First Transactions at Zecco.com

Thursday, 10/26, I made my first 5 trades as part of the Magic Formula. Here are the steps I took:

1. Went to MagicFormulaInvesting.com and requested a list of 25 companies with market capitalizations above 50 million.
   
2. Picked 9 companies, looking for either recent filings or good return numbers, or a name I recognized. The formula calls for choosing 5-7 of these companies at random, and I strayed a little bit from this. The time I spent researching these companies was a couple minutes each. I read their company profiles, saw if they pay a dividend, and that's about it.
   
3. Did a sanity check on these to see if they were profitable, and ran a generic DCF analysis to see if they were undervalued, based on analyst projections (one of the points of the magic formula is that nobody knows how much a company will grow in the future, but you can see how much money they made in the past; this is obvious when you compare high and low analyst projections for most companies. Trained professionals vary widely in their guesstimates, so why should I, an average guy with no training, spend hours and hours trying to come up with my own numbers?). This bumped off just 1 company, and 1 company squeaked by, so I dropped it.
   
4. Left with just 7 companies, I dropped 2 more. I had looked into buying one earlier this year and had rejected it (it was a biotech with 1 product about to face generic competition, Viropharma), so I marked it off the list, and dropped the other because I didn't like its product. Maybe I'll buy these 4 dropped companies in a couple of months.
   
5. Bought equal dollar amounts (or about as close as I could get) of the following 5 companies at Zecco.com:
   

1. 9 shares of FCX @$59.31 = $533.79
   
2. 20 shares of FDG @$24.72 = $494.40
   
3. 33 shares of PALM @$15.41 = $508.53
   
4. 46 shares of PLAY @$10.94 = $503.24
   
5. 29 shares of OVTI @$15.78 = $457.62
   For a grand total of: $2497.58
   

The plan is to do this every 2 or 3 months, and post the results.