Message Font: Serif | Sans-Serif
 
No. of Recommendations: 13

I bought the book and really liked the premise. I've been looking for a statistically veriable mechanical investing processs that makes sense, is simple, and that uses a screen that someone maintains online for free. Something to replace the Foolish Four, if you will. This one meets all of the above. What's an added bonus is that Greenblatt's formula is just a little off the beaten path; which makes it just a little unique versus the "standard" value screens.

I didn't want to blindly apply the screen, because I wanted to avoid buying any companies with significant issues that could be easily found with just a little research. I screened 25 companies and then spent a good solid day researching each. I started with the stock research wizard at msn:

http://moneycentral.msn.com/investor/research/wizards/SRW.asp

I eliminated any companies that were strong based on some accounting anomoly, that had scary amounts of debt, or that had zero analyst coverage (my thinking here was that if nobody knew about these companies the chances of them being found in the next year were slim; or that they were such insignicant companies within their industries that they could be squashed as a result of their short-term success).

Then I read all recent headlines, plus any eye-catching headlines over the past couple of years. I looked at insider trading, but only found a coule of companies with any significant insider buying. I also went to the Fool bulletin boards (most of the companies that I stayed with long enough to get to the bulletin boards didn't have bulletin boards. The bulletin boards were little help, since most of the really strong companies on the Greenblatt screen ended up being pretty small (less than a billion).

After all this, I decided to buy

1. American Eagle Outfitters (AEOS), which had by-far the strongest overall story, in my opinion.
2. King Pharmaceuticals (KG). I hate pharmaceuticals, but this company really looked great.
3. UST Corporation (UST). Smokeless tobacco company. Only real fear here is that cigarette companies are talking about getting into smokeless tobacco; however, I don't think they can break into the brands.
4. Valassis (VCI). I've worked extensively with this company when I was a marketing exec at Tyson Foods. They're products, at least at the time, were some of the best at generating real, verifiable sales. They're currently pushing a program of bundled, vertically-integrated promotions. This is what I used them for early during the concept's development, and they produced remarkable results. I think this company has huge upside.

So, although a single day's research into 4 companies is hardly anything approaching rigorous, I did try to separate good companies from the bad ones. My greatest fear is that this approach, which goes fundamentally against the whole idea of mechanical investing, will backfire.

I'm glad this board is here, and look forward to this community growing with the success of the book. I hope others will post their gleanings...

TDT
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.