An Experiment: Mixing Greenblatt with Graham

I am going to do an experiment. My thesis is that if I combine high return on capital / low p/e stocks (Joel Greenblatt’s magic formula essentially) with Ben Graham’s Low Price to Book, I can perhaps yield substantial returns. When I say low price to book I mean as close to 1 or below as possible.

Low P/B on Magic Formula

Kelly Services (KELYA — 28.70) P/B — 1.4
Avici Systems (AVCI — 7.95) P/B — 1.5
Optimal Group (OPMR — 8.78) P/B — 0.98
Footstar (FTAR.OB — 8.77) P/B — 1.43

I will keep track of these holdings