10 Dividend Blue-Chip Bargains To Potentially Profit From This Irrational Market Freakout

seekingalpha09-06

Joel Greenblatt's Magic Formula combines value and quality investing. By focusing on earnings yield and return on capital, it has achieved 40% annual returns for 21 years.The market's recent selloff, ...

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By focusing on earnings yield and return on capital, it has achieved 40% annual returns for 21 years.The market's recent selloff, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4719028-10-dividend-blue-chip-bargains-to-potentially-profit-from-this-irrational-market-freakout\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>10 Dividend Blue-Chip Bargains To Potentially Profit From This Irrational Market Freakout</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\n10 Dividend Blue-Chip Bargains To Potentially Profit From This Irrational Market Freakout\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-06 19:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4719028-10-dividend-blue-chip-bargains-to-potentially-profit-from-this-irrational-market-freakout><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Joel Greenblatt's Magic Formula combines value and quality investing. By focusing on earnings yield and return on capital, it has achieved 40% annual returns for 21 years.The market's recent selloff, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4719028-10-dividend-blue-chip-bargains-to-potentially-profit-from-this-irrational-market-freakout\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"KKR","symbol_name":"KKR & Co L.P.","start_time":0,"source_url":"https://seekingalpha.com/article/4719028-10-dividend-blue-chip-bargains-to-potentially-profit-from-this-irrational-market-freakout","article_id":"2465476692","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/520885672/image_520885672.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2465476692","pubTimestamp":1725620400,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Joel Greenblatt's Magic Formula combines value and quality investing. 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By focusing on earnings yield and return on capital, it has achieved 40% annual returns for 21 years.The market's recent selloff, driven by weak manufacturing data, is an opportunity to buy high-quality undervalued dividend blue-chip stocks using Joel Greenblatt's Magic Formula.September's market volatility is average. Focus on long-term investment strategies rather than knee-jerk reactions to short-term data.The Magic Formula combines free cash flow yield and return on capital to identify undervalued, high-quality stocks that offer long-term solid returns and income growth.Investing in these top 10 FCF Magic Formula dividend blue chips offers a 4% yield today, 10% long-term dividend growth, 14% income growth potential, and 19% upside potential in the next 12 months.   peshkov Joel Greenblatt's Magic Formula That Beats The Market... Upgraded Joel Greenblatt achieved 40% annual returns for 21 years at Gotham Capital using a combination of value and quality investing in a more advanced version of his famous \"Magic Formula that beats the market.\" Key Components of the Magic Formula Earnings Yield: This is calculated as earnings before interest and taxes (EBIT) divided by the company's enterprise value (EV). It measures how cheap a company is relative to its earnings. Return on Capital (ROC): This is calculated as EBIT divided by the sum of net fixed assets and working capital. It indicates how efficiently a company generates profits from its capital. Ranking and Selection: Companies are ranked based on their earnings yield and return on capital. The strategy recommends investing in the top 20 to 30 companies with the best combined rankings. Portfolio Management: Investors are advised to buy two to three positions each month in the top-ranked companies, hold them for a year, and then rebalance by selling losers just before the year ends and winners just after to optimize tax implications. Exclusions: The formula typically excludes small-cap stocks, financial companies, utility companies, and non-U.S. companies. The idea behind the Magic Formula is that you want a good mix of wonderful companies at good to great prices. This mirrors Warren Buffett's strategy in recent decades. It's far better to buy wonderful companies at fair prices than fair companies at wonderful prices.\" As Greenblatt stated in a 2006 interview with Barron's, the Magic Formula is designed to help investors with “buying good companies, on average, at cheap prices, on average.”   