CVS Caremark Corporation (CVS), Expedia Inc (EXPE): The Best “Magic Formula” Stocks Today

Page 2 of 2

High flying profits

Expedia Inc (NASDAQ:EXPE) makes our magic formula list, checking in with an earnings yield of 2.23% and ROC of 17.28%. The company is in a unique position because it’s in a fast growing industry, but at the same time its business model has relatively low barriers to entry, so there’s good and bad. Since Expedia Inc (NASDAQ:EXPE)’s business landscape is a draw, between good and bad, it makes sense to rely on fundamentals.

Expedia Inc (NASDAQ:EXPE)’s fundamentals are strong. Revenues have been growing faster than earnings over the past year, and now revenue is projected to grow nearly 40% by 2015. Unlike arch rival Priceline.com Inc (NASDAQ:PCLN), Expedia Inc (NASDAQ:EXPE) also pays a dividend of 0.92%. Sure that dividend is scant, but when you combine it with a fast growing industry and a profitable, high margin, business–the overall investment thesis makes sense.

Best of breed brands

Intuit Inc. (NASDAQ:INTU) ranks among the 50 best magic formula stocks as well, with an earnings yield of 4.45% ROC of 38.94% This company earns excellent returns on equity because its businesses are both low yield and hold dominant market share.

If you’re not familiar with this company, it provides technology based financial management solutions through signature brands like Quicken Loans, Inc., Turbo Tax, and QuickBooks. I can’t think of a better sign for a stock than having brands that are both riding strong trends with “best of breed” names.

Intuit Inc. (NASDAQ:INTU)’s earnings are expected to grow 30% by 2015, and both EPS and revenues have grown at about 10% for five consecutive years. The numbers and the shift of customers wanting more software based financial programs, makes this stock a winner.

It’s ok to like a value

Everyone likes a value, but finding them doesn’t have to be so hard. What I like best about Joel Greenblatt’s “magic formula” is that it provides outstanding returns without making the process cumbersome. It cuts straight to the two most important aspects of buying a stock: the stock’s value and (business) performance.

But what it doesn’t do is make a smart decision for you; you’ll have to do that. In other words, it makes sense to start with the magic formula to screen stocks, but ultimately you’ll have to make the call on which stocks to buy.

I like these stocks because not only are they cheap with great past performance, they have a bright outlook going forward. Wouldn’t you agree?


Adem Tahiri has no position in any stocks mentioned. The Motley Fool recommends Intuit and PetSmart. The Motley Fool owns shares of Intuit.
Adem is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article The 4 Best “Magic Formula” Stocks Today originally appeared on Fool.com is written by Adem Tahiri.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Page 2 of 2