You can make any strategy a winner on a particular historical data set. Similarily, one year does not make a fool-proof winning strategy. And a strategy so simple and so well known most certainly won't. Try that for the next 5 years (even then there's a chance it still could come out on top just as there is for dart pickings) and then come ranting and raving...........
Mer, I think you miss the point here. A good strategy has 3 elements 1) reliable entry and exit strategies 2) decent money management & 3) correct stock selection. And the 3rd point is often overlooked. Vitor clearly has a formula that will help you with point 3 - so I for one will pay attention to this strategy
Skaap: Vitorc's system says nothing about the other 2 points. So clearly your argument relates to the third. By definition correct stock selection is one that generates a positive return, or possibly outperform the market, but your comment suggests you think correct stock selection is something else (weird). My argument suggests this well-known system will not consistently select shares that outperform. If everyone (or one clever person with enough leverage) utilizes this system then the STOCK RETURNS will not be above market returns and I think there are enough smart people to work this strategy out. So in summary, your point is, well, pointless.
First of, it's not my system, it's Joel Greenblatt's, who explains how everything works in much more detail. Don't use the system if you have not read the book. Magic formula is not a trading strategy, its a buy and hold strategy for (at least) a year. MF is based on an extremely simple concept, and I think it is close to Warren Buffet's strategy - buy highly cash generative companies (the ROCE bit) whose share is currently at a discount (low PE). I don't see how you can bungle up backtesting on such a simple strategy as it is +-5 stocks held over a long period. As far as track records are concerned (from 2008 on), check out http://www.powerstocks.co.za/dashboard.php, which seems to confirm the backtesting on http://www.powerstocks.co.za/mf-backtest.php. Joel has a website in the US that actually applies the formula and gives you the top x candidates. https://www.magicformulainvesting.com/marketing/servlet/forms/MFI/Marketing/forms/WelcomeForm.
that's exactly my point...back-testing means next to nothing. If a strategy works in the past, doesn't mean it works in the future. For example, buy low PE companies was a well documented strategy that beat the market if employed from 1965-1985 (I stand to be corrected on dates). If then implemented after 1985 (after the study) it fails. Similar story with the strategy discussed for different time periods. If anyone is actually interested read some stuff by Fama and French (Google Scholar them). This is the reason you have some of the quant strategy funds (this strategy is a quant strat) continually and sometimes instantaneously updating strategies. And if you still disagree, leverage up like a champ and become a billionaire! We'll see who gets there first! Anyway, I have to leave SCMB and the forum (even though I hardly post) but thanks for the entertainment all.