MagicDiligence Frequently Asked Questions
Welcome! This page will get you started using the service, and is a good reference to come back to later for questions. Before getting into the details, let's first go over what you need before buying the first MagicDiligence stock:
MagicDiligence uses the Magic Formula® Investing (MFI) strategy as the basis for finding attractive investment opportunities. To understand the theory behind the strategy, do yourself a favor and spend $15 and 2 hours reading Joel Greenblatt's excellent book. Since most have probably already read the book, let's move on...
Get a low or no-cost brokerage account.
The Magic Formula is a farily high turnover strategy, and brokerage commission costs can significantly affect overall returns. MagicDiligence recommends finding a good, low-cost brokerage to implement MFI. Some good choices include E*TRADE, TD Ameritrade, or Zecco.
What are Top Buys?
The basic premise of MagicDiligence is to use the Magic Formula® screen and apply equity analysis to find MFI stocks that are truly great companies with growth potential, competitive advantages, and strong financial health. By finding these and weeding out the not-so-great companies in the screen, we aim to limit the losers while maximizing the winners, beating the market in the process.
Which Magic Formula® Screens are Used?
MagicDiligence uses three screens: the top 50 stocks over 50 million market cap, the top 50 stocks over 1 billion market cap, and the top 30 stocks over 3 billion market cap. This provides a nice mix of top-ranked small cap stocks as well as attractively priced larger and better known firms.
What are Active Dropouts?
All Top Buys are held for one year, as per the MFI strategy's guidelines. During that period, picks may fall out of the official MagicFormulaInvesting.com website. When that happens, the pick is marked as an Active Dropout. These stocks should not be bought at the current time.
What to Buy and When?
In short, Top Buys can be bought and Active Dropouts should not be bought, but held.
What is the Sell Early Price?
The Sell Early price represents a price at which MagicDiligence believes a position is at or above a fair value. This price will represent a substantial return on initial investment, and is expected to limit further gains. If a Top Buy position reaches the Sell Early price, MagicDiligence will sell the position prior to the one-year MFI holding period.
How Do I Use the Other MFI Stock Reviews?
Not all members will buy just the stocks recommended by MagicDiligence. The service provides research notes and recommendations on other stocks in the Magic Formula® list. This is purely for informational purposes. These stocks will not be actively followed, and are not listed on the Picks page.
What if a Top Buy Remains on the MFI Screen after One Year?
Most recommendations will fall off the MFI screen during their year period, but some may remain when the time comes to sell them. In this case, MagicDiligence will normally renew the recommendation for another year, unless other factors have made the pick unfavorable. Members will updated on what will be done when the one-year anniversary approaches.
If a previous recommendation is renewed for another year, there will be no new recommendation for that bi-weekly period, as the goal is to keep the MD portfolio to 26-30 stocks. However, MagicDiligence will never renew previous picks in 2 consecutive bi-weekly periods without also providing a new stock recommendation.
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.
To cancel your subscription, simply click on the link in the upper right hand corner marked "Account" (or click here), and then click "Cancel Subscription". Alternatively, you can email firstname.lastname@example.org and request a cancellation.
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. 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 is not a registered investment advisor. All logos are trademarked properties of their respective companies.
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