Be nice to people. This changes the whole environment.
- Manlobbi
Halls of Shrewd'm / US Policy❤
No. of Recommendations: 5
https://acquirersmultiple.com/2023/01/joel-greenbl...I thought this podcast was interesting. Greenblatt was asked about companies that he would just simply by and hold for the next 5, 10 or 15 years and he mentioned he has large personal stakes in Alphabet, Microsoft and Amazon. He is fond of their valuation, moats, network effects and does not feel they need his constant time and attention.
I own these is my brokerage accounts beyond a dominant BTK position but would not mind BRK considering these as well with so much cash pouring in. Thoughts, esp. at these prices?
No. of Recommendations: 0
I get the feeling Buffett would invest in Microsoft if only he didn't have such a close relationship with Bill Gates. I know it sounds a bit backwards, but Buffett has mentioned it a few times.
No. of Recommendations: 0
I don't think I've ever seen these three appear on his Magic Formula Investing screen in the last 10 years.
I occasionally check in to have a look. Interesting he's selling one method and doing another.
The MFI method has underperformed in the recent decade according to Mungofitch I think. I read the books but never implemented the formula. I was more interested in the screening approach at the time but have moved away from screening.
No. of Recommendations: 1
'Interesting he's selling one method and doing another.'
Sorry for the confusion. I think the majority of his assets are indeed in his Gotham fundsbut this was a response to a direct question from the host wrt a few stocks he has held and would suggest to investors to simply buy and hold for a decade or so.
I have not invested with or beside him over the years but always find his perspectives pretty interesting and thoughtful.
No. of Recommendations: 6
The MFI method has underperformed in the recent decade according to Mungofitch I think.Not according to GTR1 backtesting:
On 11/19/2015 borisnad posted post-discovery of some screens which included his version of Greenblatt's Magic Formula. Note I modified the friction to 0.35% per trade based on my experience.
https://gtr1.net/2013/?!!QlpoMTFBWSZTWQMT9X4AAkcfg...CAGR 17.78 with a SAWR of 10.8% since 1997. CAGR 11.7 & SAWR 9.9%since the 2015 screen post. slightly less than SPY 11.95 CAGR but 0.5% better SAWR than SPY.
Later boris modified the screen based on a talk Greenblatt gave saying it works best with a ROIC>50% filter. The screen using this filter:
https://gtr1.net/2013/?!!QlpoMTFBWSZTWZ8S2fQAAPPfg...This ups the CAGR slightly and SAWR to 13% from 1997 but dramatically to a 21.1% CAGR from 2015!
MI isn't as profitable as it was 15 years ago but it can still add a little spice to the mix.
RAM
No. of Recommendations: 1
Later boris modified the screen based on a talk Greenblatt gave saying it works best with a ROIC>50% filter. The screen using this filter:
https://gtr1.net/2013/?!!QlpoMTFBWSZTWZ8S2fQAAPPfg...
This ups the CAGR slightly and SAWR to 13% from 1997 but dramatically to a 21.1% CAGR from 2015!Ram, the link you posted finishes Oct, 2018. Is that because the criteria are not available past that date?
Craig
No. of Recommendations: 1
Ram, the link you posted finishes Oct, 2018. Is that because the criteria are not available past that date?
Ouch! My oversight and I apologize , I didn't notice the results from GTR1 didn't complete to the present.
The problem is on 10/23/2018 SIP changed their sector and industry codes. The screen needs to by changed to
access the old codes bfore and the new codes after 2018. My first pass at correcting this isn't working.
RAM
No. of Recommendations: 0
No. of Recommendations: 0
I don't think I've ever seen these three appear on his Magic Formula Investing screen in the last 10 years.
Microsoft and Alphabet are currently on the Magic Formula screen for the top 30 companies with a minimum market cap. of 90000 million
No. of Recommendations: 19
The MFI method has underperformed in the recent decade according to Mungofitch I think...
Poor performance after a model is build is pretty normal for any quant method...backtests are never like reality.
The hope is that a method that backtests at market+10% might get you market+3% in reality.
The problem with the "magic formula" is a bit more interesting, and a bit bigger.
The method he proposed simply does not perform as he says it does, in the exact historical period that he originally tested.
As in: not within 10%/year of what he claimed, which (IIRC) was in the vicinity of 28%/year.
This was tested by quite a number of observers, with some testing databases of outstanding quality.
There are various possible explanations for this gap.
* His testing database or software was not of sufficiently high quality.
* He used some selection criteria that were not disclosed in the book.
* He made some errors in his testing methodology, including the risk of substantially overtuning to his test data set.
* He fibbed.
* Something else I haven't thought of?
He's a pretty respected person, so I personally do not suspect #4.
More likely some mix of #2 and #3.
Bottom line: the issue is NOT that MFI has not done well since it was published.
The issue is that it didn't do well (as described) before it was published.
Jim
