The Greenblatt Method

The Greenblatt Method, also known as the "Magic Formula," is an investment strategy that focuses on buying quality companies at attractive prices. It involves ranking stocks based on two key factors: high returns on invested capital (indicating good business performance) and low price-to-earnings or price-to-earnings growth ratios (suggesting undervaluation). By selecting stocks that score well on both measures, investors aim to attain consistent returns over time. The approach emphasizes a disciplined, math-driven process to identify undervalued, high-quality businesses, reducing emotional decision-making and promoting long-term investment success.