Quant Investing  Consider how challenging it is for even the best fund managers to beat the market over the long term to illustrate how remarkable these results are. Resolve Asset Management  Over the last 21 years, the best fund manager in America, out of 3,220 funds that survived that long, outperformed the S&P by 1.8% and the 40 other fund managers that beat the market had a median outperformance of 0.3%. Tweaking the Magic Formula has been found to work in other countries and with other valuation methods, including a 28% annual return in Indonesia, 4X better returns than their local stock market. Quant Investing  The Magic Formula can be optimized even further using different approaches to valuation or profitability. Quant Investing  It's also proven itself outside the US and companies of all sizes, though with an important caveat. See the risk section. So this got me thinking: If the Magic Formula worked well historically using earnings, the most popular valuation metric, what if you used the best valuation metric? Free Cash Flow Yield: The Valuation Gold Standard The 12-month forward PE is worth paying attention to, which is why most Magic Formula investors use PE.   Pacer Funds  This valuation metric makes sense when 80% of institutional funds are being managed using forward PE. However, over the long term, FCF yield, or free cash flow divided by enterprise value (market cap + net debt), is the best valuation metric, at least over the last 33 years. Pacer Funds Pacer Funds  The 10% highest FCF yield since 1991 delivered 2X the average volatility-adjusted annual returns of the Russell 1000. VictoryShares The annualized returns were 16% annually, which can be boosted by almost 2% annually by excluding slower-growing companies. Note that even the 33% slowest growing top 10% FCF yield companies outperformed the S&P by 2% annually since 1991. That's 33 years in which pure deep value, with slow growth, beat the S&P more than the best fund manager of the last 21 years. FCF Yield Magic Formula I spent the weekend working with our fantastic tech team creating a spreadsheet that would run a screen for a Super Version of the Magic Formula.  FCF yield instead of EBIT or earnings for value. Greenblatt ROC for quality.  We ran the screen on the entire Master List.  FCF Yield Magic Formula Results We're automating this to update every night.  Dividend Kings Research Terminal  Some companies don't have Greenblatt ROC available, so they had to be excluded from the screen. OK, now we have the entire Master List of about 425 companies ranked by the FCF Yield Magic Formula. But remember that this only creates a watch list, and studies have shown that the Magic Formula can be improved. So here's how I did that. First, I used the watch list creation tool to enter the ten tickers for the top 10 companies. Dividend Kings Zen Research Terminal  But valuation always matters, as you can see, over 10-plus years. Bank of America  So, I eliminated the overvalued stocks KKR (KKR) and H&R Block (HRB) and replaced them with the next two best FCF Magic Formula stocks eBay (EBAY) and Paychex (PAYX). Dividend Kings Zen Research Terminal  By eliminating those two companies, the top 10 Magic Formula stocks go from 3% overvalued to 18% undervalued. The yield of 2.9% is OK, basically matching the Vanguard High Dividend Yield ETF's (VYM) 3%. But with a solid 14% to 15% long-term total return and income growth consensus. Dividend Kings Zen Research Terminal  Eliminating the two non-dividend stocks PayPal (PYPL) and Square (SQ) and replacing them with the next two on the FCF Magic Formula list, Franklin Resources (BEN) and Omnicom (OMC), creates a top 10 list that yields 3.8%, a 1% bump. However, the downside? The long-term total return potential is down to 11.9%. Why? As you can see, three of these companies have total return potentials (yield + long-term growth consensus) of less than 10%. Single Stock Risk Is Very Real: Make Sure The Companies You Are Considering Are Worth The Risk  Wide Moat Research  The juice isn't worth the squeeze for those three companies, so let's replace them with the next three companies on the list. However, some replacements are also slower-growing companies like Interpublic Group (IPG) and Buckle (BKE). Continuing down the list until we find all companies offering double-digit long-term consensus return potential and income growth, we end up with this Top 10 list. Top 10 FCF Magic Formula Dividend Blue Chips Dividend Kings Zen Research Terminal  The average yield is 3.7%, almost as high as the 3.8% we got by eliminating the non-dividend stocks early on. However, eliminating the sub-10% total return potential stocks has brought the consensus long-term total return/income growth to 13.5%, 2% higher. So, we give up 0.1% yield to obtain 2% higher income growth and total return potential. The average historical discount to fair value is 11%, compared to -4% in the preliminary screen. That's compared to the S&P's 5% premium and a 3% discount for the dividend aristocrats. One of our DK members created the PEGY Ratio. It's a brilliant approach to PEG investing (growth at a reasonable price). The PEG ratio is the PE ratio divided by the long-term growth rate, popularized by Peter Lynch. 