MagicDiligence Frequently Asked Questions
What is MagicDiligence?
Welcome! This page will get you started using the service, and is a good reference to come back to later for questions.
MagicDiligence offers unique, exclusive stock screening and ranking tools to help you generate interesting investment ideas any time and regardless of what type investor you are. Looking for undervalued stocks of great companies? We have a screen for that. Looking for rapidly growing companies with high returns on capital? We have a screen for that. Trying to decide which of your watch list stocks is the most attractive for investment? We have a tool to do just that.
See the below sections for more info on all of our tool offerings.
What stocks are considered?
Our "Magic" screens use a version of earnings yield and/or free cash flow yield in ranking stocks. As such, we aim to compare businesses that derive the bulk of their earnings from increasing profitability and free cash flow using common forms of working capital (mainly, equity and debt financing and self-funded working capital).
Some business models are designed around asset collection instead of earnings. Banks, insurance companies, master limited partnerships (MLPs), utilities, and a few other businesses often focus on (and are valued by) asset growth instead of earnings growth. We filter these out of our "universe" of stocks screened as valuing them by earnings yield is not particularly meaningful.
Additionally, we filter out international firms that list in the U.S. using American Depository Receipts, or ADRs. These companies generally report financial results in their native currencies (euros, yen, etc.), often less than quarterly, and frequently in different formats than U.S. GAAP rules. All of this makes comparing them against native U.S.-listed firms difficult and unreliable.
All other equities are fair game and our universe typically contains about 3,000 stocks!
What are the Pre-Created Screens?
The Pre-Created Screens are designed to mimic the method used by Joel Greenblatt's Magic Formula® Investing screens, but with additional info like actual statistical values and an ordered ranking. These stocks represent the best combination of high earnings yield and high returns on tangible invested capital in the market.
There are 3 pre-created screens: the top 50 stocks over a $50 million market cap, the top 50 stocks over a $1 billion market cap, and the top 30 stocks over a $3 billion market cap.
What is the Star List?
The Star List looks at the entire universe of stocks and filters out only those stocks that:
- Have an Earnings Yield in the top 20% of the market.
- Have a Free Cash Flow Yield in the top 20% of the market.
- Have a Return on Tangible Invested Capital in the top 20% of the market.
- Have a 3-Year Average Revenue Growth in the top 20% of the market.
- Have a Current Ratio over 1.0.
With all these criteria, the Star List highlights stocks that sell very cheaply against recent earnings and free cash flow, invest their capital very efficiently, are growing sales rapidly, and are not in any immediate financial danger. These stocks could make excellent candidates for further research into potential investment!
What is the Magic Screener?
In addition to being able to specify minimum market cap and number of stocks (as with the "official" screens), the Magic Screener provides numerous additional features:
- The actual ranking of stocks instead of just an alphabetical sorting
- Actual statistical values for each stock
- 3-Year Average Revenue Growth column to quickly find growing companies
- Sortable columns
- Ability to rank by free cash flow yield instead of earnings yield.
- Ability to specify a maximum market cap in addition to a minimum.
- Ability to see up to 500 stocks, instead of just 50 as with the "official" screener.
What is the Single Stock Stats Calculator?
The Single Stock Stats Calculator allows you to calculate our proprietary earnings yield, free cash flow yield, and return on tangible invested capital statistics for ANY stock, and shows you where those statistics rank in the broader market. It is a useful tool for seeing where a stock you are interested in "ranks" in the market for value, efficiency, and growth metrics.
What is the Portfolio Ranker?
The Portfolio Ranker allows you to compare any number of stocks against each other using the "Magic" method of ranking by earnings yield (or free cash flow yield) and return on invested capital. For example, you could compare a handful of technology stocks that interest you, your entire watch list of stocks, or even the S&P 500 to find the best options for potential investment!
What is the Stocks By Statistical Distribution?
The Stocks By Statistical Distribution tool allows you to see all stocks falling into a particular grouping for any of our primary "Magic" statistics: earnings yield, free cash flow yield, return on tangible capital, or 3 year average revenue growth rate. We group each of these statistics into 5 "buckets":
- "Poor" (0-20%): Stocks in this grouping are in the bottom 20% of our "universe" of stocks for this statistic. For example, a stock falling into this bucket for earnings yield would be considered one of the most expensively valued stocks in the market.
- "Below Avg" (20-40%): Stocks here are between the 20th and 40th percentile of all stocks for the selected statistic.
- "Average" (40-60%): Stocks failling into this bucket are "middle-of-the-pack" for the statistic selected.
- "Above Avg" (60-80%): These stocks rank better than average for the statistic selected, somewhere in the 60th to 80th percentile.
- "Very High" (80-99%): These stocks are at the top of the market for the given statistic. For example, a "very high" earnings yield is one of the highest 20% in the market, while a "very high" 3-year average revenue growth number indicates this is one of the fastest growing companies in the market.
- "Suspicious" (99-100%): For stocks at the very top 1%, we mark them as "suspiciously high". Stocks falling into this category should be examined closely for statistical anomolies or the existence of unsustainable one-time earnings events that skew their calculations from what could be normally expected. Usually stocks in this bucket have something odd going on... but not always! Occassionally a good opportunity can be found here.
What is the Billing Policy? How do I Cancel?
Billing is performed on a monthly basis. The cycle begins on the date of sign-up and is renewed automatically in every subsequent month if not cancelled.
Joel Greenblatt and MagicFormulaInvesting.com are not associated in any way with this website. Neither Mr. Greenblatt or MagicFormulaInvesting.com endorse this website's investment opinions, strategy, or products. Investment recommendations on this website are not chosen by Mr. Greenblatt, nor are they based on Mr. Greenblatt's proprietary investment model, and are not chosen by MagicFormulaInvesting.com. Magic Formula® is a registered trademark of MagicFormulaInvesting.com, which has no connection to this website. The information on this website is for informational purposes only and solely represents the views and opinions of the author. No warranty is provided or implied as to the accuracy, completeness, or timeliness of this information. This information may not be construed as investment advice of any kind, nor can it be relied upon as the basis for stock trades. DON'T RELY SOLELY ON THIS WEBSITE'S INFORMATION OR STATISTICS! Please do your own research before buying. Alexander Online Properties LLC, the proprietor of this website, is not responsible in any way for losses or damages resulting from the use of this information. Alexander Online Properties LLC is not a registered investment advisor. All logos are trademarked properties of their respective companies.
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