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15 Magic Formula investment ideas in Europe

I am sure you have heard of the Magic Formula investment strategy, if not here is a quick summary.

The Magic Formula investment strategy was explained in the excellent book by Joel Greenblatt called “The little book that still beats the market”.

It identifies good quality companies that are trading at an attractive price.

It does this by looking for companies with a high earnings yield (companies are undervalued) and a high return on invested capital (ROIC) (quality companies).

 

European Magic Formula companies

As most of the writing on the internet is focused on Magic Formula investing companies in the USA I thought you will be interested in a few Magic Formula investing ideas in Europe.

 

What the screen looks like

To find Magic Formula investing companies using the screener I did the following:

  • First select the top 20% Magic Formula companies.
  • Under Countries select Europe, Scandinavia, the UK and Switzerland.
  • To make sure the companies have high enough volume for you to invest select companies with an average daily traded value of €100,000.
  • Lastly select companies with a market value of more than €50 million.

 

This is what the completed screen looks like:

EMF_1

Click image to enlarge
Source: Quant-Investing

 

Here are the top 15 Magic Formula investing companies the screen came up with:

EMF_2 

Click image to enlarge
Source: Quant-Investing

 

But the Magic Formula can be substantially improved

But as you may know in the research paper Quantitative Value Investing in Europe: What Works for Achieving Alpha we found that you can substantially improve the performance of the Magic Formula by adding momentum to the screen.

You can read about the back test we did to test the Magic Formula investing strategy with momentum here: Magic Formula and 6m momentum

To add momentum to the screen all you have to do is select the 30% of companies with the best 6 month share price momentum (Price Index 6m).

This is what the screen looks like:

EMF_3
 

Click image to enlarge
Source: Quant-Investing

 

Here are the top 15 Magic Formula investing companies with positive momentum the screen came up with:

 EMF_4

Click image to enlarge
Source: Quant-Investing

 

I hope you the screen has given you a few interesting investment ideas to research further.

 

Wishing you profitable investing

 

Tim_sign3

PS To find Magic Formula investment ideas in the countries you invest in (for less than an inexpensive lunch for two) click here: Join today

PPS It is so easy to put things off, why not sign up right now while it is still fresh in your mind?

 

These Magic Formula articles may also interest you:

Does the Magic Formula also work in Finland?

Does the Magic Formula also work in Belgium, Luxembourg and the Netherlands?

A better alternative to the Magic Formula?

Investment strategy tested: Magic Formula investing & 6 month Price Index

How to get the best returns with Magic Formula investing

Magic Formula investment strategy back test