In this article, we will take a look at the 15 Best Magic Formula Stocks to Invest In.
Joel Greenblatt’s legacy as an investor is based on his ability to spot opportunities where most others can’t. According to the founder of Gotham Asset Management, “You Can Be a Stock Market Genius” was more than just a catchy title; it was a collection of “war stories” from a decade of finding underappreciated value in unique circumstances. Throughout his Wall Street career, Greenblatt has consistently generated double-digit percentage returns, cementing his place as one of the few fund managers to do so.
From 1985 to 1994, Gotham Capital, his previous business, had an incredible run, with the fund achieving a 34% net return over this time. That said, even he was aware that this approach appeared too good to be true.
In his book ‘The Little Book that Beats the Market’, Greenblatt describes the Magic Formula as a market technique that involves assessing companies using two metrics: return on capital and earnings yield (EBIT/enterprise value). The investor often emphasizes that the Magic Formula discourages investing in businesses with average or poor returns on capital since it establishes a rating system to discover top companies with the best return on capital and earnings yield.
Naturally, this does not imply that the Magic Formula is an infallible approach to success. In fact, it seems that Joel Greenblatt’s investment technique has led his fund to underperform the overall market. The Gotham Large Value Fund (GVALX) returned only 13.62% compared to the S&P 500’s 16.64% over the past five years, as of the end of June 2025.
Joel Greenblatt of Gotham Asset Management
Our Methodology
To make our list of the best Magic Formula stocks, we ranked the stocks in Gotham Asset Management’s Q1 2025 SEC filings by their stake value and picked out the most valuable holdings.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
15. Skyworks Solutions, Inc. (NASDAQ:SWKS)
Gotham Asset Management’s Q1 2025 Stake: $29.5 million
Number of Hedge Fund Holders: 31
Skyworks Solutions, Inc. (NASDAQ:SWKS) ranks among the best magic formula stocks to invest in. On June 25, Skyworks Solutions, Inc. (NASDAQ:SWKS) declared the launch of new timing devices intended for use in data centers and high-speed networking.
These include the SKY62101 ultra-low jitter clock generator, which can generate both Ethernet and PCI Express spread spectrum clocks with 18fs RMS phase jitter performance, and the SKY63104/5/6 family of jitter suppressing clocks. The devices seek to simplify complex clock tree designs by integrating general-purpose clock production, Ethernet, and PCIe into a single component.
According to James Wilson, vice president and general manager of Skyworks’ Mixed Signal Solutions division, the company’s MultiSynth and DSPLL technologies “set a new benchmark for performance and integration.”
Skyworks Solutions, Inc. (NASDAQ:SWKS) creates and produces semiconductor components for use in consumer electronics, telecommunications, automotive, and aerospace.
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