Validea's Top Consumer Discretionary Stocks Based On Joel Greenblatt

According to Validea's Earnings Yield Investor model, which is based on Joel Greenblatt's value investment strategy, Best Buy Co. Inc. (BBY) received a rating of 80%, while Ulta Beauty Inc. (ULTA) received a rating of 60%; a score of 80% or above typically indicates that the strategy has some interest in the stock and a score above 90% typically indicates strong interest. The model assesses companies based on high return on capital and earnings yields, but both companies ultimately failed the final ranking based on the strategy's criteria.

Analysis

Validea's Earnings Yield Investor model, based on Joel Greenblatt's strategy focusing on high return on capital and earnings yields, assigned Best Buy Co. Inc. (BBY) an 80% rating, a level typically indicating some strategic interest. However, BBY scored 'NEUTRAL' on both individual criteria of Earnings Yield and Return on Tangible Capital, ultimately resulting in a 'FAIL' for its final ranking under this model. Similarly, Ulta Beauty Inc. (ULTA) received a 60% rating from the same model, below the threshold for strategic interest, and also registered 'NEUTRAL' for both Earnings Yield and Return on Tangible Capital, leading to a 'FAIL' in its final ranking. The general sentiment for these assessments is mildly negative, with specific ticker sentiments of -0.3 for BBY and -0.5 for ULTA, reflecting the model's unfavorable conclusions despite BBY's initial higher score. Thus, neither Consumer Discretionary stock met the comprehensive criteria of Greenblatt's published strategy as interpreted by Validea in this instance.

Key Decisions for Investors

• Investors following Validea's Joel Greenblatt model should note that both Best Buy (BBY) and Ulta Beauty (ULTA) failed the strategy's final ranking, suggesting these stocks are not currently recommended based on this specific value investing approach.
• Despite BBY's 80% initial score indicating some interest, its 'NEUTRAL' assessment on key metrics and ultimate 'FAIL' signal caution for adherents of this model.
• Given the 'FAIL' status and mildly negative sentiment from this specific model, investors might consider avoiding new positions or re-evaluating existing holdings in BBY and ULTA if their investment thesis heavily relies on Greenblatt's 'Magic Formula' criteria.