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'Magic Formula' Inventor Joel Greenblatt New Buys Rundown

May 24, 2013 | About:
Holly LaFon

Holly LaFon

261 followers
Joel Greenblatt believes that anybody can invest like a pro and invented a famous “magic formula” to ensure – or at least enhance the probability of – success for non-professionals. The basics of his formula investing technique involve purchasing 30 companies with high earnings yield and high return on capital, and selling after a year.

Greenblatt’s portfolio at his hedge fund, Gotham Capital, had high turnover of 29% in the first quarter. His $1.97 billion portfolio contains 822 stocks total, of which 187 are new picks last quarter. The five largest of these are as follows.

1. Warner Chilcott PLC (WCRX)

Greenblatt bought 1,366,561 shares of Warner Chilcott at $14 per share on average, equivalent to 0.94% of his portfolio. His largest purchase, the shares have advanced 45% from his average price to $19.83 on Friday.

Warner Chilcott create pharmaceuticals targeting gastroenterology, women’s health, dermatology and urology in U.S. and Western European markets.

Earnings yield: 76%

Return on capital: 440%

10-Year Revenue and Earnings History

1369422692303.png

Valuation:

P/E – 12.4

P/S – 2.07 (close to two-year high)

2. Seagate Technology PLC (STX)

Greenblatt bought 440,879 shares of Seagate Technology at $34 on average, equivalent to a 0.82% weighting in his portfolio. Shares have gained 26% from his price to $42.99 per share Friday.

Seagate is a hard disk drive and storage company founded in 1979.

Earnings yield: 16.9

Return on capital: 101%

10-Year Revenue and Earnings History

1369423223812.png

Valuation:

P/E – 6.9

P/B – 4.4

P/S – 1.09 (close to five-year high)

3. Marvell Technology Group Ltd. (MRVL)

Greenblatt bought 892,334 shares at $10 on average, for a 0.48% portfolio weighting. He has an 18% gain on the shares as of Friday, with the stock at $11.28 per share.

Marvell Technology Group is a fables semiconductor company founded in 1995.

Earnings yield: 7.6%

Return on capital: 66.1%

10-Year Revenue and Earnings History

1369424116643.png

Valuation:

P/E – 21

P/B – 1.2

P/S – 2.01

4. Axiall Corp. (AXLL)

Greenblatt bought 117,110 shares at $55 on average, a 0.37% portfolio weighting. He has a 15% loss from his average purchase price as of Friday, with the price at $46.67.

Axiall harnesses applied chemistry to solve everyday problems in plastics, pharmaceuticals, paints, and many other products.

Earnings yield: 4.9%

Return on capital: 25.7%

10-Year Revenue and Earnings Growth History

1369424581061.png

Valuation

P/E – 19.9

P/B – 5.5

P/S – 0.6

5. Jabil Circuit Inc. (JBL)

Greenblatt bought 362,946 shares at $19 on average, a 0.34% portfolio holding. Shares are essentially flat from that price on Friday.

Jabil is a manufacturing solutions partner, helping companies move their products to market and optimize supply chains.

Earnings yield: 13.4

Return on capital: 26.40%

10-Year Revenue and Earnings History

1369425064274.png

Valuation:

P/E – 10.4

P/B – 1.9

P/S – 0.2

See Joel Greenblatt’s portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Joel Greenblatt.

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Rating: 2.5/5 (2 votes)

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