Every so often, MagicDiligence compiles a list of Magic Formula stocks sorted by their dividend yield, price-to-sales ratio, and price-to-book ratio for investors that like to use those metrics. The result is a list of attractive value stocks for additional research. Here are the top 10 in each of the three metrics listed above:Dividend Yield

Dividend yield is a favorite metric for income investors, providing both steady, predictable returns and downside protection. With Magic Formula Investing, you are also buying dividend stocks that are both cheap against earnings and represent a company that efficiently invests capital. The Top 10 Magic Formula highest dividend yield stocks (forward yield) right now are:

1) 7.0% - EarthLink Inc (ELNK)

2) 6.4% - Altria Group Inc (MO)

3) 6.1% - Reynolds American Inc (RAI)

4) 5.9% - United Online Inc (UNTD)

5) 5.6% - Value Line Inc (VALU)

6) 5.5% - Lorillard Inc (LO)

7) 4.7% - Garmin Ltd (GRMN)

8) 4.6% - Block (H&R) Inc. (HRB)

9) 4.5% - Deluxe Corp (DLX)

10) 4.3% - Lockheed Martin Corp (LMT)

Price-to-Sales Ratio

Using the price-to-sales ratio was a tactic shown to be highly successful by such guru investors as Ken Fisher in Super Stocks and by James O'Shaughnessy in What Works on Wall Street. The Top 10 Magic Formula stocks with lowest price-to-sales ratios are:

1) 0.11 - AmerisourceBergen Corp (ABC)

2) 0.15 - McKesson Corp (MCK)

3) 0.16 - Eastman Kodak Co (EK)

4) 0.24 - Unisys Corp (UIS)

5) 0.26 - Providence Service Corp (The) (PRSC)

6) 0.29 - Oshkosh Corp (OSK)

7) 0.35 - GameStop Corp. (GME)

8) 0.36 - EMCOR Group Inc. (EME)

9) 0.46 - Dell, Inc. (DELL)

10) 0.49 - Amedisys Inc (AMED)

Price-to-Book Ratio

Finally, the price-to-book ratio is often considered the "classic" test of value investing: are you buying a company at or less than the net value of its assets? Price-to-book ratio was a favorite of the "father" of value investing, Ben Graham. The top 10 Magic Formula stocks with lowest price-to-book ratio are:

1) 0.51 - Jiangbo Pharmaceuticals Inc (JGBO)

2) 0.92 - Amedisys Inc (AMED)

3) 1.03 - Time Warner Inc (TWX)

4) 1.17 - GameStop Corp. (GME)

5) 1.21 - AOL Inc (AOL)

6) 1.25 - Comtech Telecommunications Corp. (CMTL)

7) 1.26 - Argan Inc (AGX)

8) 1.27 - EarthLink Inc (ELNK)

9) 1.29 - Motorcar Parts of America Inc (MPAA)

10) 1.31 - United Online Inc (UNTD)

Disclosure: Steve owns GME

Steve Alexander
[www.magicdiligence.com]

The Strategy of Ben Graham – Warren Buffett’s Mentor

From 1923 to 1957 Warren Buffett’s mentor, Ben Graham, followed a strategy of investing in net-nets. He said: “It always seemed, and still seems ridiculously simple to say that if one can acquire a diversified group of common stocks at a price less than the...net current assets alone…the results should be quite satisfactory. They were so in our experience, for more than 30 years.”
Today net-nets are rare. They are collected under GuruFocus’ Net-Net Screener. GuruFocus also publishes a monthly newsletter which recommends the safest net-nets. All of these are included in GuruFocus Premium Membership.

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