Comments on: Formula Investing by Greenblatt

By: Name

Name — Fri, 14 Aug 2009 20:12:27 +0000

This sounds like Hussman's HSGFX approach.

By: Name

Name — Fri, 14 Aug 2009 15:12:27 +0000

This sounds like Hussman's HSGFX approach.

By: Doug

Doug — Wed, 12 Aug 2009 20:53:40 +0000

One way to do it would be to buy put options (with one month expirations for every month the index is below the 10-month MA) on the closest liquid index ETF. Theoretically, the “Formula stocks” would perform “less bad” than the index, so you would still get a positive return in a potentially down market.

By: markknodel

markknodel — Thu, 06 Aug 2009 22:03:29 +0000

I like your idea “Would be interesting to use this system as your alpha generator, then hedge out the market risk when below a long term moving average?” But, How would it work? What are you thinking? Let's say that you buy a portfolio of 30 mid-cap stocks using the magic formula and you hold them for one year like the strategy suggests. How could you use the 10-month moving average to hedge out market risk if you go below the moving average? Are you thinking tracking a mid-cap index and if it goes below the 10-month MA then sell out of the portfolio or track each stock based on it's 10-month MA? Open to your ideas!