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The Little Book That Beats the Market

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3.85  ·  Rating Details  ·  1,779 Ratings  ·  126 Reviews
Joel Greenblatt provides a guide to beating the market for all ages. In addition to setting out the basic principles of successful stock market investing, he provides a 'magic formula' that is easy to use and makes buying good companies at bargain prices automatic.
Hardcover, 155 pages
Published November 28th 2005 by John Wiley & Sons
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Jon
Apr 26, 2013 Jon rated it it was amazing
This is just fantastic. In his little book which is part of a larger series on investing, Greenblatt humourously ivites us to a time tested fairly simple investing strategy called the "Magic Formula". http://www.magicformulainvesting.com/

In essence it is value investing by looking at the earning yield (not dividend yield!)and the return on assets (ROA).

I find Greenblatt to be a fantastic and amusing mentor that describes finance in a very simple and thorough manner. The introduction should be ob
...more
Saugat Banerjee
Jul 21, 2011 Saugat Banerjee rated it really liked it
The advice given in the book about the 'magic formula' sounds good and the author backs it up with past 17 years of results. Its about picking 20-30 stocks with high Return on Capital and available in bargain prices. Its a quite unique way of investing as you need to keep selling the stocks around one year mark and then buy new ones with the magic formula. His website is free to find the stocks out using the 'magic formula'. But, its like a process which needs time and patience (and ofcourse mon ...more
Marko
Aug 10, 2014 Marko rated it it was ok
This is a book where the writer tries to sell in a concept in a funny and easy way. But it isn't funny and he seems to think that the reader is stupid.
The method of picking stocks might work, but the writer could have explained it in one page instead. He doesn't need to sell in the method on 95% of the pages of the book.
Matt
Jan 18, 2013 Matt rated it it was amazing
Being interested in finance at an early age is pretty difficult for me because of all of the complex terminology and concepts. My brother, who is in finance, suggested this for me because it is easy to understand. He was completely right, Greenblat was able to explain market analysis so well a 10 year old could go out tomorrow and be able to choose stocks well. He used interesting metaphors with his kids and their candy business as if they were a multi-million dollar company. After reading this ...more
Todd Wood
Jun 19, 2015 Todd Wood rated it really liked it
While a very simple and straightforward book, the concepts are actually very powerful and important. It is written in a way to be accessible to non-finance people, and offers a good explanation as to why certain companies outperform others. Most simplistically, you want to buy companies with above average earnings growth for below average prices... duh. But a nice reminder, and probably would be a good read for the average person. I knocked a star off due to the fact that calling this the "magic ...more
Paul
Feb 27, 2010 Paul rated it liked it
I have 30 years trading experience in the stock market and am always looking for new angles to improve my skills and profits.
I found that even though the principles presented in this book are not new that I enjoyed reading the book because of the clear and concise manner the information was presented. The principles described in the book are explained very simply and well. The website is well worth utilizing to save the time in screening the stocks yourself. Most casual investors will not want t
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Gabriel Pinkus
Dec 31, 2014 Gabriel Pinkus rated it it was amazing
Shelves: favorites
His formula is the best I've seen that attempts to measure the good company investment in the cigar butt vs good company debate value investors have. Quite an interesting book.

In the appendix Joel has a great example about two identical companies, except one is in debt, and proposes that they have the same EBIT/EV and implies that they're the same value.... The problem is that Joel doesn't look at interest rates and some other things...

He also data mines a little bit with academic articles with
...more
NiveusT
Feb 09, 2016 NiveusT rated it really liked it
Shelves: financial
Great little book about the stock market and trading that gives beginners an incite to what the world of stock trading has to offer. Quick read.

It gives one of many methods of investing that on average beats the market averages over most every 3 year period. The "Magic Formula" is indeed magic if one can learn to pick stocks to the same degree as the analytic software they use do.

Quite a humorous and upbeat book. Makes you excited to become a part of the investing world. Gives a few resources at
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Hellkitten
Dec 21, 2011 Hellkitten rated it it was amazing
Great book. Even if you don't want to follow Greenblatt's plan, this is a good book to read to get you thinking about the stock market and the economy. Just a good read. You'll enjoy it, if nothing else.
Guido Profitos
Dec 02, 2015 Guido Profitos rated it liked it
Es un libro idóneo para que alguien neófito en finanzas pueda comprender el funcionamiento básico sobre cómo se eligen las acciones para invertir (guiándose en el análisis fundamental y el largo plazo, antes que en el análisis técnico y el corto plazo). También se da cierta introducción a estrategias de inversión. No me agradó del todo el tono del libro, ya que si bien el autor lo pensó para adolescentes, al final se terminó vendiendo para adultos, aunque conservó el tono infantil. Por otra part ...more
John
I read this book in 2012 or thereabouts. Liked it.

