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11 Best Magic Formula Stocks to Buy Now

In this piece, we will take a look at the 11 best magic formula stocks to buy now. If you want to skip our coverage of what magic formula investing is all about, then you can take a look at the 5 Best Magic Formula Stocks to Buy Now.

Considering the thousands of companies that trade on stock markets such as the NASDAQ and the NYSE as well as the plethora of information that investors are bombarded with every day, investing sometimes appears as nothing short of wizardry. For novices, terms such as relative strength indexes (RSIs), standard deviations of returns, beta, earnings per share, yields, and other metrics appear to be a new language that requires a detailed study before one can become comfortable with it.

One investor who literally describes his investment strategy as ‘magic’ is Joel Greenblatt. Mr. Greenblatt is the chief investment officer of the ominously named Gotham Asset Management. While his investment decisions focus mostly on making returns for investors rather than fighting crime, Mr. Greenblatt’s approach has nevertheless won him more fame in financial markets than Bruce Wayne. He set up Gotham Asset Management in 2008, which makes the fund relatively younger when compared to some other funds that have been around for decades.

However, before Gotham Asset Management, the Magic Formula investor was at the helm of the fund Gotham Capital. He set up Gotham Capital in 1985, and the fund successfully focused on investing in distressed or ‘special situation’ companies and stocks. These stocks are of firms that might be facing troubles in managing their debt, or they might be struggling in their markets due to choices made of their own accord or broader macroeconomic factors. Mr. Greenblatt’s Gotham Capital was one of the top performing funds in its league back in the mid 80s and 90s as it delivered net 30% returns during the time periods.

Like some other hedge fund and investing heavyweights like Warren Buffett of Berkshire Hathaway and Seth Klarman of Baupost Group, Mr. Greenblatt is also an adherent of one of Wall Street’s best known investment approaches. If you haven’t guessed it already, this approach is called Value Investing. Value investing simply analyzes a stock to compute what the investor believes is a fair value of the shares. This value is then compared to the market price of the stock, and if it’s higher than the market price, then a potential investment decision is made. This investment decision is also influenced by the difference between fair and market values. The higher this difference is, the more comfortable an investor is buying the shares as it leaves a greater ‘margin of safety’ for non fundamental downward share price movements.

So where’s the magic? Well, Mr. Greenblatt’s flavor of value investing is called Magic Formula investing. This strategy is based on the two fundamental metrics of share price and stock valuation. These are the Return on Capital Employed (ROCE) and the earnings yield. For the uninitiated, the ROCE divides a firm’s operating income by the sum of its working capital and net fixed assets. The logic behind this computation is that the ROCE measures the return to investors over the costs of doing business as measured by buying and selling inventory and spending on assets. The earnings yield of a stock is its earnings per share divided by the share price, and it enables investors to understand the true post expenses, tax, and interest ability of their investment to make money.

In Magic Formula investing, the ROCE and earnings yield of stocks are calculated first. They are then ranked according to these metrics, and the top shares are bought and held for the long term to benefit from a firm’s ability to capitalize on its assets and cash to turn a profit and return for investors.

So what are some magic formula stocks that can deliver magical returns? We took a look today, and some top stock picks are Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Snowflake Inc. (NYSE:SNOW).

Rommel Canlas/Shutterstock.com

Our Methodology

To make our list of the best magic formula stocks to buy now, we scanned the Q4 2023 investment portfolio of Joel Greenblatt’s Gotham Asset Management and picked out the top holdings in U.S. dollar terms.

For these best magic formula stocks, we used hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.

11 Best Magic Formula Stocks to Buy Now

11. Berkshire Hathaway Inc. (NYSE:BRK-A)

Number of Hedge Fund Investors As Of Q4 2023 end: 117

Gotham Asset Management’s Q4 2023 Stake: $22 million

Berkshire Hathaway Inc. (NYSE:BRK-A) is the famed investment management company of Warren Buffett that also has the honor of being the most expensive stock on the U.S. markets. Yet, the future is quite rosy, as analysts have set an average share price target of $632,500.

During last year’s fourth quarter, 117 out of the 910 hedge funds covered by Insider Monkey’s research had invested in Berkshire Hathaway Inc. (NYSE:BRK-B). Out of these, the biggest investor was Michael Larson’s Bill & Melinda Gates Foundation Trust as it owned 19.9 million shares that were worth $7.1 billion.

10. Exxon Mobil Corporation (NYSE:XOM)

Number of Hedge Fund Investors As Of Q4 2023 end: 85

Gotham Asset Management’s Q4 2023 Stake: $22.8 million

Exxon Mobil Corporation (NYSE:XOM) is a well known American oil and gas company that is one of the biggest of its kind in the world. The shares are rated Buy on average and the average analyst share price target is $124.89.

