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Matthew Tewksbury Unlocked Joel Greenblatt’s Magic Formula

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After an analysis of the portfolio of Matthew Tewksbury’s Stevens Capital Management, it is highly likely that the investment manager has unlocked the Magic Formula investment strategy of Joel Greenblatt’s Gotham Asset Management. Unlike the common scenario where two investment managers have a couple of common stock investments, these two investors have 405 common stock positions. Some of these common positions include UnitedHealth Group Inc. (NYSE:UNH), Procter & Gamble Co (NYSE:PG), Altria Group Inc (NYSE:MO), Gilead Sciences, Inc. (NASDAQ:GILD), and Sanderson Farms, Inc. (NASDAQ:SAFM). Greenblatt (pictured) has a public equity portfolio valued at $13.11 billion, and is primarily invested in the consumer discretionary, technology, and industrial sectors. On the other hand, Stevens Capital Management is a relatively smaller fund, with a public equity portfolio of $2.81 billion and its major investments being in finance, consumer discretionary, and technology stocks.


Stevens Capital Management and Gotham Asset Management are just two of the more than 700 hedge funds that we have in our database, whose public equity portfolios we collate quarterly as part of our small-cap strategy. Even though most smaller investors believe that tracking 13F filings is a fruitless endeavor because they are filed with a delay of a maximum of 45 days after the end of a calendar quarter, the results of our research prove that is not the case. To be on the safe side, we used a delay of 60 days in our backtests that involved the 13F filings of funds between 1999 and 2012 and we still managed to gain an annual alpha in the double digits. Moreover, since the official launch of our strategy in August 2012, our small-cap strategy has obtained returns of more than 142%, beating the S&P 500 Total Return Index by greater than 84 percentage points (see the details).

Joel Greenblatt
Joel Greenblatt
Gotham Asset Management

UnitedHealth Group Inc. (NYSE:UNH) is the number one stock investment of Stevens Capital Management, which owns 365,044 shares valued at $43.18 million. Gotham Asset Management holds a comparatively smaller position of 4,960 shares valued at $587,000. UnitedHealth Group Inc. (NYSE:UNH) is one of the biggest health insurers in the country, and the insurance firm is trying to lower its expenses with the acquisition of smaller rivals such as Aetna Inc (NYSE:AET). The healthcare benefit company has market cap of $44.72 billion and any acquisition effort from UnitedHealth Group Inc. (NYSE:UNH) is likely to fetch a higher number. Eagle Capital Management and AQR Capital Management are among the primary stockholders of the insurance company.

Procter & Gamble Co (NYSE:PG) is another common stock position of both investment managers. Stevens Capital Management’s current position in the packaged goods provider includes 508,873 shares with a market value of $41.70 million. Gotham Asset Management owns 711,812 shares of the company with a market value of $58.33 million. Last week, leading beauty product company, Coty Inc (NYSE:COTY), won the auction for the acquisition of Procter & Gamble Co (NYSE:PG)’s beauty businesses. Coty Inc is likely to buy the hair-care, cosmetics, and fragrance businesses of Procter & Gamble for $12 billion, as the deal is in the final stages. Procter & Gamble has received major investments from Warren Buffett, and Donald Yacktman’s Yacktman Asset Management.

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