Show Me The Ideas!

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Show Me The Ideas!

By Alex Lanoie

Now that the Investment Decision System series is done, it’s time to start applying it. This week, I’ll share with you where I looked this time to find new investment ideas and what I focused on. Referring to the IDS series, this would be Step #2 and Step #3.

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Greenblatt, show me ideas!

As mentioned in the past, I am lucky to have access to the financial information provider Capital IQ. CapIQ offers a multitude of different ways to filter and find attractive investment ideas, all online. One of the options it offers is a selection of idea generation screens. These screens are pre-programmed screens, which already include several screening criteria and formulas to facilitate the idea generation phase. One of these screens is named the Greenblatt’s Magic Formula Score. If you haven’t done so yet, I suggest you read my post about the Magic Formula (Link: Making money like magic?). The Magic Formula can be very useful in finding potential targets and CapIQ makes it even better by allowing you to modify the “original” Magic Formula to improve on it or adapt it to your needs.

This time, I modified the CapIQ Magic Formula to focus on Hong Kong-listed stocks, with a market cap of US$950 million or above (if I input US$1 billion or above, I’ll miss the companies with a market cap of just under US$1 billion… that’s where the US$950 million comes from – a 5% margin). The first 50 results of the list are shown in the table below.

Company Name Ticker Market Capitalization [My Setting] [Latest] ($USDmm, Historical rate) Greenblatt Earnings Yield Custom Data Point[Greenblatt Earnings Yield]:  Percentile  Relative to Screen Results
(Highest = 100)
Greenblatt Return on Capital Custom Data Point[Greenblatt Return on Capital]:  Percentile  Relative to Screen Results
(Highest = 100)
Magic Formula Score
Gemdale Properties and Investment Corporation Limited (SEHK:535) SEHK:535                                              1,602.0                           0.163                                                 97.01                           3.33                                                   98.8                 195.81
BAIC Motor Corporation Limited (SEHK:1958) SEHK:1958                                              9,424.0                           0.214                                                   98.2                         0.606                                                 95.81                 194.01
IGG Inc (SEHK:799) SEHK:799                                              1,345.7                           0.128                                                 91.62                         0.766                                                 97.01                 188.62
China Lesso Group Holdings Limited (SEHK:2128) SEHK:2128                                              1,960.4                           0.147                                                 94.01                         0.374                                                 92.22                 186.23
Dongyue Group Limited (SEHK:189) SEHK:189                                              1,307.3                           0.149                                                 95.21                         0.324                                                 86.83                 182.04
Harbour Centre Development Limited (SEHK:51) SEHK:51                                              1,329.5                             0.16                                                 96.41                         0.318                                                 85.03                 181.44
Yuzhou Properties Company Limited (SEHK:1628) SEHK:1628                                              2,087.7                           0.217                                                   98.8                             0.3                                                 81.44                 180.24
China SCE Property Holdings Limited (SEHK:1966) SEHK:1966                                              1,623.9                             0.11                                                 88.02                         0.349                                                 91.02                 179.04
Miramar Hotel and Investment Company, Limited (SEHK:71) SEHK:71                                              1,303.0                           0.113                                                 89.22                         0.325                                                 87.43                 176.65
Logan Property Holdings Company Limited (SEHK:3380) SEHK:3380                                              5,253.8                           0.135                                                 92.22                         0.311                                                 83.83                 176.05
Yuexiu Transport Infrastructure Limited (SEHK:1052) SEHK:1052                                              1,198.5                           0.085                                                 75.45                           3.63                                                   99.4                 174.85
CITIC Telecom International Holdings Limited (SEHK:1883) SEHK:1883                                                 965.4                           0.097                                                 82.63                         0.362                                                 91.62                 174.25
Tianneng Power International Limited (SEHK:819) SEHK:819                                                 951.1                           0.185                                                   97.6                         0.273                                                 76.05                 173.65
Texhong Textile Group Limited (SEHK:2678) SEHK:2678                                              1,158.7                           0.156                                                 95.81                         0.276                                                 77.25                 173.05
Future Land Development Holdings Limited (SEHK:1030) SEHK:1030                                              3,184.4                           0.086                                                 77.25                         0.436                                                 94.61                 171.86
Powerlong Real Estate Holdings Limited (SEHK:1238) SEHK:1238                                              1,782.0                           0.106                                                 86.83                         0.311                                                 84.43                 171.26
Sichuan Expressway Company Limited (SEHK:107) SEHK:107                                              1,684.8                           0.079                                                 72.46                         0.975                                                   97.6                 170.06
Pacific Textiles Holdings Limited (SEHK:1382) SEHK:1382                                              1,500.5                           0.087                                                 79.64                         0.343                                                 90.42                 170.06
