The Little Book That Beats the Market (Little Books. Big Profits) | 
|  | | | Title: | The Little Book That Beats the Market (Little Books. Big Profits) | | Author: | Joel Greenblatt | | Publisher: | Wiley [Website] | | Type: | Book / Hardcover | | Publication Date: | 19 November, 2005 | | ISBN / ISBN-13: | 0471733067 / 9780471733065 | | List Price: | $19.95 | | You Save: | $6.38 | | Amazon Price: | $13.57 | |
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| Editorial Review / Publisher's Information:
Product Description
Two years in MBA school won't teach you how to double the market's return. Two hours with The Little Book That Beats the Market will. In The Little Book, Joel Greenblatt, Founder and Managing Partner at Gotham Capital (with average annualized returns of 40% for over 20 years), does more than simply set out the basic principles for successful stock market investing. He provides a "magic formula" that is easy to use and makes buying good companies at bargain prices automatic. Though the formula has been extensively tested and is a breakthrough in the academic and professional world, Greenblatt explains it using 6th grade math, plain language and humor. You'll learn how to use this low risk method to beat the market and professional managers by a wide margin. You'll also learn how to view the stock market, why success eludes almost all individual and professional investors, and why the formula will continue to work even after everyone "knows" it.
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Customer Reviews:
• Simplistic, Good Explanation Of Basic Concepts For Novice Investors 18 September, 2008
This brief text is a good read for the novice investor who wants to learn more about equity valuation. Basically, it distills the drivers of stock values into two components: return on assets and earnings yield. Buy stocks with strong numbers in both of these categories and, over time, you will outperform the market. Only problem with this approach is that stock values are based on expectations of FUTURE performance. Stocks often have high earnings yields today because professional stock pickers expect their finances to degrade in the future. Forecasting future performance is what is most important. The author fails to stress this concept.
For the novice investor, the author is able to explain some of the more fundamental concepts of equity valuation in a straightforward manner. Yet, this text would be only one of a several books someone should read before trading individual stocks instead of purchasing mutual funds.
- Reviewed by customer ID: A33ZYFE8XMKKR1
• Excellent!! 20 February, 2008
Very insightful, and excellently written. Despite the name this is not another shallow book, full of cliches and nothings. In a really entertaining fashion Greenblatt explains in very simple easy to understand illustrations, what stocks are, how they are traded and the basic principles of the stock market and market fluctuations. He then builds on these principles to teach the fundementals of wealth building that most successful investors utilize. Alot of basic principles that somehow a lot of smart investors forget. Great reading for the experienced, and novice alike! This book should really be required reading in high school and/or college.
- Reviewed by customer ID: A3SPQKK3DXANAZ
• Great Book To Start Learning About Investing 29 November, 2008
First book I ever read about the market. Very simple and to the point. Great place to start your reading about investing.
- Reviewed by customer ID: A16CWZVGR2IZJ
• Reviewers Need A Lesson In Reading Comprehension 27 March, 2008
I read every chapter of this book while at Borders except the last one, so I cannot vouch for the effectiveness of the "Magic Formula" website that seems to generate so much controversy. I can, however, clarify a glaring misconception in what Goldblatt wrote in his book.
Contrary to what many of the reviewers wrote (especially the negative reviewers), Goldblatt was not insisting that people focus only on Return on Assets and P/E ratio. Goldblatt was also not insisting on a definition of "capital" (within his concept of "return on capital")that leads to an over-emphasis on services over manufacturing. He illustrated perfectly his two pieces of investment data in the following ways:
First, Return on Capital can be best interpreted as a return on invested capital. If it costs $1 million to build a retail store and that store, within a year, generates $2 million, then the ROC is 100%.
Second, his other measure is really a profit-yield per share. You get this measure by taking the amount of profit generated by a firm, dividing it by the number of shares outstanding, and then dividing that by the share price times 100. So, if a company has a $1 million profit and it's selling a million shares for $10 a share, then the profit-yield per share is 10%.
These two concepts seem to form the core of value investing in that they discipline a person to invest in the market as if they were buying a business or a partnership share in the business. The relevant question in any such investment is always "how much will my partnership share make?"
All other factors are just risk management.
The trick is finding data to generate these statistics. I don't know how well Goldblatt's website does that.
- Reviewed by customer ID: A2ESDP8YHKNB2C
• Great Reading For People Contemplating Value Investing 24 October, 2008
Great info with a humorous touch and a link to data to use in applying what you learn. I am not going to apply it until a more normal market comes along though.
- Reviewed by customer ID: AROLCR1XJL02H
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