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.
8. Cognizant Technology Solutions Corporation (NASDAQ:CTSH)
Share Price Upside: 50.6%
Number of Hedge Fund Holders: 49
Cognizant Technology Solutions Corporation (NASDAQ:CTSH) is among the 10 Best Magic Formula Stocks for 2026. On February 24, the company announced that it had been selected by a leading vehicle maker to transform its global workplace services.
This will be a multi-year collaboration to enhance and modernize the manufacturer’s global facilities through artificial intelligence and automation. According to the company’s press release, its digital workplace services suite, Cognizant WorkNEXT, will be leveraged for the initiative.
Earlier in the month, on February 17, Cognizant Technology Solutions Corporation (NASDAQ:CTSH) expanded its partnership with Wallenius Wilhelmsen, which will see the company providing the shipping and vehicle logistics firm with strategic technology services.
These services will include infrastructure and core business applications, which will help in enhancing Wallenius Wilhelmsen’s position as an integrated supply chain provider.
In other news, the stock continues to be on analysts’ radar. As of the close of business on February 23, it is a Moderate Buy with an average upside potential of 50.6%. Recent analyst updates include Wells Fargo reiterating its Overweight rating on the stock, with a price target of $98, last week.
Cognizant Technology Solutions Corporation (NASDAQ:CTSH) is an IT consulting and outsourcing services company that helps clients modernize, reenvision, and transform their businesses.
7. CGI Inc. (NYSE:GIB)
Share Price Upside: 53.4%
Number of Hedge Fund Holders: 22
CGI Inc. (NYSE:GIB) is among the 10 Best Magic Formula Stocks for 2026. On February 24, the company announced that its subsidiary, CGI Federal Inc., had secured a $64 million indefinite delivery/indefinite quantity contract from the U.S. Environmental Protection Agency’s (EPA) to modernize its financial management platform, Compass.
The agreement aims to enhance the implementation of the company’s Momentum Enterprise Suite by leveraging AI and other capabilities of the ERP solution to expand automation and software consolidation.
According to CGI Inc. (NYSE:GIB)’s press release, this is a five-and-a-half-year contract, featuring several task orders that will further solidify the company’s partnership with the Environmental Protection Agency (EPA).
In other news, the IT and business processes services provider reported financial results for the first quarter of fiscal 2026 on January 28. Revenue grew 7.7% year-over-year to $4.08 billion, driven by recent acquisitions and robust demand for the company’s APAC delivery center. Adjusted diluted EPS stood at $2.12, improving 7.6% from the prior year’s period.
Wall Street analysts have a bullish outlook on the stock, with a Strong Buy rating and an average share price upside potential of 53.4% as of the close on February 23.
CGI Inc. (NYSE:GIB) is an information technology and business consulting services company offering a broad portfolio of capabilities.
6. EPAM Systems, Inc. (NYSE:EPAM)
Share Price Upside: 54.1%
Number of Hedge Fund Holders: 44
EPAM Systems, Inc. (NYSE:EPAM) is among the 10 Best Magic Formula Stocks for 2026. Morgan Stanley on February 20 cut its price target on the stock to $160 from $175, while maintaining an Equal Weight rating.
The adjustment followed the company’s fourth-quarter earnings call a day earlier, during which it forecast Q1 2026 earnings in line with Wall Street’s estimates but appeared conservative to investors and analysts.
Shares slumped 16% in premarket trading, which Morgan Stanley attributed to the cautious outlook for 2026. The firm also described the budgetary commentary as ‘slightly muted’, in a research note to analysts.
EPAM Systems, Inc. (NYSE:EPAM) anticipates revenue in the range of $1.38 billion to $1.40 billion for the first quarter, adjusted profit expected between $2.70 and $2.78 per share.
On the same day, Goldman Sachs analyst James Schneider trimmed the price target on the stock to $235 from $250. However, the firm described the share price slump as an overreaction and reiterated a Buy rating on the stock.
EPAM Systems, Inc. (NYSE:EPAM) is a leading provider of digital and AI transformation services worldwide.
5. Gen Digital Inc. (NASDAQ:GEN)
Share Price Upside: 54.3%
Number of Hedge Fund Holders: 48
Gen Digital Inc. (NASDAQ:GEN) is among the 10 Best Magic Formula Stocks for 2026. This week, Argus Research cut its price target on the stock to $32 from $35, citing the impact from the tech selloff this year.
However, the firm reiterated a Buy rating on the stock. According to a report on TipRanks, Argus analyst Joseph Bonner told investors in a research note that the company’s fundamentals remain reasonable, while adding that the concerns regarding Gen-AI agents posing a threat to software in the cybersecurity space were exaggerated.
As of the close on February 23, Gen Digital Inc. (NASDAQ:GEN) sports a Moderate Buy rating with an average share price upside potential of 54.3%.
In other news, the company on February 17 announced that it was partnering with Vercel to add independent safety checks to skills.sh, the latter’s directory for skill packages that is widely used by developers to publish and install modular capabilities to enhance the performance of AI agents.
Gen Digital Inc. (NASDAQ:GEN) provides cybersecurity services for individuals and businesses through its consumer brands, including Avast, LifeLock, Norton, and others.
