The “Simple Magic Formula” Indian Stocks For 2017

I had previous written regarding an investment strategy of investing in simple magic formula stocks.

You can find the simple magic formula stocks for 2016 here.

The returns of this strategy  are:

  • July 2015-Dec 2015: -3.50%( CNX 500= -3.78%)
  • 2016: -4.03% ( CNX 500=3.39%)

This is not a great return for the strategy but there are some caveats. It is a short duration to assess the return. Secondly, we are investing in all stocks with a ROA >25 and a P/E>5 in the CNX 500, while the actual strategy buys 3-4 stocks with low P/E from the top 25 or top 50 stocks every 3-4 months and holds it for a year. Whether this is important or not, I do not know. If we look at the returns of the 20 stocks with the lowest P/E, the returns are better, around -1.73%.

But in the Indian context we get only around 40 stocks from the CNX 500 and even if we include the whole Indian stock market, we get only around 120 stocks. I have chosen the CNX 500 because there may be liquidity and operator manipulation in the other stocks but this may not be true.

The simple magic formula stocks for 2017 are as follows, arranged from lower to higher P/E are as follows:

Name Price P/E
Bombay Burmah 515.3 9.54
Sonata Software 193.4 10.91
Vinati Organics 588.5 11.01
Infosys 1,010.60 12.8
Avanti Feeds 490.05 13.83
Pidilite Inds. 589.8 14.55
Vakrangee 273.7 15.38
eClerx Services 1,400.00 15.67
Hexaware Tech. 207.1 15.84
Greaves Cotton 122.05 16.37
Interglobe Aviat 821.45 16.46
Indo Count Inds. 163.65 17.14
MRF 48,905.65 17.18
Hero Motocorp 3,043.65 17.28
Triveni Turbine 118.85 17.61
Kajaria Ceramics 465.6 18.55
Sun TV Network 492.4 18.98
Divi’s Lab. 783.7 19.01
Alembic Pharma 595.1 19.19
Bajaj Auto 2,632.20 19.27
P & G Hygiene 7,084.05 21.09
Bajaj Corp 371.45 22.03
VST Inds. 2,405.20 22.39
Mindtree 521.65 22.61
Oracle Fin.Serv. 3,125.80 24.03
TCS 2,365.55 26.36
Kansai Nerolac 319.25 27.24
Gulf Oil Lubric. 648.7 27.37
Castrol India 380.65 28.53
Amara Raja Batt. 870.3 29.05
Kitex Garments 406.45 29.43
Credit Analysis 1,305.35 29.51
8K Miles 646.15 29.62
TVS Srichakra 3,203.25 33.88
Ajanta Pharma 1,782.80 34.03
Symphony 1,151.80 36.21
Colgate-Palm. 904.6 40.18
Marico 260.45 40.35
Hind. Unilever 826.35 41.49
Britannia Inds. 2,886.30 41.72
Eicher Motors 21,803.05 41.77
Mayur Uniquote 339.9 42.95
Asian Paints 891.05 43.17
ITC 241.65 48.38
Tata Elxsi 1,405.20 48.93
CRISIL 2,203.00 49.84
Page Industries 13,650.80 50.25
Dr Lal Pathlabs 1,070.95 50.53
Torrent Pharma. 1,317.15 56.28
Blue Dart Exp. 4,385.45 58

We shall continue to track the returns of this strategy here.

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3 thoughts on “The “Simple Magic Formula” Indian Stocks For 2017

  1. learningcurve says:

    hi, thanks for the post. By magic formula, if u referring to greenblatt formula, then is it not methodology is diff?.. he outlined something like clubbing two criteria to arrive at score n then choosing…

    • Venkata Sreekanth Sampath says:

      You are perfectly right. He used ROIC and earnings yield. High ROIC + high Earnings Yield and ranked the stocks to choose. The problem is that his calculation is not the usual calculation although one can use the numbers available elsewhere, but that is not what he recommended. He also wrote that if you are using data from other sites, then to use ROA > 25 as a primary screening measure, then exclude all financial related stocks and choose the stocks with a low P/E. If the P/E is less that 5, he felt the data may be fishy, and he excluded the stocks. This is the simple magic formula which I have used. It is the modified Greenblatt formula, which he has mentioned in the last few pages of the book: The Little Book That Beats The Market.

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