The Security Analysis Podcast
A Different Kind of Magic Formula (Solo Episode)
Mar 5, 2025
Discover a fresh take on the magic formula for investing, blending insights from legends like Buffett and Graham. Unravel the flaws in using Return on Invested Capital during market peaks with a striking example of an egg company. Explore the innovative BSG stock list, focusing on undervalued companies at cyclical lows. The discussion also highlights the evolution of personalized investment strategies, influenced by the rise of ETFs, while seeking audience input on future podcast directions.
23:04
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Quick takeaways
- The podcast emphasizes creating a stock list that blends quality and value, inspired by Joel Greenblatt's magic formula for investment decisions.
- Research suggests prioritizing low enterprise multiples over ROIC may improve investment outcomes by avoiding cyclical peak selections in undervalued companies.
Deep dives
Investment Evaluation and Strategy Development
The speaker outlines the process of evaluating companies for potential long-term investments and determining their valuations. Each week, a different company is analyzed to see if it presents an attractive investment opportunity, focusing on high-quality businesses. A recent initiative introduced on the website includes creating a stock list that applies investment strategies inspired by Joel Greenblatt's magic formula, which seeks to combine quality and value in stock selection. Building on this, the speaker is experimenting with identifying companies that are undervalued based on quantitative metrics to guide investment decisions.
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