Very clear thesis - reversion to the mean.

If you buy out of favor (share price down due to some temporary earnings issue), but good companies ...over time, these companiesshare prices will revert back to a normalized P/E ratio, and you will do fine.

I even selectively chose and bought stocks I understood from the magicformulainvesting website...I used the site to give me ideas to investigate.

The general thesis...reversion to the mean...I believe
...more
Joe Vander Zanden
Aug 05, 2015 Joe Vander Zanden rated it it was amazing
Joel's approach to investing is witty, entertaining, and informative. After reading this book it became clear to me why he has been such a successful teacher. Most of the content is review for more knowledgeable value investors but is still worth perusing as an entertaining refresh course on valuation techniques and core strategic principles. For the beginner, this book is a fantastic place to start your education. In fact, I'd recommend starting the book with a group of friends so that you can ...more
Pulkit Goel
Jul 11, 2015 Pulkit Goel rated it really liked it
This is a great book to get the most basic concept in investing straightened out. Being not from a finance background, as most people are, the investment jargon gets too heavy on a person who has a slight intersest in it, leave alone the art which is being played behind the scene. This book provides these basic concepts in a very elegant way.
However, this book has heavily stressed out the use of 'magic formula' throughout, which might not present the complete picture to the reader. Thus, advisab
...more
Danm
Aug 05, 2014 Danm rated it liked it
Decent investing book, but couldn't really get into it. These stats can be skewed in so many different ways that you can make them look ugly, decent, or pretty. IMO, the key to successful investing is choosing high-quality companies that consistently increase their cash flow, revenue, net income, and comps (if a retailer) while keeping the balance sheet at least relatively clean. Industry trends also play a BIG role. Additionally, any book that uses the word "formula" should be approached with c ...more
Khairul Bashar
Feb 10, 2014 Khairul Bashar rated it really liked it
The book seems to be a good starting point when it comes to value investing, really easy to read and easy to grasp the concepts. The writer has been successful in capturing readers' attention throughout.

This book has stated a “Magic Formula” of high yielding investment. The formula is indeed so simple that even a naive/amateur investor can generate alpha. Joel Greenblatt asked the investors to judge stocks by using only two parameters:

1. High Earnings Yield (Earnings yield is the reciprocal of P
...more
Catherine
Mar 17, 2009 Catherine rated it really liked it
What a fun little book! Addressed to a 12-year old, it makes market analysis and investing seem actually understandable. I'm only half-way through but I feel I've already learned a great deal. A friend lent it to me, and it was given to her by a wealthy couple who are nearby neighbors. If you want to explain investing to your teenagers or college students, this is a great book.

The moral of the story is that buying stocks that have a high return on capital investment (in other words if you can s
...more
Rob
Mar 24, 2008 Rob rated it liked it
The most endearing trait of this book is that it is short. After all, who really wants to spend hours reading a book on investing? This book is very simple and contains a purported "magic formula" on how to beat the market. While I'm skeptical of the simplicity, it does make logical sense and the author does a fair job of backing up his claims. However, this book came out in 2006 and the author claims you need a min of 3 years of following the "formula" to reap the benefits, so it's not exactly ...more
John Barbour
Jul 09, 2013 John Barbour rated it it was amazing
Shelves: investment
I am presently listening through this one on CD. This is the third time I've done it. It's just one of those books. It's entertaining and it takes a couple times through it to really grasp the concepts. It's really about value investing - buying good companies at a discount price with a good margin of safety. But the catch is; How do you know what a company is worth and what's a good price? That's where this book comes in. It helps you learn how to figure this out and does so in an entertaining ...more
Mountainking
Nov 22, 2015 Mountainking rated it it was amazing
An excellent 'Explain like I'm five years old' introduction to value investing in stocks. Let us face it, most of the material relating to Investing is noise. Be it Mutual Funds, Indexing, Asset Allocation, Market Efficiency, Dollar Cost Averaging and what have you.. Indexing works if you're going to live for over 100 years. Bad idea.

