Editors Reads Verdict
One of the most accessible introductions to value investing ever written, with a testable, transparent methodology behind it. Greenblatt's own record gives the Magic Formula credibility that most investing books lack.
What We Loved
- Extremely accessible — written to be understood by a 12-year-old
- Magic Formula is testable, transparent, and grounded in value principles
- Backed by Greenblatt's own exceptional track record
Minor Drawbacks
- Formula has underperformed in certain market environments
- Requires discipline to hold losing positions the formula selects
Key Takeaways
- → The Magic Formula ranks stocks by earnings yield and return on invested capital
- → Mr. Market is irrational — systematic buying of cheap, good businesses exploits this
- → Most investors fail because they cannot endure short-term underperformance
| Author | Joel Greenblatt |
|---|---|
| Published | September 7, 2010 |
| Language | English |
| Genre | Finance, Investing, Non-Fiction |
Overview
Joel Greenblatt, whose hedge fund Gotham Capital averaged 40% annual returns for over two decades, wrote this book to explain a simple two-factor formula for identifying undervalued quality companies. The original Little Book and this updated edition are essential reads for quantitative value investors.
What the Book Covers
Greenblatt explains the logic of buying good businesses cheaply, introduces the Magic Formula (ranking stocks by earnings yield and return on capital), provides backtested results, and addresses the psychological challenges of following a systematic approach through periods of underperformance.
Who Should Read This
Anyone curious about systematic value investing. An excellent first step for investors who want something more structured than pure index fund investing.
Final Verdict
One of the most accessible introductions to value investing ever written, with a testable methodology behind it.
Frequently Asked Questions
What is "The Little Book That Still Beats the Market" about?
Joel Greenblatt's Magic Formula investing strategy — a simple, systematic approach to finding good companies at cheap prices that has beaten market averages over time.
What are the key takeaways from "The Little Book That Still Beats the Market"?
The Magic Formula ranks stocks by earnings yield and return on invested capital Mr. Market is irrational — systematic buying of cheap, good businesses exploits this Most investors fail because they cannot endure short-term underperformance
Is "The Little Book That Still Beats the Market" worth reading?
One of the most accessible introductions to value investing ever written, with a testable, transparent methodology behind it. Greenblatt's own record gives the Magic Formula credibility that most investing books lack.
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