The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK ( MagicDiligence.com) -- Every so often, MagicDiligence compiles a list of Magic Formula stocks sorted according to dividend yield, price-to-sales ratio, and price-to-book ratio for investors who like to use those metrics.
The Magic Formula Investing strategy identifies stocks with a combination of high earnings yield and return on capital, aiming to find "great companies at cheap prices."
Here are the top 10 Magic Formula stocks in each of the three categories listed above:
Dividend YieldDividend yield is a favorite metric for income investors, providing both steady, predictable returns and downside protection. With Magic Formula Investing, you buy dividend stocks that are cheap against earnings and are issued by companies that efficiently invest capital. The Top 10 Magic Formula highest dividend-yield stocks (forward yield) right now are:
- 11.7% - Mind C.T.I (MNDO)
- 11.4% - Great Northern Iron Ore (GNI)
- 9.6% - PDL BioPharma (PDLI)
- 6.4% - USA Mobility (USMO)
- 4.7% - Cherokee (CHKE)
- 4.7% - Lorillard (LO)
- 4.1% - Deluxe (DLX)
- 3.9% - H&R Block (HRB)
- 3.8% - Lockheed Martin (LMT)
- 3.7% - Raytheon (RTN)
Price-to-Sales RatioUsing the price-to-sales ratio was a tactic shown to be highly successful by such guru investors as Ken Fisher in his book Super Stocks and by James O'Shaughnessy in his book What Works on Wall Street. The Top 10 Magic Formula stocks with lowest price-to-sales ratios are:
- 0.19 - Providence Service (PRSC)
- 0.28 - Unisys (UIS)
- 0.34 - GameStop (GME)
- 0.35 - Oshkosh (OSK)
- 0.37 - EMCOR (EME)
- 0.49 - Amedisys (AMED)
- 0.52 - SAIC (SAI)
- 0.52 - Dell (DELL)
- 0.55 - Northrop Grumman (NOC)
- 0.57 - Hewlett-Packard (HPQ)
Price-to-Book RatioLastly, the price-to-book ratio is often considered the "classic" test of value investing: Are you buying a company at or less than the net value of its assets? Price-to-book ratio was a favorite of the "father" of value investing, Ben Graham. The top 10 Magic Formula stocks with lowest price-to-book ratio are:
- 0.87 - Amedisys (AMED)
- 1.01 - Trimeris (TRMS)
- 1.11 - Comtech Telecommunications (CMTL)
- 1.11 - GameStop (GME)
- 1.17 - Tessera Technologies (TSRA)
- 1.19 - United Online (UNTD)
- 1.25 - Almost Family (AFAM)
- 1.36 - Transition Therapeutics (TTHI)
- 1.43 - SuperGen (SUPG)
- 1.43 - Argan (AGX)
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