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Strategies & Market Trends : Greenblatt's Little Book That Beats The Market -- Ignore unavailable to you. Want to Upgrade?

To: Stewart Whitman who wrote (80)	2/19/2006 8:42:52 PM
From: Shane M	Read Replies (1) \| Respond to of 218

Thanks for the comments Stew. I understand your interpretation and it does help. Here's an example- One of my holdings is Dorel Industries DIIB This company scores pretty well on Greenblatt's ROC. EBIT 12mm 148.0 Curr Asset 621.8 Curr Liab 302.4 Net Fixed asset 149.7 Oth LT Asset 39.2 Greenblatt ROC calc = 29.1% (includes Oth LT asset) That's telling me based on net current assets and prop/plant/equip this business is a solid performer, and the 29.1% ROC is the highest over the past 3 yrs (range 23-29%). However, if I calculate return on totoal capital including net income, equity and lt debt you get a ROTC of around 9%. The 9% ROTC is the lowest ROTC in 3yrs for DIIB range (9%-14%). The declining trend in ROTC is at odds with a stable ROE in the 17-20% range over the past 3 yrs. DIIB is a stock I had labeled as progressively getting worse at allocating capital with deceptive ROE quality due to increasing debt load, but the Greenblatt ROC indicates it's a pretty good underlying business and value ranking highly in the combined ROC/Yield rankings. Shane