In riffing on another fund, Gratio Value, it occurred to me that no one, to my knowledge, had licensed Joel Greenblatt's 'magic formula' for use in an ETF.

If you're unfamiliar, Greenblatt is a celebrated author--most recently of the best-selling 'Little Book That Beats the Market'--and accomplished investor. He also maintains a companion website, Magic Formula Investing, that allows users to screen firms using on the 'magic formula' that is the focal point of the 'Little Book'. The site has become very popular in investing circles, with many value hounds using it as a cheat-sheet of sorts.

Given that the 'magic formula' is completely formulaic (rank stocks based on earnings yield and returns on invested capital) and transparent (earnings yield and ROIC can be easily calculated), it seems like it would lend itself very nicely to an index. And that index, in turn, could be licensed by an ETF provider.

That doesn't mean such a product would sell, mind you. But Greenblatt has amassed a terrific record over time by employing a strategy very similar to the 'magic formula'. So it's not as if it isn't proven. Also, part of the reason that Greenblatt's approach has caught on is its simplicity and accessibility. Those qualities would likely resonate with ETF investors as well, though selling a book and selling a fund are obviously very different endeavors.

I'm not sure a name like 'SPDR Magic Formula' would pass the sniff test with the regulators. But I'm sure that Greenblatt--who has a flair for the Vaudevillean--would have no trouble coming up with something.