NEW YORK (MagicDiligence.com) -- So, how did the Magic Formula® Investing strategy perform in 2011? In a word: poorly, along with pretty much any other fundamental value strategy and small-cap indicies in general.
Simply put, 2011 was not a good year to be a value investor. For one of the few times in history, most quantitative fundamental value strategies significantly trailed most of the major benchmarks.
The weekly sample screens and their performance vs. the S&P 500 can be seen in the chart at the end of this article. Each entry represents one of the actual "Top 50 stocks over 50 million" screen listings from the official site. The composite performance is an average of the individual performances of all 50 stocks screened on that day, including dividends. The ending date for the calculations was market close on 12/23.
The chart is interesting in that there are two distinct stories here. First of all, for much of the year the strategy badly lagged the index, in many cases by 15% to 20%. However, there was a slow improvement starting in the summer, and in October the screen started outperforming the S&P, which it has continued to do now for 13 consecutive weeks. Overall, the samples show MFI outperforming for 13 weeks and underperforming for 36. The average relative performance for MFI vs. the S&P was negative 9.2%.Some observations and tidbits concerning these results and the strategy in 2011:
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV