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The Little Book That Still Beats the Market

3.88 of 5 stars 3.88  ·  rating details  ·  427 ratings  ·  45 reviews
In 2005, Joel Greenblatt published a book that is already considered one of the classics of finance literature. In "The Little Book that Beats the Market--"a "New York Times" bestseller with 300,000 copies in print"--"Greenblatt explained how investors can outperform the popular market averages by simply and systematically applying a formula that seeks out good businesses...more
Hardcover, 183 pages
Published September 7th 2010 by John Wiley & Sons (first published December 31st 1999)
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The Intelligent Investor by Benjamin GrahamOne Up On Wall Street by Peter LynchMargin of Safety by Seth A. KlarmanThe Essays of Warren Buffett by Warren BuffettCommon Stocks and Uncommon Profits and Other Writings by Philip A. Fisher
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I'm far from a financial expert (don't ask me about my own portfolio... I tend to leave money in CDs and mutual funds and forget about it). However, I have done a bit of reading, and know enough to smell BS or something that has the ring of truth.

Greenblatt's book is aimed at the very naive (in the sense of not knowing much, not in the sense of being stupid or gullible) investor. That is, the average American who thinks s/he can use "common sense" and a few hot tips or some "expert opinions" on...more
Key ideas:
1. A very basic concept: high ROIC + high earnings yield
2. Rank the biggest 3,500 or 1,000 stocks on BOTH of those matrics and pick the top 20-30 stocks, rebalance yearly.
3. The result is a market beating portfolio (by a wide margin)
4. Greenblatt spends a lot of time explaining if this is so easy, why hasn't everyone used it? His explanation is that the formula doesn't always work, it may not work for 1 or 2 years, which prevents short-term investors from using it.

What I think:
1. This...more
In many ways, I would equate The Little Book That Still Beats The Market to P90x. I've always respected the P90x fitness plan because it basically says "Hey, if you want to get in shape, work your ass off and don't eat very much. It's going to really suck," which is the most honest approach to a weight loss program I have ever heard. Joel Greenblatt takes a similar approach in this book, as he basically says if you buy above average companies at below average prices, and remain disciplined in do...more
Beat the market? Snake oil.

Not so fast.

Greenblatt is one of the most successful money managers of all time, and a student of the legendary Ben Graham's philosophies on investing. So he has serious street cred. However, even if he did not the concepts in the book are very logical and sound ones.

The book basically introduces the concept of a Fundamental Index Fund, and argues for a specific metric upon which to base the index.

Rather than weighting on market cap (like funds indexed to the Dow, S&P...more
Alex Moskalyuk
Basic introduction to value investing with prolonged explanation of some financial terms, and one basic idea - forward-looking low P/E ratios are a good test to differentiate between good and bad stocks.
Really straight forward and simple. Great advice that is common sense but overlooked many times due to the role of emotions in the market.

I really wish he didn't baby the reader along the entire way. I understand that the book was written for all audiences that want to begin investing but as a 23 year old, I felt like I could have found the book in the children's section of the library.

Regardless, still well said and the author gives you all of the tools you need to execute everything he says in...more
5/5 for the quality of the content, 1/5 for value for money, as I could reduce the salient points to a few paragraphs... but I won't, because that's probably plagiarism.

That said, this book could prove to be excellent value if you then go on to make the kinds of returns suggested by Joel Greenblatt and the application of his 'magic formula' to past market data, which is possible. The formula is founded on the solid principles adopted by such eminent investors as Warren Buffet - namely, buying in...more
Steve Bradshaw
Wish I hadn't wasted any money on this one. Although I am a big proponent of value investing and wanted to give Greenblatt a chance, this book is far too simple to be useful to anyone with a more than a passing interest in the stock market. Return on Capital and Earnings Yield are not terrible filters to start off with, but I do believe there is more to successful value investing than applying a simple formula.

