Validea's Top Information Technology Stocks Based On Joel Greenblatt

Validea's Earnings Yield Investor model, based on Joel Greenblatt's 'Magic Formula' strategy, has rated several Information Technology stocks, with HP Inc. (HPQ) receiving a 100% rating and CGI Inc. (GIB) a 90%, both indicating strong interest due to their fundamentals and valuation. In contrast, Cognizant Technology Solutions (CTSH), Amdocs Ltd (DOX), and Cricut Inc. (CRCT) were ultimately ranked as 'FAIL' by the model, despite CTSH initially scoring 80%, suggesting these do not meet the strategy's full criteria for investment.

Analysis

Validea's Earnings Yield Investor model, based on Joel Greenblatt's historically successful "Magic Formula," has identified several Information Technology stocks with varying degrees of attractiveness. This model, which targets high return on capital and earnings yields, generated 30.8% annual returns from 1988-2004, significantly outperforming the S&P 500's 12.4%. HP Inc. (HPQ) received a top rating of 100%, signifying strong interest as a large-cap value stock in Computer Hardware.

CGI Inc. (GIB), a large-cap growth stock in Computer Services, also garnered strong interest with a 90% rating from the model. The strategy considers scores of 80% or above to indicate interest, with over 90% signaling strong interest. Cognizant Technology Solutions Corp (CTSH) achieved an 80% rating, suggesting some initial interest, but ultimately failed the model's final ranking criteria.

Conversely, Amdocs Ltd (DOX) and Cricut Inc. (CRCT) received ratings of 70% and 60% respectively, falling below the 80% threshold for strategic interest and both failing the final ranking. Despite the model's focus on earnings yield and return on tangible capital, all five companies were individually rated "NEUTRAL" on these specific metrics, suggesting the final ranking incorporates other fundamental factors or a weighted composite not explicitly detailed.

Key Decisions for Investors

• Consider HPQ and GIB for potential long positions, given their strong ratings (100% and 90% respectively) by a historically outperforming quantitative model.
• Exercise caution with CTSH, DOX, and CRCT, as they either failed the model's final ranking or scored below the threshold for strategic interest despite their initial descriptions.
• Investors should conduct further due diligence beyond the model's summary, particularly understanding the specific factors contributing to the "PASS" or "FAIL" final rankings given the "NEUTRAL" scores on individual yield and capital metrics.