Adding Booking Holdings (BKNG) to the Magic Formula Portfolio - Round 9
Best performance since starting and now fully invested
Welcome to Round 9 of building my Magic Formula Portfolio.
Quick reminder if you are new to Guru Gems: while studying investing masters, I’m creating two real-money portfolios to put my learnings into practice.
Check out my recent 1-year anniversary post to learn more about my journey:
In the most recent Guru deep-dives I covered 2 lesser-known Gurus, who have both delivered exceptional results:
Magic Formula Refresh
In “The Little Book that (Still) Beats the Market”, Joel Greenblatt suggests that a regular investor can beat the market averages by buying a group of ‘good’ companies at ‘bargain’ prices.
‘Good’ → High return on capital
‘Bargain’ → High earnings yield
Since he expects the magic formula to work on average, Greenblatt suggests to own a basket of 20-30 stocks.
You can read more on Joel Greenblatt and his Magic Formula here.
You can also download my Joel Greenblatt e-book for free:
Current Magic Portfolio Performance
Last month I added lululemon athletica (LULU), Exelixis (EXEL), and MediaAlpha (MAX) to the portfolio in Round 8, bringing the total number of holdings to 24 stocks.
The overall performance of the Magic Portfolio is currently +8.2%, which is the best performance I have had until now.
Considering that many names are in small-cap, out-of-favor industries and that there is virtually zero exposure to semiconductor/AI stocks, an 8% return after a bit less than a year is not that bad.
Lantheus Holdings (LNTH), a radiopharmaceutical company, is my best performer, and at some point was even a 2-bagger. The main driver was the FDA approval for a new formulation called Pylarify TruVu on March 6 2026.
Catalyst Pharmaceuticals (CPRX) is my second-best performer with a 56% return since buying it last August. The big ‘catalyst’ here was the company securing extended U.S. patent exclusivity for Firdapse until 2035.
lululemon (LULU), a name I added in the most recent round in April, sank more than 10% this week after reporting Q1 2026 earnings, in which they lowered full-year outlook. While this was somewhat expected, multiple analysts further adjusted their price targets downward, putting more pressure on the stock.
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New Magic Formula Stocks
As I explain in detail in my first Magic Portfolio post, I use Joel Greenblatt’s Magic Formula screener combined with financial ratios data to identify the top stocks in terms of combined rank for Return on Capital (using ROCE) and Earnings Yield (using EV/EBIT).
Since I am already at 24 names in the portfolio, I will be adding just 1 name in this round, to get to a full portfolio of 25 names.
#25 is a bit special since it is a ‘Magic Formula meets Guru Gems’ stock.
Booking Holdings (BKNG, Market cap $130B)
Magic Formula metrics: ROCE 3Yr: 72%; EV/EBIT: 13.6x
Booking Holdings is the world’s largest online travel agency, operating across five primary consumer-facing brands: Booking.com, Priceline, Agoda, KAYAK, and OpenTable.
The company serves travelers and accommodation providers in more than 220 countries, processing over 1.2 billion room nights in 2025, a new all-time record.
With $27B in revenue and $9B in free cash flow in 2025, this is a software-like business operating in a growing $3+ trillion global travel market.
Magic Formula meets Guru Gems
Not only does BKNG rank high on the Magic Formula screener (3yr ROCE 72%, EV/EBIT 13.6), but it also appears in the portfolios of some of the Gurus I am tracking.
François Rochon holds a ~3% position, AKO Capital has it at ~4% and for David Rolfe at Wedgewood Partners it is a ~5% position.
What’s happening
The stock is down more than 25% over the past year, now trading at around $165 (there was a 25-for-1 stock split in April).
Here is what David Rolfe wrote in his latest Q1 2026 Client Letter on why he believes the stock went down:
Booking Holdings detracted from overall performance during the quarter. Earnings per share grew +17%, with revenues up +16%, as travel demand remained strong late into 2025 and into early 2026. Most of the stock’s weakness stemmed from investors labeling it an “AI loser” and, later in the quarter, the outbreak of war in the Middle East.
Consumer AI, as a disruptive force in existing commerce, is proving to be much more difficult than markets expect. We view these AI tools and distribution channels as incremental rather than as drivers of the “zero-sum” dynamics that markets have been craving. As for the Middle East, for now, it represents a short-term disruption to travelers, particularly air travelers, given credible risks to international airline fuel supplies. However, we expect this will not be a multi-year headwind - more like a few quarters.
When both a quantitative screen like Greenblatt’s Magic Formula and long-term quality investors like Rochon converge on the same name, it’s usually worth paying attention.
On Monday, I’m adding BKNG to the Magic Formula Portfolio and I will then hold it for exactly one year, as Greenblatt prescribes.
This brings me to 25 stocks in the Magic Formula portfolio, which means I am now fully invested. I started on 7 July 2025 so in my update next month, I will be selling the first 3 names and add 3 new names.
“If you are able to stick with the magic formula strategy through good periods and bad, you will handily beat the market averages over time”
— Joel Greenblatt
That’s it for this week! Please like or share if you enjoy reading Guru Gems.
You can follow me on X @guru_gems and Substack @gurugems for more insights.
Until next week!
Good to see you beating YTD S&P500!