• Angga Sasmitapura Universitas Katolik Parahyangan
  • Michael Michael Universitas Katolik Parahyangan
  • Sandra Faninda Universitas Katolik Parahyangan



Magic Formula, value investing, return portofolio


The rapid growth of active investors in Indonesia stock market raises awareness on the importance of investors’ skill needed in analyzing and choosing profitable stock. One of the method knows to analyze profitable stock in the market is Magic Formula introduce by Joel Grenblatt -part of value investing. Magic Formula is a method on choosing a profitable stock in a simple way based on combination of  both High Earnings Yield and High Return on Capital. The period use in this research is from 2016 – 2020. This research use LQ 45 stock listed in Indonesia Stock Exchange. This qualitative research used secondary data which is analyzed using backtesting simulation. The result of this research shows that Magic Formula’s Stock Portfolio build based on data consist of different number of stock: 15, 20, and 25 stock; combination of both high Earnings Yield and High Return on Capital. The Magic Formula’s Portfolio formed based on the LQ 45 stock has higher aritmathic average return compare to LQ 45 return and even the 15-stock-based portfolio beat the Indonesia Composite Index average return. However on the CAGR rate of return, the calculation show that the return of the Magic Formula Portfolio below the return of Indonesia Composite Index


Andrianto, Y., & Mirza, A. R. (2016). A Testing of Efficient Markets Hypothesis in Indonesia Stock Market. Procedia - Social and Behavioral Sciences, 99-103.

BEI (Bursa Efek Indonesia). (2019). IDX Fact Book 2019. Jakarta: PT Bursa Efek Indonesia.

Bodie, Z., Kane, A., & Marcus, A. J. (2017). Essentials of Investments. New York: McGraw-Hill Education.

CNBC Indonesia (2021, 1 Februari). “OJK: Gegara Covid, Jumlah Investor Ritel Tembus 4 Juta. CNBC Indonesia.” Diakses tanggal 25 Februari 2022.

Fama, E. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 282-417.

Faninda, S. dan Djajadikerta, H. (2020). Integrated Reporting Impressions And Investment Decisions Of Indonesian Individual Investors - A Preliminary Research. Journal of Accounting and Business Studies, 5(1).

Faninda, S. dan Setiawan, A. (2022). Integrated Report dan Keputusan Investasi Investor Individual. Bandung: Jurnal Riset Akuntansi dan Keuangan.

Graham, B., & Dodd, D. L. (2008). Security Analysis: Principles and Technique. New York: McGraw-Hill Companies.

Greenblatt, J. (2006). The little book that beats the market. Hoboken, N.J.: Wiley.

Greenblatt, J. (2010). The Little Books That Still Beats the Market. Hoboken: John Wiley & Sons.

Hongratanawong, L. dan Kakinuma, Y. (2014). “Testing the Validity of the Greenblatt’s Magic Formula: Evidence from Thailand, Japan and US Stock Markets.” The Journal of American Business Review, Vol. 3, Number 1. (2021, 28 September). “Jumlah Investor Pasar Modal Meningkat Pesat Selama Periode Januari-Agustus 2021.” Diakses tanggal 25 Februari 2022.

Preet, S., Gulati, A., Gupta, A., Aggarwal, A. (2021). “BACK TESTING MAGIC FORMULA ON INDIAN STOCK MARKETS: An Analysis of Magic Formula Strategy.” Paideuma Journal, Volume XIV, Issue 10.

Reilly, F. K., Brown, K. C., & Leeds, S. J. (2019). Investment Analysis and Portofolio Management. Singapore: Cengage.

Statman, M. (2008). What is Behavioral Finance?. Handbook of Finance, vol. II, chap. 9, 79-84.

Thaler, R. H. (2015). Misbehaving: The Making of Behavioral Economics. New York: W. W. Norton & Company. (2021, 22 Maret). “Pria di Jakarta Bunuh Diri Diduga Depresi Kalah Investasi Saham.” Diakses tanggal 19 Juni 2022.

Ye, Y. (2013). “Application of the Stock Selection Criteria of Three Value Investors, Benjamin Graham, Peter Lynch, and Joel Greenblatt: A Case of Shanghai Stock Exchange from 2006 to 2011.” International Journal of Scientific and Research Publications, Volume 3, Issue 8.