Validea's Top Information Technology Stocks Based On Joel Greenblatt

Validea's Earnings Yield Investor model, based on Joel Greenblatt's strategy, identifies HP Inc. (HPQ) and Western Digital Corp (WDC) as top-rated Information Technology stocks, with scores of 100% and 90% respectively, indicating strong interest based on underlying fundamentals and valuation. Leidos Holdings Inc (LDOS) and CGI Inc (GIB) failed the model's criteria with scores of 70% and 60% respectively. The Greenblatt strategy focuses on companies with high return on capital and earnings yields, and has historically shown strong back-tested returns.

Analysis

Validea's Earnings Yield Investor model, employing Joel Greenblatt's "Magic Formula" which prioritizes companies with high return on capital and robust earnings yields, has identified HP Inc. (HPQ) and Western Digital Corp. (WDC) as top-rated Information Technology stocks. HPQ, a large-cap value stock in the Computer Hardware sector, achieved a perfect 100% rating, while WDC, a large-cap value stock in Computer Storage Devices, secured a 90% rating, both signifying strong model interest based on their underlying fundamentals and valuation. Intriguingly, both HPQ and WDC were rated "NEUTRAL" on the explicitly mentioned criteria of Earnings Yield and Return on Tangible Capital, yet still received a "PASS" on their final ranking, indicating that the overall model assessment incorporates other factors or applies specific weightings not fully detailed in the summary table. In contrast, Leidos Holdings Inc. (LDOS) and CGI Inc. (GIB), large-cap growth stocks in Computer Services, did not meet the strategy's thresholds, scoring 70% and 60% respectively, leading to a "FAIL" in their final ranking despite also having "NEUTRAL" sub-criteria ratings. The Greenblatt strategy itself has a notable history of strong performance, with back-tested annual returns of 30.8% from 1988 to 2004, considerably outpacing the S&P 500.

Key Decisions for Investors

• Investors utilizing Greenblatt's value investing principles should consider HP Inc. (HPQ) and Western Digital Corp. (WDC) for further due diligence, given their high model scores of 100% and 90% respectively, which align with positive per-ticker sentiment.
• It is advisable to conduct a deeper investigation into the specific components of the Greenblatt model that led to 'PASS' ratings for HPQ and WDC, particularly since their disclosed Earnings Yield and Return on Tangible Capital were 'NEUTRAL', to fully understand the basis for their strong overall scores.