Magic formula investing is a term referring to an investment technique outlined by Joel Greenblatt that uses the principles of value investing.
Greenblatt suggests purchasing 30 'good companies': cheap stocks with a high earnings yield and a high return on capital.
He touts the success of his magic formula in his book 'The Little Book that Beats the Market', Joel Greenblatt, citing that it does in fact beat the S&P 500 96% of the time, and has averaged a 17-year annual return of 30.8%. This strategy combines magic formula investing with momentum investing.
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