Raytheon Company (RTN), United Therapeutics Corporation (UTHR), GameStop Corp. (GME): What is The Stock Market’s ‘Magic Formula’ Telling Us to Buy?

At number five is Deluxe Corporation (NYSE:DLX), whose main business is printed personalized products such as checks, mailing labels and promotional items. The company may not be very glamorous, but it has put in a very solid performance this year and has increased its bottom line from $144 million to $170 million. Insiders have been buying the stock and analysts recommend a buy, with an expected test of $42.60 before profit taking comes into play. Although there are low barriers to entry in this market, and even Wal-Mart Stores, Inc. (NYSE:WMT) is offering check-printing services, for a strict value investor in this sector, Deluxe Corp is the better buy.

Value investing, technically speaking, is defined as weighing stocks on a “calculation of each stock’s absolute and relative value” compared to other peers in the sector. Of these top five stock picks in Greenblatt’s equity portfolio, there are competitors to each that may have better name recognition or more impressive revenue growth.

Still, Gotham Asset Management, a proponent of value investing, does not seem to be looking for a leader in each industry, but rather a so-called “second born,” like Deluxe, Raytheon Company (NYSE:RTN), Cisco Systems (NASDAQ:CSCO) or United Therapeutics Corporation (NASDAQ:UTHR) that has consistent and predictable growth. GameStop Corp. (NYSE:GME) is an industry-leader in the used game segment, but with the secular headwinds it faces, we can include this company in the same group.

Although there are some positions that we may see reduced or eliminated over the next few quarters, most are very strong performers that will likely remain in Gotham’s portfolio for a while longer.

Disclosure: none