For their fourth quarter of 2023 shareholdings, 85 out of the 933 hedge funds tracked by Insider Monkey were the firm’s shareholders. Exxon Mobil Corporation (NYSE:XOM)’s largest shareholder among these is Ken Fisher’s Fisher Asset Management as it owns $1.3 billion worth of shares.

Along with Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Snowflake Inc. (NYSE:SNOW), Exxon Mobil Corporation (NYSE:XOM) is a top magic formula stock to buy.

9. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Investors As Of Q4 2023 end: 81

Gotham Asset Management’s Q4 2023 Stake: $25.1 million

Johnson & Johnson (NYSE:JNJ) is one of the biggest healthcare and personal well being companies in the world. It makes and sells a variety of products that include off the shelf beauty products and vaccines. 2024 is proving to be a crucial and interesting month for the firm, as after its CEO was grilled by Senators for high drug prices, an incorrect media report claimed that a Johnson & Johnson (NYSE:JNJ) frostbite drug had secured FDA approval.

After digging through 933 hedge funds Q4 2023 investment portfolios, Insider Monkey discovered that 81 had bought Johnson & Johnson (NYSE:JNJ)’s shares. Ken Fisher’s Fisher Asset Management owned the biggest stake which was worth $996 million.

8. Broadcom Inc. (NASDAQ:AVGO)

Number of Hedge Fund Investors As Of Q4 2023 end: 91

Gotham Asset Management’s Q4 2023 Stake: $28.5 million

Broadcom Inc. (NASDAQ:AVGO) is a semiconductor company whose products enable connectivity in wireless gadgets and wireless devices. The firm scored a big win on the A.I. front in February 2024 when its CEO joined Meta’s board to deepen the pair’s partnership for networking chips.

As of December 2023 end, 91 out of the 933 hedge funds profiled by Insider Monkey were the firm’s shareholders. Broadcom Inc. (NASDAQ:AVGO)’s largest hedge fund investor is Ken Fisher’s Fisher Asset Management due to its $2.3 billion investment.

7. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Investors As Of Q4 2023 end: 173

Gotham Asset Management’s Q4 2023 Stake: $34.9 million

NVIDIA Corporation (NASDAQ:NVDA) is a semiconductor designer that is best known for its graphics processing units (GPUs). These have also propelled it right at the top of the artificial intelligence food chain, and thanks to the expected booming demand for NVIDIA Corporation (NASDAQ:NVDA)’s GPUs, the shares are up by a whopping 231% over the past 12 months.

By the end of last year’s fourth quarter, 173 out of the 933 hedge funds polled by Insider Monkey had invested in NVIDIA Corporation (NASDAQ:NVDA). Out of these, the biggest investor was Rajiv Jain’s GQG Partners through its $6.8 billion investment.

NVIDIA Corporation (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Snowflake Inc. (NYSE:SNOW) are some top magic formula stocks.

6. Meta Platforms, Inc. (NASDAQ:META)

Number of Hedge Fund Investors As Of Q4 2023 end: 242

Gotham Asset Management’s Q4 2023 Stake: $34.98 million

Meta Platforms, Inc. (NASDAQ:META) is one of the biggest social media and communications companies in the world. The high technology mindset of its chief Mark Zuckerberg is serving the firm well these days, with Zuckerberg sharing in January 2024 that Meta Platforms, Inc. (NASDAQ:META) will buy hundreds of thousands of NVIDIA’s latest GPUs this year to beef up its A.I. computing capabilities.

242 out of the 933 hedge funds part of Insider Monkey’s Q4 2023 database had bought the firm’s shares. The largest Meta Platforms, Inc. (NASDAQ:META) shareholder is Rajiv Jain’s GQG Partners as it holds $3.9 billion worth of shares.

Click here to continue reading and check out 5 Best Magic Formula Stocks to Buy Now.

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Disclosure: None. 11 Best Magic Formula Stocks to Buy Now is originally published on Insider Monkey.

AI, Tariffs, Nuclear Power: One Undervalued Stock Connects ALL the Dots (Before It Explodes!)

Artificial intelligence is the greatest investment opportunity of our lifetime. The time to invest in groundbreaking AI is now, and this stock is a steal!

AI is eating the world—and the machines behind it are ravenous.

Each ChatGPT query, each model update, each robotic breakthrough consumes massive amounts of energy. In fact, AI is already pushing global power grids to the brink.

Wall Street is pouring hundreds of billions into artificial intelligence—training smarter chatbots, automating industries, and building the digital future. But there’s one urgent question few are asking:

Where will all of that energy come from?

AI is the most electricity-hungry technology ever invented. Each data center powering large language models like ChatGPT consumes as much energy as a small city. And it’s about to get worse.

