Top 20 Magic Formula Stocks by Cumulative Value Statistics
- Highest Dividend Yield
- Best 1-year Relative Strength
- Lowest Price-to-Sales Ratio
- Lowest Price-to-Book Ratio
For the final article in this vein, we're going to combine all of the rankings into a cumulative chart, a quantitative measure of the most undervalued stocks on the MFI screen. The methodology here is simple. All of the stocks in the two MagicDiligence MFI screens, the top 100 over 50 million and the top 50 over 2 billion, were first ranked 1-130 (there were 20 stocks on both screens) in each category. For example, the stock with the lowest price-to-sales ratio gets 1 point, while the highest price-to-sales ratio received 130 points. Then this procedure was duplicated for dividend yield, relative strength (1-year performance), and price-to-book ratio. When a number of stocks held the same value, the ranking assigned was the same number to all matching stocks (for example, all non-dividend paying stocks earned a rank of 55). A cumulative score was achieved by adding the 4 rankings together. The goal is to find the stocks that ranked the highest on average across all statistics.
This list should just be used as a starting point for more research. O'Shaughnessy specifically points out that using too many statistical factors does not usually improve performance. However, the fact that these stocks would place high in several of his individual portfolio studies bodes well for their potential investment quality.
There are some interesting opportunities in this list, so here it is... The numbers in the columns represent ranking for each statistic used.
|FIX||Comfort Systems USA||44||15||39||13||111|
|HSII||Heidrick & Struggles||30||40||26||38||134|