Book Review: The Little Book That Beats the Market

Posted on September 16, 2007 , filed under Stocks | Print This Post

Purchase a copy from Amazon and remember to “add to cart” before navigating away.

My original review for this book was posted February 9th, 2006. I’ve updated the review since my last post.

In The Little Book That Beats the Market, Joel Greenblatt covers investing in stocks based on a company’s return on capital and earnings yield. It took me two hours to read the 155 page book and it makes tremendous sense. Joel speaks with enthusiasm for value investing.

The little book that beats the market emphasizes a fundamental way of finding bargain investment opportunities defined by the books “magic formula”. Although the phrase “magic formula” may scare some, it really is a misnomer, it should have been called “commonly ignored common sense formula”. Joel suggests buying a basket of stocks with a high return on capital and earnings yield. He then suggests to cycle out of the basket once a year. Although it’s not recommended to do this, I use ROE and ROA criteria for comparable statistics due to the ease of research on Yahoo! Finance.

I have been using Joel’s main criteria for finding undervalued investments on Raw Greed with a mixture of my own screening criteria with spectacular results. With all screening criteria, some objective analysis is necessary if you are going to use it to buy individual stocks. There are some very strong basics in The Little Book that Beats the Market. I highly suggest picking up a copy.

The author Joel Greenblatt is the founder and a managing partner at Gotham Capital. The fund has grown at an average annualized rate of 40%, for over 20 years.

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1 Comment »

Comment by Ray

2007-09-16 10:13:29

I bought The Intelligent Investor from here. Ill buy the others as soon as its best price drops down to 6 or 7. Good work with your picks, I love this site!

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