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James Li
James Li
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Top 3 High-Quality Stocks Based on Greenblatt Magic Formula Rank

Application of new GuruFocus 'Customized Ranking' feature

October 22, 2020 | About:

According to the All-in-one Screener's "Customized Ranking" feature, a Premium feature of GuruFocus, the top three high-quality stocks based on Joel Greenblatt (Trades, Portfolio)'s "Magic Formula" rank are Check Point Software Technologies Ltd. (NASDAQ:CHKP), Biogen Inc. (NASDAQ:BIIB) and NetEase Inc. (NASDAQ:NTES).

New 'Customized Ranking' feature recap

The GuruFocus Screener's new feature allows users to build a user-defined ranking of the Screener results based on a combination of several filters at once. For example, users could apply Greenblatt's magic formula, which ranks the stocks based on earnings yield and return on capital. The following video illustrates how to create and save the ranking.

Figure 1 illustrates a snapshot of the Screener results showing green flags for the top three ranked stocks.

Figure 1

Check Point Software

Check Point Software ranks number one on the list with a Greenblatt return on capital of 1,091.52% and earnings yield of 6.24%. Both ratios outperform over 77% of global competitors, with the return on capital topping 98.63% of global software companies.

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GuruFocus ranks the Israeli software company's financial strength and profitability 9 out of 10 on several positive investing signs, which include no long-term debt, a strong Altman Z-score of 8.43, a five-star business predictability rank and an operating margin that is outperforming over 98.49% of global competitors.

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Gurus with large holdings in Check Point Software include Jim Simons (Trades, Portfolio)' Renaissance Technologies and John Rogers (Trades, Portfolio)' Ariel Investments.

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Biogen

Biogen ranks second on the Screener list with a return on capital of 159.76% and earnings yield of 16.45%.

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GuruFocus ranks the Cambridge, Massachusetts-based biotech company's profitability 10 out of 10 on several positive investing signs, which include a five-star business predictability rank, a high Piotroski F-score of 7 and an operating margin that has increased approximately 2.10% per year on average over the past five years and is outperforming over 98% of global competitors.

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Gurus with large holdings in Biogen include PRIMECAP Management (Trades, Portfolio) and the Vanguard Health Care Fund (Trades, Portfolio).

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NetEase

NetEase ranks third on the list with a return on capital of 199.36% and earnings yield of 4.13%.

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GuruFocus ranks the Chinese online services provider's profitability 10 out of 10 on several positive investing signs, which include a five-star business predictability rank and profit margins and returns that outperform over 85% of global competitors.

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Disclosure: Long Biogen.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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