Codere losses drive investors to Greenblatt's Magic Formula

From Codere to Greenblatt's Magic Formula

September 2013. A group of investors who lost money on Codere shares decided to stop watching the betting house's stock price and seek redemption across the Atlantic. The chosen vehicle was not a fund or a broker with an office in central Madrid: it was a fundamental screening presented as Joel Greenblatt's magic formula. Surrounding the operation were dark humor, self-criticism, and plenty of numbers, making this episode a rather honest snapshot of how retail investors behave when the ground shifts beneath their feet.

What peine with Codere shares?

One participant recalls reading that the stock traded around €13 per share in August, a memory-based note rather than verified data, and from there the trail is a catalog of late entries and antiestéticarful exits. One reported trade: €1,500 turned into €2,100 in a single morning, buying at €2.17 and selling at €2.70 between nine and ten o'clock, only to rebuy at €2 days later and close the position at €1.80 antiestéticaring further losses. Another voice in the exchange admits to selling with a 100% gain and re-entering at the worst possible moment.

The expectation of seeing it reach €4 again resurfaces every season, accompanied by the inevitable joke about not specifying which year. And the most repeated conclusion about the stock is dismissed in four words: "don't touch it." With such emotional material, any strategy promising fresh air has half the battle won.

Greenblatt's formula and exile to US companies

The method relies on fundamentals and a stated horizon of one year or more, although some of the selected names became nervous prematurely. The detailed example is Kohl's Corporation: after an 8% drop in a single session due to lowered forecasts, the projected earnings per share stand between $4.08 and $4.23, so with the price at $53.55, the price-to-earnings ratio sits at 7.75, according to the investor's own calculation.

The twist has its nuances: someone burned by a Spanish penny stock seeks refuge in US companies, territory where the same investor declares himself a learner. "Careful, I'm still learning too," he warns. In parallel, classic sarcasm appears: the announcement of new names is preceded by a warning to other forum users about their supposed bad luck.

Valassis, Unisys and Kohl's: the two-month scoreboard

Two months after the first recommendation, the tally published by the investor itself comes out as trinc:

• Valassis Communications: from $27.96 to $34.04, a +21%
• Unisys: from $27.33 to $30.50, a +11.6%
• Kohl's: from $53.55 to $50.52, a -5.7%
• Declared average return: +19%

Previously, there was an exit from Sturm, Ruger and Company at $72.4001 with a +15%, noting that part of the result came from benefiting from the exchange rate. Positions remain open in ITC Holdings, National Research, or 3D Systems, which once jumped 8.10% in a day. Three stocks in two months are, in any case, a tiny sample. The resident skeptic summarizes without anesthesia: what you win in the market one day, you give back over subsequent days.

The real cost of learning: six-part stop loss and -80% in Colonial

Learning doesn't come free. A market stop-loss order was executed in six tranches, with the resulting crunch of commissions, and the later explanation was that a limit order would have charged only one sale commission. The lesson, admitted with twisted humor, turned out more expensive than a premium subscription to a paid forum.

On another note, a participant reports a -80% on €20,000 in Colonial, with a sale in 2008 equivalent to €18 per current title, not counting subsequent capital increases. From this emerges the sharpest advice of the episode: distrust what you read online, because behind every purchase is someone selling convinced of the opposite. There is also another declared -27% loss that, in the owner's words, gives him the right to stay in.

Eurovegas, Credit Suisse and undying hope

Among the reasons a forum user lists for keeping the Codere embers alive appear two wildcards: institutional visits by Sheldon Adelson and a possible move by Credit Suisse, argued as a "good bet" rather than data. For optimism regarding the Spanish stock, the bar is set at €3: until it reaches that level, not a kind word.

The analysis gets stuck exactly there. Some observe that no one expects to see it at €2.50 by Christmas anymore, while US bets keep gaining momentum and the debate splits between the magic formula and auction pennies. No one confirms whether the next win lies in a US balance sheet or in a stock most considered dead three months ago. That doubt remains in the conversation, and with that doubt we continue.