4. Covista Inc. (NYSE:CVSA)
Share Price Upside: 63.4%
Number of Hedge Fund Holders: 32
Covista Inc. (NYSE:CVSA), formerly Adtalem Global Education Inc. (ATGE), is among the 10 Best Magic Formula Stocks for 2026. On February 5, the company announced that it would be rebranding itself as Covista, with its ticker changing to CVSA effective February 24, 2026.
The move marks the final stage of the higher education firm’s four-year transformation to becoming the country’s leading healthcare education provider. Chairman and CEO Steve Beard believes the name change reflects what the company has achieved over the last four years, coupled with what he sees ahead to address the challenges facing America’s healthcare workforce crisis.
In other news, Covista Inc. (NYSE:CVSA) hosted its Investor Day on February 24 where it unveiled a growth roadmap for the next three years built on four core principles that include operational excellence, platform extension, employer integration, and a focus on technology.
The company reiterated its full-year forecast for 2026, with revenue anticipated to grow in the range of 6% to 8.5% year-over-year to between $1,900 million and $1,940 million. Adjusted EPS is expected in the range of $7.80 to $8.00 per share, reflecting a growth of 17-20% from last year.
The healthcare educator also provided its long-term financial targets for 2027 through 2029, reflecting steady growth in both revenue and adjusted earnings per share.
Covista Inc. (NYSE:CVSA) is America’s largest healthcare educator. It currently has around 97,000 students enrolled across five institutions, with 24,000 healthcare professionals graduating every year and a robust alumni network of 385,000.x
3. Adobe Inc. (NASDAQ:ADBE)
Share Price Upside: 70.9%
Number of Hedge Fund Holders: 91
Adobe Inc. (NASDAQ:ADBE) is among the 10 Best Magic Formula Stocks for 2026. On February 23, Jefferies slashed its price target on the stock to $290 from $400, citing the ongoing negative sentiment around application software names, while reiterating a Hold rating.
Shares fell sharply in response to the development, slumping 4.61% on Monday to close at $246.68. Jefferies’ update follows HSBC’s adjustment on the stock on February 13, when it cut the price target to $302 from $388 with a Hold rating. The bank said it anticipates AI-powered tools to pose a competitive risk to the company over the medium to long term.
Earlier in the month, on February 3, Piper Sandler downgraded Adobe Inc. (NASDAQ:ADBE) to Neutral from Overweight and cut its price target to $330 from $470.
Despite recent price target reductions, the stock sports a Moderate Buy rating with an average share price upside potential 70.9%, as of the close on February 23.
Adobe Inc. (NASDAQ:ADBE) is a global technology company that offers a range of web design tools, digital art, content creation, and related services. It is best known for its Adobe Acrobat and Photoshop image-editing tools.
2. Super Group (SGHC) Limited (NYSE:SGHC)
Share Price Upside: 82.6%
Number of Hedge Fund Holders: 37
Super Group (SGHC) Limited (NYSE:SGHC) is among the 10 Best Magic Formula Stocks for 2026. On February 23, the company reported financial results for the fourth quarter and full year 2025.
Quarterly revenue increased 8% year-over-year to $578.3 million, driven by growth from Europe, Asia-Pacific, Africa, and North America. Adjusted EBITDA stood at $139 million, up from $125.9 million in the prior year. The figure for unique monthly active customers was recorded at 6.1 million, improving 16% from last year.
Super Group (SGHC) Limited (NYSE:SGHC)’s annual revenue rose from $1.8 billion in 2024 to $2.2 billion. The increase was primarily attributed to robust growth in Africa and the successful launches in Botswana and the United Kingdom. Adjusted EBITDA grew 57% year-over-year to nearly $560 million.
Looking ahead, SGHC projects double-digit growth in both revenue and adjusted EBITDA, with revenue expected to exceed $2.55 billion and adjusted EBITDA to exceed $680 million.
In other news, Super Group (SGHC) Limited (NYSE:SGHC) on the same day announced to raise its targets for the annual dividend program to a minimum of 20 cents from 16 cents per share. Payments will be made on a quarterly basis, with the first scheduled for March 31, to all shareholders on record as of the close of March 16.
Super Group (SGHC) Limited (SGHC) is a leading online sports betting and gaming company. It owns Betway and Spin.
1. GoDaddy Inc. (NYSE:GDDY)
Share Price Upside: 86.1%
Number of Hedge Fund Holders: 57
GoDaddy Inc. (NYSE:GDDY) is among the 10 Best Magic Formula Stocks for 2026. On February 23, Benchmark cut its price target on the stock to $210 from $240, while keeping a Buy rating, as part of the fourth quarter earnings preview.
During the day, Jefferies analyst Brent Thill also slashed the price target to $100 from $140 with a Hold rating. The firm noted that application software stocks were being impacted more by the ongoing negative sentiment than overall software companies, citing it as the reason for the adjustment.
Based on the recommendations of 10 analysts, GoDaddy Inc. (NYSE:GDDY) is a Moderate Buy with an average share price upside potential of 86.1% as of the close on February 23.
In other news, on February 19, the company announced that its Agent Name Service (ANS) had integrated with Salesforce’s MuleSoft Agent Fabric. This is expected to help businesses discover and confirm the identities of AI agents, thereby reducing risks to data integrity and security.
GoDaddy Inc. (NYSE:GDDY) is a leading domain name registrar, serving millions of entrepreneurs worldwide in the growth and expansion of their businesses.
While we acknowledge the potential of GDDY to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than GDDY and that has 100x upside potential, check out our report about this cheapest AI stock.
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