This article looks at the 10 Best Magic Formula Stocks for 2026.

For the past several decades, individual investors have sought high-quality, undervalued stocks. While many strategies exist, most require a thorough analysis of financial statements.

However, in 2005, American academic and hedge fund manager Joel Greenblatt introduced what he called the ‘Magic Formula’ in his book The Little Book That Still Beats the Market. This is a straightforward, rules-based approach to investing in good stocks trading at a discount.

Under this technique, stocks are gauged on two metrics. The first is high returns on capital, which measures how efficiently the company utilises its capital to generate profits. The second metric assesses the stock’s cheapness through its earnings yield.

While the use of the formula does not guarantee success, Joel Greenblatt’s Gotham Large Value Institutional (GVALX) fund has so far outperformed the broad market index this year, returning 8.61% against the S&P 500’s gains of 0.65%, as of the close on February 24.

With that said, let’s now shift focus and see the best magic formula stocks for 2026.

Our Methodology

To identify the best Magic Formula stocks, we used the screener on magicformulainvesting.com, a website owned by an entity controlled in part by Joel Greenblatt. We used the platform to shortlist 50 stocks to invest in that had a market cap of at least $2 billion. From the pool, we selected 10 stocks with the highest average upside potential in share price and ranked them in ascending order of upside. All data is as of the close of business on February 23, 2026. Additionally, we also included data on hedge fund holdings in these companies as of Q4 2025 to provide further insight into investor interest.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).

10 Best Magic Formula Stocks for 2026

10. Expedia Group, Inc. (NASDAQ:EXPE)

Share Price Upside: 46.5%

Number of Hedge Fund Holders: 70

Expedia Group, Inc. (NASDAQ:EXPE) is among the 10 Best Magic Formula Stocks for 2026. The stock has been on analysts’ radar and currently holds a consensus Moderate Buy rating, with an average upside potential of 46.5% as of the close on February 23.

Recent updates include those from Citigroup analyst Ronald Josey, who on Monday slashed the firm’s price target on the stock to $225 from $281 while maintaining a Neutral rating.

This follows BMO Capital’s adjustment on February 17, when it lifted the price target on the online travel platform to $255 from $250 and kept a Market Perform rating on its shares.

In a research note to investors, the firm noted Expedia Group, Inc.’s (NASDAQ:EXPE) solid revenue and earnings beat in Q4, while highlighting that Booked Room Nights and Bookings also came in above Wall Street’s expectations. However, BMO Capital cautioned that increased marketing spending for Hotel.com and Vrbo could squeeze margins ahead.

Expedia Group, Inc. (NASDAQ:EXPE)’s revenue for the quarter was reported at $3.54 billion, up 11.4% year-over-year. Adjusted profit per share stood at $3.78, beating estimates by 32 cents.

During the earnings call, the company projected a higher year-over-year adjusted core profit margin for the first quarter of 2026, but appeared muted on the full-year outlook due to ongoing macroeconomic uncertainty.

Expedia Group, Inc. (NASDAQ:EXPE) is an online travel company connecting travelers, partners, and advertisers from across the world.

9. Booking Holdings Inc. (NASDAQ:BKNG)

Share Price Upside: 50.5%

Number of Hedge Fund Holders: 109

Booking Holdings Inc. (NASDAQ:BKNG) is among the 10 Best Magic Formula Stocks for 2026. As of the close of business on February 23, the stock remains a Strong Buy, with an average upside potential of 50.5%.

On Monday, Morgan Stanley upgraded the stock to Overweight from Equal Weight, while reducing its price target to $5,500 from $6,150. According to TipRanks, analyst Brian Nowak told investors in a research note that he expects the company to remain ‘a key driver of travel’ despite the evolution in agentic tools.

The Morgan Stanley analyst also noted the travel company’s ability to retain customers and its ability to leverage passenger information to drive lucrative direct business.

This follows Citigroup’s update on February 19, when the firm trimmed its price target on the stock to $6,250 from $6,500, citing ongoing market volatility.

However, the investment bank reiterated a Buy rating on the shares, while noting results from the recently concluded quarter, in which the travel services company registered a 9% increase in room nights compared to last year, and beat estimates for both revenue and profit.

Booking Holdings Inc. (NASDAQ:BKNG)’s revenue for the quarter ended December 31 was reported at $6.35 billion, up 16% year-over-year, and above estimates of $6.13 billion. Adjusted profit came in at $48.80 per share, beating expectations by 33 cents. The improved performance was attributed to steady demand for international travel.

Booking Holdings Inc. (NASDAQ:BKNG) provides online travel and restaurant reservations, along with other related services. It owns and operates several renowned platforms, including Booking.com, Agoda, Kayak, and OpenTable.