29% annual returns for 13 years at Fidelity. To make the PEG ratio even more effective, we use FCF yield instead of PE and the total return consensus instead of the growth consensus. PEGY Ratio: The Ultimate Single Metric For GARP Investing EV/FCF (valuation) dividend by (Yield + median long-term growth consensus) The PEGY ratio combines quality (FCF yield is a value/quality metric) with growth, yield, and income growth potential. In other words, a single metric that incorporates:  Quality Value Yield Growth potential Income growth potential  The PEGY of the US stock market? 2.8. These 10 FCF Magic Formula Dividend Blue-chips? 0.97. That's quality, high-yield growth at a reasonable price. The average safety and quality is 89% Ultra SWAN and 88% very safe dividends.         Rating Dividend Kings Safety Score (Over 1,000 Metric Model) Approximate Dividend Cut Risk (Average Recession) Approximate Dividend Cut Risk In Pandemic Level Recession   1 - unsafe 0% to 20% over 4% 16+%   2- below average 21% to 40% over 2% 8% to 16%   3 - average 41% to 60% 2% 4% to 8%   4 - safe 61% to 80% 1% 2% to 4%   5- very safe 81% to 100% 0.5% 1% to 2%   Top 10 FCF Magic Formula Dividend Blue-chips 88% 0.5% 1.60%   S&P Risk Rating 66% Percentile, Above-Average A- stable outlook credit rating = 2.86% 30-year bankruptcy risk 20% or Less Max Risk Cap   Click to enlarge (Source: DK Zen Research Terminal) The dividend safety is robust, with a very low 1.6% risk of a cut even in a severe recession. S&P estimates a 2.86% 30-year average bankruptcy risk, corresponding with an A-stable credit rating.   S&P S&P rates their average long-term risk management as the 66th global percentile.   S&P       S&P LT Risk Management Score Rating   0% to 9% Very Poor   10% to 19% Poor   20% to 29% Suboptimal   30% to 59% Acceptable   60% to 69% Good   70% to 79% Very Good   80+% Exceptional   Top 10 FCF Magic Formula Dividend Blue-chips 43%   Global Percentile 66%   Click to enlarge (Source: S&P) S&P estimates these ten companies are 43% optimal on all 1,000-plus risk metrics.  The No. 1 industry leader rates each metric, set at 100%. Each metric is then scored compared to the No. 1 industry leader. Then, S&P weighs the final risk management score based on all the metrics. And then creates a global percentile.  These Top 10 FCF Magic Formula dividend blue chips have long-term risk management in the top 34% of companies, similar to the 67th percentile rating of the dividend aristocrats.  They have 19% fundamentally justified return potential in the next 12 months. Not a forecast. If they grow as expected and return to historical market-determined fair value, then 19% of the total returns 12 months from now would be 100% justified by fundamentals. In other words, a 19% total return would bring them back to fair value in the first year of ownership. From there, you'd earn starting yield + long-term growth, which is 13% to 14%. So, the investment has an almost 4% yield today, 19% return potential in the next year, 13% to 14% long-term income growth and total returns over time, and inflation-adjusted dividend growth potential.  13.5% long-term income growth consensus. 11.3% inflation-adjusted income growth consensus = doubling every 6.3 years. 190% dividend growth consensus over ten years. 10.8% inflation-adjusted yield on cost consensus in 2034.  In other words, if these companies grow as expected, their 3.7% yield today will be 10.8% on cost, adjusted for inflation in a decade. $1,000 invested today pays $37 per year in dividends and grows close to 10% annually. However, with annual rebalancing and dividend reinvestment in a decade, analysts expect $1,000 invested today to pay $108 in dividends, growing almost 10% annually. Historical Returns Since 1998 Portfolio Visualizer  2.7% outperformance for the S&P over the last 26 years. Remember that the best fund manager of the last 21 years beat the S&P by 1.8% annually. Portfolio Visualizer  The average annual return was 13% to 14%, as analysts expect over the long term. That's not just consistently better than the S&P. These blue chips delivered superior returns with greater consistency. Portfolio Visualizer  The volatility-adjusted alpha (vs. S&P) was almost 4% annually, and the volatility-adjusted returns were over 50% better. Treynor ratio: Excess total return vs risk-free bonds per unit of volatility. Income Growth History Per $1,000 Investment In 1998        Metric 10 FCF Magic Formula Dividend Blue-Chips S&P   Total Income $5,689.70 $1,116.90   Inflation-Adjusted Income $2,917.79 $572.77   Starting Yield 2.20% 1.34%   Yield On Cost 91.3% 9.8%   Inflation-Adjusted Yield On Cost 46.79% 5.00%   Income Growth 14.5% 8.5%   Click to enlarge (Source: Portfolio Visualizer) Note how income growth is very close to the average annual total returns thanks to dividend