In looking for investment ideas, it seems as though the world is all too ready to give advice on stock market picks. Everyone wants a simple "magic formula" to investing. Ideally, one would go to a website, click on a button, and have an instantaneous result of a list of stocks to buy that could only go up.
Thankfully, Joel Greenblatt has already done it. Nothing could be more simple for the little guy. In "The Little Book that Beats the Market" a straightforward formula is given that bested the S&P for 30 years.
Basically, he uses the Return on Assets(ROA), and ranks the stocks. Then, he takes the earnings yield, and ranks the stocks. Combining the two lists of rankings, he comes up with a rank of stocks. For example, if Joe Blow company ranked #2 in ROA, and #376 on earnings yield, then overall the stock would gain a rating of #378. From this list, he then eliminates foreign companies, financial companies, and utilities. One should buy 20-30 of these stocks, and hold them for a year minus one day if the they are a loser, and for a full year if they are winners (for tax purposes).
More simply, he has a website that does all this for you, giving you your list.
A good book, only takes a day or two to read. Get it from your local library.
So for my "magic" selection, I have simply visited the site and obtained the stock ICF International, (ICFI) which is a companey that.... well, never mind. You see, you don't even have to know what the company does. See how easy? I'll buy twenty shares on Monday.
2 comments:
Pat, I looked at the IFCI profile on Yahoo! finance. I'm *pretty* sure this company is a front for the CIA. Seriously, their services include security and "change management strategy" and they have offices in South America. It's an interesting strategy, just looking at a couple of key statistics. The plus with this company is that they do a lot of work overseas, which is probably good with the $ so weak. The negative is they probably are possibly heavily dependent upon government contract work, which could be volatile in an election year, especially if the Democrats win. Also, where's the other 29 stocks you picked out of a hat? You did say you're supposed to buy 30 stocks based on this approach! Happy investing!
-KEN
Thanks Ken. The rest are in the old IRA. I'm now really curious about the whole CIA thing. Don't worry, Huckabee is a sure thing.
-pat
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