7 January 2015 marked the start of an experiment I wanted to run on Singapore-listed stocks. I documented it in the article titled The Best Shares in Singapore’s Stock Market. The aim of the experiment was to find out how the Magic Formula investing strategy works here over the long run.
The Magic Formula was developed by Joel Greenblatt, and it was described in his 2005 investing book, The Little Book That Beats The Market. According to The New York Times, Greenblatt has an incredible track record as an investor – from 1985 to 1994, he delivered annual returns, before fees, of 50%.
In The Best Shares in Singapore’s Stock Market, I had described how the Magic Formula works, so I will not repeat myself. But what’s important to note is that the Magic Formula requires a yearly refresh.
So, on January 2016, I published two articles: (a) An article that touched on the 2015 Magic Formula portfolio’s returns and lessons; and (b) an article on a new portfolio of Magic Formula stocks for 2016. On January 2017, I did the same thing. I wrote and published two articles: (a) An article discussing the 2016 Magic Formula portfolio’s returns and lessons; and (b) an article on a fresh portfolio of Magic Formula stocks for 2017.
And today – a year after the 2017 Magic Formula portfolio was constructed – I looked back at how the portfolio performed and wrote an article on the returns and the lessons I learnt. It turns out that the group of stocks delivered a pleasing return of 25.5%.
Here are all the articles I mentioned in the two paragraphs just above:
As you may have guessed, I do want to continue running the Magic Formula experiment to see whether Greenblatt’s investing strategy can work here in Singapore over the long-term. So, without further ado, here are the five best stocks – in descending order – within my new list of 30 stocks for the 2018 Magic Formula portfolio (in a similar manner to what I did for the 2015, 2016, and 2017 Magic Formula portfolios, I had excluded all financial and utility stocks, as well as those with a market capitalisation of less than S$100 million):
1. Sinostar PEC Holdings Limited (SGX: C9Q)
2. Delong Holdings Limited (SGX: BQO)
3. Lung Kee Bermuda (SGX: L09)(SEHK: 255)
4. Capital World Ltd (SGX: 1D5)
5. Geo Energy Resources Ltd (SGX: RE4)
The table below contains all 30 names in the 2018 Magic Formula portfolio [Editor’s note: An article sharing the valuation and financial data used to pick the 30 stocks has been published; it can be found here. A series of articles that takes a deep dive into the 30 companies shown below have also been started; they can be found here.]:
Source: S&P Global Market Intelligence
These are Singapore’s best stocks for 2018, according to the Magic Formula at least. I don’t know which of them will turn out to be the big winners, so let’s check back in 2019!
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing owns shares in OKP Holdings, China Sunsine Chemical Holdings, Valuetronics Holdings, Yangzijiang Shipbuilding (Holdings), Straco Corporation, and Boustead Singapore. The Motley Fool Singapore has a recommendation on AEM Holdings and Straco Corporation.