reinvestment and annual rebalancing. This is why total returns matter for income investors. Maximizing long-term retirement income requires strong total returns, not just a high safe yield. Over the last quarter century, these Magic Formula blue chips delivered 5X more inflation-adjusted income than the S&P. Remember how analysts expect an 11% inflation-adjusted yield on cost in a decade? When you give great companies even longer to compound income, you can get 47% real yields on cost. $1,000 invested in 1998 is now paying $470 per year in inflation-adjusted dividends, compounding at 13% to 14% per year for the foreseeable future. But you don't have to wait decades for impressive returns and a nice payout from buying \"above-average quality companies, on average, for below-average prices, on average.\" Consensus 2026 Total Return Potential  Not a forecast. Consensus return potential. These are the expected returns if and only if these companies grow as expected and return to historical fair value by the end of 2026. Fundamentals would justify that.  Average: 60% = 17.0% annually vs. 35% or 12% annually S&P. 1-Year Fundamentally Justified Upside Potential: 19% vs 10% S&P Altria (MO) 2026 Consensus Return Potential FAST Graphs, FactSet  Franklin Resources (BEN) 2026 Consensus Return Potential FAST Graphs, FactSet  T. Rowe Price (TROW) 2026 Consensus Return Potential FAST Graphs, FactSet  Brookfield Asset Management (BAM) 2026 Consensus Return Potential FAST Graphs, FactSet  Essential Properties Realty Trust (EPRT) 2026 Consensus Return Potential FAST Graphs, FactSet    Federated Hermes (FHI) 2026 Consensus Return Potential FAST Graphs, FactSet  Paychex (PAYX) 2026 Consensus Return Potential FAST Graphs, FactSet  Automatic Data Processing (ADP) 2026 Consensus Return Potential FAST Graphs, FactSet  Apollo Global Management (APO) 2026 Consensus Return Potential FAST Graphs, FactSet  SEI Investments (SEIC) 2026 Consensus Return Potential FAST Graphs, FactSet  Risk Profile: Why These Blue Chips Aren't For Everyone There are several important caveats to remember when investing in Magic Formula. For example, while the backtests of various iterations of this strategy, such as those using foreign stocks, did very well from 2000 to 2011, that was partially because international stocks did very well during the last decade of the 2000s. That was because value generally did well, and emerging market stocks, based on commodities and basic materials, were on fire. Energy, commodities, companies selling to BRIC countries, especially China. EV/FCF will naturally be lower for companies that are traditionally value stocks, which can mean sector concentration, though not what you might imagine. Based on EV/FCF and the most recent quarterly return on capital, this article's screen is heavily weighted toward financials and technology, which make up 80% of these recommendations. For this article, I limited the recommendations to 10, but the strategy calls for 20 to 30 stocks to ensure adequate diversification, using 3.33% to 5% weightings for each. That's another critical thing to remember: This is a purely quantitative approach to investing. That means the strategy will likely work well in the long term, but remember what Greenblatt told Barron. We're buying good companies, on average, at cheap prices, on average.” - Joel Greenblatt \"On average\" is critical. The nature of quantitative investing is statistical. I can guarantee you that some of these ten stocks won't work out. The thesis will break, and that's where the annual rebalancing comes in. If you rebalance a quantitative portfolio every year, you screen out deteriorating companies, usually long before they suffer what JPMorgan calls \"permanent, catastrophic declines.\" Another thing to keep in mind? Income Growth Is Variable In Any Given Year  Portfolio Visualizer  Financial stocks can have variable dividends, and even the dividend aristocrats have variable income if you use equal weightings. Dividend Aristocrats ETF (NOBL) Dividend Income Over Time Portfolio Visualizer  NOBL is the official S&P aristocrat ETF, equally weighted at around 2% among just over 50 aristocrats. S&P companies with 25-plus year dividend growth streaks. By definition, everything in the NOBL ETF raises its dividend every single year. Yet, thanks to equal weighting and annual rebalancing, there are sometimes years with flat or negative income.  From 2021 to 2022, there was a decline in NOBL income. 2023 to 2024 is set to be a modest decline in NOBL income.  