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Strategies & Market Trends : Value Investing
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To: E_K_S who wrote (43158)7/3/2011 1:15:19 PM
From: Spekulatius  Read Replies (3) of 78702
 
The problem with the Magic formula screen is that it only looks at backward data by design. The underlying assumption is that companies that have shown a good cash yield in the past, have a strong business and the stock will come back (to get into the screen they have to get cheap first).

Now you need to ask yourself, why a stock went down to begin with - in most cases there will be good reasons. The market pays for future earnings, not the past ones. Speaking of the Magicformula screen - anybody looked at PWER? Volatile business but the stock sure looks cheap.
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