The Magic Formula works because it ranks companies by two things that matter — how cheap they are and how good they are. Everything else is noise.
Figure out what something is worth, and pay a lot less for it. That's the whole game.
Choosing individual stocks without any idea of what you are looking for is like running through a dynamite factory with a burning match. You may live, but you are still an idiot.
Spinoffs are one of the most predictable mispricings in the market. The parent dumps the shares. Institutions sell without looking. That's your opportunity.
If you can hold on during the bad years — and there will be bad years — the Magic Formula works. If you can't, you will sell at the bottom and miss everything.
Most people are better off in an index fund. But if you want to beat the market, these are the principles that actually work.