Credit: AZquotes.com, Author edit
In part I of this series, we broke down Joel Greenblatt’s Magic Formula investing strategy in an attempt to find what has been contributing to its underperformance in recent years. Operating on the basis that quantitative strategies degrade over time as the markets evolve, we tested the hypothesis that the Magic Formula has had difficulty with the market transitioning to “asset light” versus more capital intensive firms.
We looked specifically at the quality factor (Return on Tangible Capital), and had found that if we isolate the testing universe to those