Erasmus School Of Economics  Weighting by value can slightly improve returns over time, but it's trickier and requires some spreadsheet programming. Note that how you weigh the portfolio will affect returns over long periods. Equal weight outperformed for the first 11 years - if you picked wrong, it could mean years of frustration. In the last decade, when growth outperformed value, the Magic Formula failed to beat the market. Some studies have suggested integrating the Magic Formula with momentum indicators to improve returns. For instance, a backtest in Europe from 1999 to 2011 showed that combining the Magic Formula with momentum indicators significantly enhanced returns, suggesting that layering strategies could be beneficial. And finally, we can't forget that even the highest quality companies will sometimes be very volatile. The Magic Formula is all about safety, quality and valuation. It's not designed for low volatility. 10% Worst Months Since 1998             10 FCF Magic Formula Dividend Blue-Chips SPY   Year Month Return Return   2008 10 -20.42% -16.52%   2020 3 -18.53% -12.46%   1998 8 -14.55% -14.12%   2020 2 -12.21% -7.92%   2002 7 -12.00% -7.88%   2022 6 -10.64% -8.25%   2002 9 -10.33% -10.49%   1999 2 -9.95% -3.21%   2001 9 -9.92% -8.16%   2022 9 -9.76% -9.24%   2022 1 -9.09% -5.27%   2008 3 -9.07% -0.90%   2018 12 -9.00% -8.79%   2002 6 -8.48% -7.38%   2009 2 -8.39% -10.74%   2022 4 -8.23% -8.78%   2010 5 -8.10% -7.95%   2008 1 -7.93% -6.05%   2023 10 -7.84% -2.17%   2008 9 -7.60% -9.44%   2023 5 -7.43% 0.46%   2008 11 -7.11% -6.96%   2011 9 -7.04% -6.94%   2024 4 -6.92% -4.03%   2016 1 -6.76% -4.98%   2022 12 -6.54% -5.76%   2001 3 -6.43% -5.60%   2008 6 -6.31% -8.35%   2009 1 -6.27% -8.21%   2014 1 -5.93% -3.52%   Average   -9.29% -7.32%   Median   -8.31% -7.90%   Click to enlarge (Source: Portfolio Visualizer) Notice how the worst months for these blue chips usually, but not always, correspond to the worst months for the S&P. There are times when these stocks fall heavily while the S&P is up. That's called \"line item risk\" or idiosyncratic risk. Any given stock can collapse 10%, 20%, or even 30% while the S&P doesn't dive or go up. And if you have a 10-stock portfolio, that means higher concentration, resulting in line item risk. Long-term quantitative investing, following sensible rules, works. But you will have stocks that are not working. Stocks that might drive you crazy. The portfolio might be doing exactly what it's designed to do, and you might lose confidence because of one or two companies that aren't working. 10% Best Months Since 1998: The Upside Of Downside             10 FCF Magic Formula Dividend Blue-Chips SPY   Year Month Return Return   2020 11 15.46% 10.88%   2000 3 14.02% 9.69%   1998 9 12.34% 6.36%   1998 10 11.68% 8.11%   2021 3 11.61% 4.54%   2009 3 11.58% 8.35%   2009 7 11.39% 7.46%   2020 4 11.38% 12.70%   2010 9 11.24% 8.96%   2001 11 11.09% 7.80%   2022 11 10.54% 5.56%   2000 10 10.53% -0.47%   2022 7 9.80% 9.21%   1999 4 9.71% 3.80%   2009 4 9.70% 9.93%   2003 5 9.27% 5.48%   2019 2 9.09% 3.24%   2023 11 9.03% 9.13%   2015 10 8.98% 8.51%   2000 9 8.75% -5.48%   2010 3 8.74% 6.09%   2011 10 8.61% 10.91%   2004 10 8.55% 1.29%   2013 1 8.55% 5.12%   2003 4 8.43% 8.46%   2016 3 8.20% 6.72%   2002 10 8.16% 8.23%   2000 7 8.15% -1.63%   2007 10 7.94% 1.36%   2009 5 7.92% 5.85%   Average   10.01% 6.21%   Median   9.49% 7.09%   Click to enlarge (Source: Portfolio Visualizer) Three of these top months occurred when the S&P was down that month. That's the upside of stock picking and quantitative, rules-based investing. You own a portfolio different from the S&P - that's the point. The point is to beat the market by combining superior combinations of yield, growth, valuation, and income growth that the market delivers. However, it's also important to remember that Magic Formula investing, like any strategy, doesn't always work. Bottom Line: The Market's Freakout Is A Buying Opportunity For Smart Long-Term Investors I'm not a psychic, so I can't tell you whether the economic data for the rest of this week will be as expected. A recession is coming at some point, but it's impossible to predict when or how bad it will be. We can only watch the data as it arrives, knowing that the market will overreact to news, either to the upside or the downside. If you remember that disciplined financial science, not market timing, not \"from the gut\" stock picking, and investing by the seat of your pants are the best chances to build life-changing income and wealth, you will be far less likely to make costly mistakes. The Magic Formula is a simple, easy-to-follow, rules-based approach to buying \"above-average quality companies at below-average prices.\" As long as you understand the limitations of any rules-based investing strategy and incorporate it into your diversified and optimized portfolio strategy, companies like these ten can help you achieve strong income today, with potentially life-changing income growth in the future.  It provides a wonderful combination of safety, quality, valuation, and growth to help you achieve your financial dreams.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.4","shortVersion":"4.29.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2465476692"}