Joel Greenblatt's Magic Formula Screens for Undervalued, Profitable Stocks
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Joel Greenblatt's "Magic Formula" screens for stocks with high return on capital and high earnings yield.
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Return on capital measures a company's profitability and competitive advantage.
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Earnings yield compares earnings to enterprise value to find undervalued stocks.
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The Magic Formula strategy beat the market over a 17-year test period.
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The screen ranks stocks by return on capital and earnings yield to find ones meeting the criteria.