Really fluid and engaging writing style, a breath of fresh air amidst all the so called experts littering their books with statistics and graphs. Most are gulity of
...more
Yuval
Apr 18, 2012 Yuval rated it liked it
It's a nice little book, I liked the way he explained everything slowly and with a great deal of humour.
As for the "magic formula" - I'm not entirely convinced. 17 years of data is not enough time to make far-reaching statements as he does. If finding data older than that is a challenge, I would at least look at other stock exchanges in the world and test the formula there. For example, I would very much be interested to see how it would do in the Tokyo stock exchange in the last 30 years or so
...more
Purva Brown
May 07, 2014 Purva Brown rated it it was ok
I had tried to read this book back when we were initially considering stock investing and it made little sense. Now it makes a little more but that's only because I KNOW more about stocks and what I have learned has NOT come from this book. Its flippant tone and the attempt to dumb down information does more harm than good in that it confuses me rather than invite me to learn more. There are other better ways to learn about value investing.
Lain
Nov 30, 2007 Lain rated it really liked it
It's difficult to rate an investment advice book without actually taking the advice and seeing how successful it is. What I can say about this small tome is:
-It's written in a very straightforward, accessible manner
-It contains some very goofy, dorky humor that, while making me groan, also made me appreciate the author more
-Its underlying premises seem quite logical and sound
-I plan on taking the advice provided.

One thing I was especially happy to see was that when I went to the associated
...more
Dilip Patharachalam
Jan 22, 2016 Dilip Patharachalam rated it it was ok
I reread this book after 5 years after liking it the first time. Now, I completely disagree with Joel's formula. Holding stocks for just a little over a year and frequent trading are not ideal for everyone, let alone people not actively tracking their investments.

Disclaimer: I currently work for a robo advisor
Matt Burgess
May 05, 2010 Matt Burgess rated it really liked it
The Little Book that Beats the Market (2005), Joel Greenblatt

The Little Book that Beats the Market is a wonderful book. Although I can't validate the promise of Joel Greenblatt's "Magic Formula", his clear and concise outline of investing is insightful for novice to mediocre investors. Throughout the book I was taken back by Greenblatt's casual language, but in the end it convinced me that the strategies found within did not smell of a gimmick. As I enjoyed each chapter I was waiting for the "sa
...more
Marcus
Sep 12, 2009 Marcus rated it really liked it
This is a solid investment book which describes an investment strategy which is very similar to what I employ for the clients of the portfolios I manage. It is written for the non-financial professional, but all could learn from this simple, but powerful concept. Basic concept is to buy good businesses at attractive valuations. Unlike most investment books, however, it actually tells you how to identify a good business and what an attractive valuation is. It also does not promise this strategy w ...more
Aaron
Aug 03, 2007 Aaron rated it liked it
With a little bit of money coming to me in the next few months, my dad suggested I invest part of it and gave me this book as a guide (he has a PhD in economics, so I figure he must half know what he's talking about). It presents an easy-to-follow formula for investing wisely and makes a good argument for it. I am mentally challenged when it comes to this sort of thing, so I appreciate the simplicity of the book. It's a breeze to read through, easily managed in a few hours, and it's written in l ...more
Shishir
Jan 03, 2016 Shishir rated it liked it
Simple short book outlines 'value' investing. It is well explained and can help alleviate the reactive way most people invest ...swayed by the emotions of the market movements.
Jonathan Mah
May 17, 2015 Jonathan Mah rated it liked it
I think every person curious about investing should read this book. In fact, really anyone with money to invest should read this book. The book is easy to access and a quick, fun read, but still contains a lot of useful information.
Ruben
Oct 19, 2014 Ruben rated it it was amazing
Nice book to start learning Value Investing for unexperienced people. I kind of like the method he propose but If I were to invest real money, I would look further into it.
May
Jun 13, 2011 May rated it did not like it
Shelves: finance
This book was suggested by a colleague. This book could be good for the occassional investor who requires some sort of methodology. For highly concentrated portfolios, this book might also be helpful. For those in quant finance, not so much. These factors are generally considered risk tilts (i.e. value tiit).



Quant finance would also tend to pick more securities than the fairly concentrated 10-30 securities suggested in the book. At 10-30 securities, you need to be a little more sure of the name
...more
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Joel Greenblatt is an American hedge fund manager and founder of Gotham Capital. He is also an academic and a writer. He is also an adjunct professor at the Columbia University Graduate School of Business. He is the former chairman of the board of Alliant Techsystems and founder of the New York Securities Auction Corporation.
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“companies that achieve a high return on capital are likely to have a special advantage of some kind. That special advantage keeps competitors from destroying the ability to earn above-average profits.” 0 likes
“if you just stick to buying good companies (ones that have a high return on capital) and to buying those companies only at bargain prices (at prices that give you a high earnings yield), you can end up systematically buying many of the good companies that crazy Mr. Market has decided to literally give away.” 0 likes
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