ANALYSIS OF MAGIC FORMULA FOR INVESTMENT RETURN IN INDIAN STOCK

Abstract

Magic Formula Investing, popularized by Joel Greenblatt, is a strategy that focuses on selecting stocks based on two main criteria: high earnings yield and high return on capital. Earnings yield is the ratio of a company's earnings per share to its stock price, indicating how much profit a company is generating relative to its price. Return on capital, on the other hand, measures how efficiently a company is using its capital to generate profits. The goal of this strategy is to identify undervalued companies that exhibit strong financial performance. By targeting stocks with high earnings yield and return on capital, investors aim to uncover hidden gems in the stock market that may be overlooked by others. This methodical approach to value investing has garnered attention for its relative simplicity and effectiveness in outperforming the market. One of the key advantages of the Magic Formula is its straightforward nature, which makes it accessible to a wide range of investors. Unlike more complex investment strategies that require in-depth financial analysis, the Magic Formula provides a clear and systematic way to identify potential investment opportunities. Overall, Magic Formula Investing offers investors a disciplined and rules-based approach to stock selection, with the aim of achieving superior returns compared to the broader market. While past performance is not indicative of future results, the Magic Formula's track record