Even Sam Altman, the founder of OpenAI, issued a stark warning:

“The future of AI depends on an energy breakthrough.”

Elon Musk was even more blunt:

“AI will run out of electricity by next year.”

As the world chases faster, smarter machines, a hidden crisis is emerging behind the scenes. Power grids are strained. Electricity prices are rising. Utilities are scrambling to expand capacity.

And that’s where the real opportunity lies…

One little-known company—almost entirely overlooked by most AI investors—could be the ultimate backdoor play. It’s not a chipmaker. It’s not a cloud platform. But it might be the most important AI stock in the US owns critical energy infrastructure assets positioned to feed the coming AI energy spike.

As demand from AI data centers explodes, this company is gearing up to profit from the most valuable commodity in the digital age: electricity.

The “Toll Booth” Operator of the AI Energy Boom

  • It owns critical nuclear energy infrastructure assets, positioning it at the heart of America’s next-generation power strategy.
  • It’s one of the only global companies capable of executing large-scale, complex EPC (engineering, procurement, and construction) projects across oil, gas, renewable fuels, and industrial infrastructure.
  • It plays a pivotal role in U.S. LNG exportation—a sector about to explode under President Trump’s renewed “America First” energy doctrine.

Trump has made it clear: Europe and U.S. allies must buy American LNG.

And our company sits in the toll booth—collecting fees on every drop exported.

But that’s not all…

As Trump’s proposed tariffs push American manufacturers to bring their operations back home, this company will be first in line to rebuild, retrofit, and reengineer those facilities.

AI. Energy. Tariffs. Onshoring. This One Company Ties It All Together.

While the world is distracted by flashy AI tickers, a few smart investors are quietly scooping up shares of the one company powering it all from behind the scenes.

AI needs energy. Energy needs infrastructure.

And infrastructure needs a builder with experience, scale, and execution.

This company has its finger in every pie—and Wall Street is just starting to notice.

Wall Street is noticing this company also because it is quietly riding all of these tailwinds—without the sky-high valuation.

While most energy and utility firms are buried under mountains of debt and coughing up hefty interest payments just to appease bondholders…

This company is completely debt-free.

In fact, it’s sitting on a war chest of cash—equal to nearly one-third of its entire market cap.

It also owns a huge equity stake in another red-hot AI play, giving investors indirect exposure to multiple AI growth engines without paying a premium.

And here’s what the smart money has started whispering…

The Hedge Fund Secret That’s Starting to Leak Out

This stock is so off-the-radar, so absurdly undervalued, that some of the most secretive hedge fund managers in the world have begun pitching it at closed-door investment summits.

They’re sharing it quietly, away from the cameras, to rooms full of ultra-wealthy clients.

Why? Because excluding cash and investments, this company is trading at less than 7 times earnings.

And that’s for a business tied to:

  • The AI infrastructure supercycle
  • The onshoring boom driven by Trump-era tariffs
  • A surge in U.S. LNG exports
  • And a unique footprint in nuclear energy—the future of clean, reliable power

You simply won’t find another AI and energy stock this cheap… with this much upside.

This isn’t a hype stock. It’s not riding on hope.

It’s delivering real cash flows, owns critical infrastructure, and holds stakes in other major growth stories.

This is your chance to get in before the rockets take off!

Disruption is the New Name of the Game: Let’s face it, complacency breeds stagnation.

AI is the ultimate disruptor, and it’s shaking the foundations of traditional industries.

The companies that embrace AI will thrive, while the dinosaurs clinging to outdated methods will be left in the dust.

As an investor, you want to be on the side of the winners, and AI is the winning ticket.

The Talent Pool is Overflowing: The world’s brightest minds are flocking to AI.

From computer scientists to mathematicians, the next generation of innovators is pouring its energy into this field.

This influx of talent guarantees a constant stream of groundbreaking ideas and rapid advancements.

By investing in AI, you’re essentially backing the future.

The future is powered by artificial intelligence, and the time to invest is NOW.

Don’t be a spectator in this technological revolution.

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A New Dawn is Coming to U.S. Stocks

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

We’re independently funding today’s broadcast to address something on the mind of every investor in America right now…

Should I put my money in Artificial Intelligence?

Here to answer that for us… and give away his No. 1 free AI recommendation… is 50-year Wall Street titan, Marc Chaikin.

Marc’s been a trader, stockbroker, and analyst. He was the head of the options department at a major brokerage firm and is a sought-after expert for CNBC, Fox Business, Barron’s, and Yahoo! Finance…

But what Marc’s most known for is his award-winning stock-rating system. Which determines whether a stock could shoot sky-high in the next three to six months… or come crashing down.

That’s why Marc’s work appears in every Bloomberg and Reuters terminal on the planet…

And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day.

He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.

Click to continue reading…