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. Looking to create your own combo of "Magic" statistical values for a screen? You do that as well!

In keeping with our "magic" theme, we refer to our stock screens as "Spells"! The site offers 4 pre-created spells, using proven strategies to uncover attractive opportunities for growth or value investors. We also provide a set of tools so you can find EXACTLY the kind of stocks you are looking for!

See the below sections for more info on all of our offerings.

What Stocks are Considered?

Our Spells 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 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 Spells?

We playfully refer to our pre-defined ranked stock screens as "Spells"! You can find all of them under the Spells menu.

There are 2 pre-defined "Spells" - one for value-oriented investors, and one for growth:

blue wand The Magic Recipe Spell, denoted by the blue wand, ranks all stocks over a $1 billion market cap by earnings yield and return on invested capital. The goal is to uncover the best combinations of value and quality stocks available in the market today.
orange wand The Quality Growth Spell, the orange wand, is the ranking strategy applied to find growth stocks. Here we take all stocks over a $500 million market cap, limit the set to companies with 3-year revenue growth and cash returns on capital in the top 20% of the market, and then rank them by those same 2 statistics, throwing out suspiciously high numbers. There is no more powerful recipe for long-term compound investment growth than companies growing their revenues at high returns on capital. This screen is where you go to look for the next Netflix or Amazon.

What is the Spell Caster?

The Spell Caster allows you to make various tweaks to the pre-existing Spells, or even create your own screen.

With the Spell Caster, you can do all of the following:

  • See more than just the top 50 stocks in the Magic Recipe or Quality Growth spells.
  • Change the market capitalization limits to show really small cap stocks, or limit the maximum market cap screened.
  • Select any two metrics for ranking your universe of stocks - not just earnings yield and return on capital.

The possibilities are endless. The Spell Caster can be used to generate almost any kind of earnings/cash flow/efficiency-based screen you can imagine. Try it out to create your spell!

How do I use MagicDiligence with a specific stock in mind?

Our site can also be extremely useful if you have a specific stock in mind!

Simply enter your ticker into the search bar in the upper right of the page, and select it in the result. This will take you to the individual stock page for that company. (You can also click any link for it in the site to go to this page).

Here, we show you how your stock ranks against the overall market for all of our "Magic" statistics. Quantitative Diligence tells you how good (or bad) the stock's valuation, returns on capital, and growth is compared to the overall market. It also tells you whether your company is a current member of any of our Spells! Calculations shows you exactly how we calculated our statistics, alowing you to double check our figures for posterity.

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 Billing Policy? How do I Contact You With Membership Questions?

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.

For membership questions or issues, or to cancel your subscription, please email support@magicdiligence.com.

Tracking Portfolios
blue wand Magic Recipe 91.01%
orange wand Quality Growth 176.62%
Updated Quarterly (latest 2022-05-31)