A couple of weeks ago, MagicDiligence looked at MFI stocks in the Forbes' Best 200 Small Companies for 2009 list. In producing that article, I thought it would be interesting to take these 200 firms as a "universe", calculate MFI earnings yield and return on capital statistics for each, and then rank them to get a Magic Formula-style list of which ones are the best combination of cheap and high quality.

The recent break gave me a chance to do just that. Before we get to the list, though, a few things should be mentioned. The first is that some current official MFI stocks are not that highly rated here, though most are. The main reason for this is how different data providers treat operating expenses. For example, InterDigital (IDCC - a current MFI stock) has $37 million in one-time restructuring fees in the past 12 months that are technically operating expenses but should be treated as non-operating for MFI purposes. The data feed used for this project included them, leading to its relatively low ranking. Also, Joel Greenblatt's exact recipe for calculating MFI statistics is unknown. The numbers below use MagicDiligence's approximations for earnings yield and MFI return on capital.