reuters powerscreener is missing just one variable to exactly match the greenblatt
formula...it doesn't have PP&E to figure out Net Fixed Assets. frustrating because you
have all the other metrics need to copy the magic formula. however...you can substitute
other very good metrics for that missing one. you could use invested capital to get ROC
(ebit/invested cap) or you could use a simple est of invested capital; total debt plus SH
equity...and you could make some further adjustments to capital by subtracting Net WC if
you want to. Even though it's not exactly the same construct, it's the same principle of
measuring the return generated on the capital used to generate the EBIT. If you apply the
same formula to all companies, even though it may not exactly equal the magic formula your
results will probably be almost identical to the order ranking of the magic formula. who
cares if all the magic formula scores are higher or lower because it's the order of the
scores that matter (the list of the top 50 stock's generated with the magic formula will
be the same 50 stocks as those generated with a slightly different formula). I worked for
Stern Stewart, the company that popularized measuring ROC (they do EVA). I did detailed
invested capital calcs for years. I wouldn't get too hung up on the exact greenblatt
formula because there are much more rigorous (and accurate) ways to measure invested
capital than the formula given by greenblatt. Just my 2 cents worth. hope it helps.

Last edited on: 01-19-2007 07:17 pm

Since my original posting, I've also noticed that the American Association for Individual
Investors is selling a screening program called "Stock Investor Pro". I guess this one
shoud be compared with the Reuters Power Screener.

One complaint I have about most of the screeners I've looked at is that they don't allow
me to duplicate the Earnings Yield and ROC calculations from the Magic Formula. Instead,
they require me to substitute P/E and ROE. But Greenblatt's variables target the
profitability and price of the unleveraged company, whereas the substitute variables are
for the leveraged company. That's an important difference.

The point being, if I'm going to pay up for a screening program, it better darn well allow
me to calculate these variables EXACTLY the way Greenblatt tells me to.

Me too.

I'm looking for a robust stock screening utility as well. To be honest, I am surprised
that stockpickr.com does not feature one. I think it would be a complementary if not
integral tool for them.

I'm looking for a very flexible stock screening tool that will allow me to filter based on
fundamental criteria. For example, let's say that I'd like to combine Joel Greenblatt's
Magic Formula (precisely the way he calculates it) with some other fundamentals.

What are the best screening programs out there, either free or subscription?

I have used the free MSN tool, but I'm hoping to find something more flexible.

Has anybody used the Reuters PowerScreener?