Jiayuan International Group Limited (SEHK:2768) SEHK:2768                                              1,865.7                           0.077                                                 69.46                         0.427                                                 94.01                 163.47
Fufeng Group Limited (SEHK:546) SEHK:546                                              1,654.9                           0.147                                                 94.61                         0.232                                                 67.07                 161.68
Nexteer Automotive Group Limited (SEHK:1316) SEHK:1316                                              5,600.1                           0.078                                                 71.86                         0.329                                                 88.62                 160.48
Imperial Pacific International Holdings Limited (SEHK:1076) SEHK:1076                                              1,993.6                           0.067                                                 62.28                         0.654                                                 96.41                 158.68
United Company RUSAL Plc (SEHK:486) SEHK:486                                              9,367.1                           0.086                                                 76.65                         0.284                                                 79.04                 155.69
China Railway Signal & Communication Corporation Limited (SEHK:3969) SEHK:3969                                              6,431.2                           0.126                                                 91.02                         0.216                                                 64.67                 155.69
Yadea Group Holdings Ltd. (SEHK:1585) SEHK:1585                                                 970.9                           0.106                                                 87.43                         0.233                                                 67.66                 155.09
Xinyi Solar Holdings Limited (SEHK:968) SEHK:968                                              2,592.4                               0.1                                                 85.03                         0.237                                                 69.46                 154.49
SMI Holdings Group Limited (SEHK:198) SEHK:198                                              1,412.6                             0.06                                                 58.68                         0.502                                                 95.21                 153.89
China Resources Pharmaceutical Group Limited (SEHK:3320) SEHK:3320                                              7,998.5                           0.087                                                 79.04                         0.246                                                 71.26                   150.3
Crystal International Group Limited (SEHK:2232) SEHK:2232                                              2,631.0                           0.051                                                   50.9                           1.11                                                   98.2                   149.1
Beijing Tong Ren Tang Chinese Medicine Company Limited (SEHK:8138) SEHK:8138                                              1,143.6                           0.078                                                 71.26                         0.273                                                 76.65                   147.9
Zhou Hei Ya International Holdings Company Limited (SEHK:1458) SEHK:1458                                              2,139.9                           0.078                                                 70.66                         0.268                                                 74.85                 145.51
Fu Shou Yuan International Group Limited (SEHK:1448) SEHK:1448                                              1,696.8                           0.056                                                 56.29                         0.321                                                 85.63                 141.92
China Traditional Chinese Medicine Holdings Co. Limited (SEHK:570) SEHK:570                                              2,301.4                           0.081                                                 73.05                         0.234                                                 68.86                 141.92
CIFI Holdings (Group) Co. Ltd. (SEHK:884) SEHK:884                                              4,212.2                           0.087                                                 80.24                             0.2                                                 60.48                 140.72
Haitian International Holdings Limited (SEHK:1882) SEHK:1882                                              4,705.6                           0.081                                                 73.65                         0.216                                                 64.07                 137.72
China Energy Engineering Corporation Limited (SEHK:3996) SEHK:3996                                              5,030.4                           0.123                                                 90.42                         0.161                                                 46.71                 137.13
Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (SEHK:520) SEHK:520                                              1,624.0                           0.051                                                   49.7                         0.322                                                 86.23                 135.93
Dali Foods Group Company Limited (SEHK:3799) SEHK:3799                                            10,895.3                           0.056                                                 56.89                         0.281                                                 78.44                 135.33
Honbridge Holdings Limited (SEHK:8137) SEHK:8137                                              2,056.2                           0.053                                                 54.49                         0.279                                                 77.84                 132.34
YiChang HEC ChangJiang Pharmaceutical Co., Ltd. (SEHK:1558) SEHK:1558                                              1,347.2                           0.065                                                 60.48                         0.254                                                 71.86                 132.34
Sino Biopharmaceutical Limited (SEHK:1177) SEHK:1177                                            10,031.1                           0.048                                                 43.71                         0.328                                                 88.02                 131.74
Qingdao Port International Co., Ltd. (SEHK:6198) SEHK:6198                                              4,169.7                           0.103                                                 85.63                         0.152                                                 46.11                 131.74
Tian Ge Interactive Holdings Limited