Guru Stock Screen of the Week: Top 10 "Magic Formula" Stocks

This week, we bring you the Stock Screen of the week from Validea. On, you can screen for stocks using the site’s Guru Stock Screener, which scores stocks based on the fundamental stock selection criteria of legendary investors. The firm’s models are based on investing legends such as Warren Buffett, Peter Lynch, Benjamin Graham, Kenneth Fisher, Martin Zweig, David Dreman, Joel Greenblatt and others.

This week’s screen looks for the top ten stocks that pass our Earnings Yield investor model, which is based on the stock selection strategy outlined by Joel Greenblatt in his book, “The Little Book that Beats the Market”. The criteria used and resulting companies are below:

  1. The first criterion that this strategy looks at is the earnings yield, which is the inverse of the PE Ratio.
  2. The second criterion that this strategy looks at is the return on total capital, which examines how well a firm utilizes the capital that it employs.
  3. The final test of this strategy ranks each stock based on a combination of its ranking from the first two criteria (i.e. Earnings Yield and Return on Total Capital).
  4. Only stocks with Market Caps above $300 million are included in the result set.

Interested in the Guru Stock Screener – try it out with a 7 day trial to Validea.