Read this book

Posted on February 9, 2006 , filed under Stocks | Print This Post

While I was in Hong Kong I read this book. I highly recommend that Raw Greed readers pick up a copy. The little book that beats the market 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. I clearly remember one quote from the book, “Stock prices move around wildly over very short periods of time. This does not mean that the value of the underlying companies have changed very much during that same period.” This quote resembles my own theories about the effects of greed and speculation in the market. I’ve written that the psychology of the market and the ability for the market to overreact is what creates investment opportunity. I believe greed and speculation can also overtake all logic as evident by the .com bull run. The little book that beats the market will teach you a fundamental way of finding bargain investment opportunities as defined by the books “magic formula”. 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. I believe the book makes so much sense that I announced plans in an earlier post to create a separate portfolio using my IRA account to invest in stocks produced by the books criteria and then further narrowed down by my own Raw Greed criteria. If you decide to purchase the book please use the link above or in the sidebar to do so. A small Amazon referral fee will be credited to Raw Greed. I believe the two hours you spend reading the book will open your eyes to a basic and well reasoned method to investing in the market.

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