handful of sites. In particular, I spend about 80% of my time on two sites. The first is Morningstar.com in which I am a premium user and use it mostly to do basic security analysis, look at 10 years of financial data, etc.. Secondly, I spend a ton of time on Google Finance. Before moving on , I want to make a disclaimer that I am a big Google user. I use its search engine, mail, feed reader, webmaster central, Adsense, Adwords, and a few other Google products. I find Google’s products simple to use and more importantly, beneficial. Now, back to Google Finance. Google Finance is relative new to other major finance sites such as MSN Money and Yahoo Finance. It launched in 2006 and was pretty basic. You entered a stock symbol, and Google Finance returned a stock quote, chart and a few links to outside sources. Like every other Google product, Google Finance slowly but surely started to become more interesting. One of those things that made Google Finance a hair more interesting is its stock screener. And from that stock screener, we can create a custom magic formula screen.

Why Create A Custom Magic Formula Screen

First of all, always use the free official magic formula screen at magicformulainvesting.com Its the website solely dedicated to The Little Book That Beats The Market.
As a magic formula investor, there is no guarantee magicformulainvesting.com will be around in 10 years. Although, according to whois.net, the URL is registered until 2013. Yet, I want to have a backup “just in case”.
You can search for more companies, including foreign stocks. The official magic formula screen currently allows users to search for screens with 30 and 50 companies. Prior to the site update which occurred in February 2009, users were allowed to search for the top 25, 50 and 100.
You can search for smaller companies. In the same February 2009 update, users are now limited to choosing stocks with a market cap greater than or equal to 50 million. If you have seen this Bruce Greenwald Value Investing Video or this Paul Sonkin video, value is often found in small obscure companies.

Magic Formula Screen Parameters As Described In The Little Book That Beats The Market

General screening instructions can be found on the chapter titled “Step-by-Step Instructions” found on page 135. The first 2 bullet points (found on page 136) are the important ones.

Use Return on Assets (ROA) as a screening criterion. Set the minimum ROA at 25%. (This will take place of return on capital from the magic formula study.)

From the resulting group of high ROA stocks, screen for those stocks with the lowest Price/Earnings (P/E) ratios.(This will take the place of earnings yield from the magic formula study.)

Creating A Custom Magic Formula Screen In “X” Steps

Go to Google Finance’s Stock Screener, which can be found on the upper left hand.
It will take use to the default stock screener which has Market Cap, P/E Ratio, Div Yield and 52 Week Price Range.
“X” out 52 Week Price Range and Div Yield (Div. Yield is optional)
Click on “Add Criteria”; we will be searching for companies with ROA greater than or equal to 25. I also like to add the 5 year average. By adding the 5 year average, we have a better understand of its “normal” ROA. To do this go to Add Criteria

Set the P/E range between 5 & 20. On page 136, Joel Greenblatt does mention a P/E less than 5 might indicate the previous year, or the data, might be unusual. I never purchase a stock with a P/E greater than 20, even that might might be a bit too high as most magic formula stocks have a P/E less than 15, but 20 will give us some interesting results and sometimes better quality names.

Custom Magic Formula Screen Results

Below is a screen shot of the results produced. I circled the stocks that currently appear on the official magic formula screen or that have appeared on it from recent memory.

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Stocks On The Move 9.06.09

Alex Garcia — Sun, 06 Sep 2009 19:06:30 +0000

Each week I track which stocks are moving in and out of the top 30 from the Magic Formula Screen. This screen in ran for companies with a minimum market cap of 50.Here are the moves for the week ended 9-06-09 on the top 30 list.
Top 30/50 Million:

In:

Amedisys, Inc. (AMED)

Out:

Universal Travel Group (UTA)

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Stocks On The Move 6.27.09

Alex Garcia — Sat, 27 Jun 2009 15:55:22 +0000

Each week I track which stocks are moving in and out of the top 30 and 50 from the Magic Formula Screen. This screen in ran for companies with a minimum market cap of 50, 2000, and 5000 million. Here are the moves for the week ended 6-27-09 on the top 50 lists.

Top 50/50 Million:

In:

Bolt Technology Corporation (BOLT)

Interval Leisure Group, Inc. (IILG)

KBR, Inc. (KBR)

MicroStrategy Incorporated (MSTR)

Oncothyreon Inc. (ONTY)

Pfizer Inc. (PFE)

Viacom Inc. (VIA.B)

Out:

Airvana, Inc. (AIRV)

Bio-Imaging Technologies, Inc. (BITI)

Bridgepoint Education, Inc (BPI)

Cherokee Inc. (CHKE)

GP Strategies Corporation (GPX)

Herman Miller, Inc. (MLHR)

LoopNet, Inc. (LOOP)

Top 50/2000 Million

In:

Diamond Offshore Drilling, Inc. (DO)

Expedia, Inc. (EXPE)

ITT Corporation (ITT)

Out:

Cameron International Corporation (CAM)

Amdocs Limited (DOX)

Rockwell Automation, Inc. (ROK)

Top 50/5000 Million

In:

Dr Pepper Snapple Group, Inc (DPS)

Out

Murphy Oil Corporation (MUR)

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