Greenblatt is spot on when he says most people end up losing money because of impatie...more
Eric Opheim
As a person in the industry I enjoyed the book. It presents a very basic concept to achieve success in investing. I think, more importantly, it stresses the need for a long-term perspective of disciplined investing. Interestingly, though the author argues against professional management in the book, he admits his own use of professional management in the afterword citing the ease of having someone else do the work and reduce emotional reactions.
A very good explanation of a relatively simple concept. While there are many ideas about how to beat the market out there, I'm willing to believe this is a good contender. It's a value investing approach designed for those who want to get good returns over a really long time, 3-5 years minimum. There's no quick turnaround here, or aiming for the fences in terms of returns. That's probably why it ought to work decently well.

While the author does a fairly good job of explaining his technique in ba...more
Matt Ryall
Joel has a very interesting way of making his point through long and descriptive parables. I didn't find that method of exposition very helpful, although perhaps others less familiar with business and the stock market would.

The central idea of this book -- using return-on-assets and earnings-yield is a good way to find above-average companies for below-average prices -- could be covered in a much shorter book. Or you could spend 100 pages writing about why these exact measurements match well wit...more
Wei Han
This review has been hidden because it contains spoilers. To view it, click here.
Marcia D Basine

Well written, clear and understandable. I am already very thankful for the helpful and concise advice. I am willing to belt that it works, too.

It is a very simple book on stock investing. I read it in an afternoon and learned some things.
Brian Zheng
A very easy reading, specifically targeting people without any finance knowledge. Basically the author introduced his "magic formula": rank all the stocks according to simple algebraic sum of Return on Capital ranking and Earnings yield ranking of the stock. He construct the portfolio with the first 30 or so stocks based on the ranking and update the portfolio with the new set of top 30 ranked stocks every year. His definition of Return on Capital = EBIT/(Net Working Capital + Net Fixed Assets),...more
Estevo Raposo
Esto va de bolsa.

Es un libro que se lee rápido y que explica una sencilla fórmula para seleccionar valores bursátiles. Invertir en las acciones que nos indique la fórmula nos proporcionará una rentabilidad superior a la del mercado. Hay que mantener en cartera los títulos seleccionados durante un año, y persistir en aplicar la receta "mágica" año tras año aunque puntualmente se obtengan malos resultados.

El sentido del humos destilado por el autor hace que la lectura sea un auténtico paseo, no re...more
Warren Ritchie
This is by far one of the best books on value investing I've ever read.
Vikas Kukreja
The book is on the importance of ROE & valuations while making investment decisions. Though written casually and with lot of witty humour, the message is loud and clear. It emphasises without using jargons, the importance of screeners and how to exploit them to shortlist investments. Also, it provides detailed & convincing evidence backed by data that "Magic Formula" provided in the book works for long term and beats market hands down. All said, its a tad basic but helps ppl who are abou...more
Great book a must read for every investor.
Kent Say
Practical and well reasoned.
Nothing new. The writing is pandering and not useful to anyone with any sort of interest in the stock market.
Greenblatt has a very simplistic way of presenting his "magic formula" for beating the market. The book is short and to the point. The statistics in the book sound promising but as he states, the formula has to be followed precisely and you cannot jump ship early or it will not work. For those interested in making a few extra dollars than what the current market can return, I suggest this read. I am planning to try this investment strategy with one of my accounts to see how it fairs.
Feb 27, 2012 Sergey added it
I have read this book because of some references to it in back-testing resources.

I recommend to read this book to anyone who has not yet started to delve into the stock market. It provides very simple (I mean it) and comprehensible writing. It gets the idea of value investing through.

If you are a more seasoned investor reading the last chapter will get you the crux of the book. You won't miss anything by not reading the rest.
So simple. I believe.
Scottsdale Public Library
Great little book (literally) that helps the unitiated get initiated into the wide-world of investing. Written in plain English with the beginner in mind (the author wrote it for his 10 year-old son), this book will walk you through the basics of investing, including general principles, things to keep in mind, and what to look for in a company. Highly recommended!-Louis M.
This is Ben Graham revisited. It adds a couple of things and does it in simpler terms. Mr. Greenblat has a sense of humor; he claims it is written for junior high-high school age kids so that they can understand it. He does make a large pitch for having to believe in the system to stay with it during those times when it doesn't work.
An interesting read and great for someone who is just beginning to think about how to invest in stocks. It would be interesting to recreate the study that has presented in this book to see the results and perhaps what other information could be found. Overall, this is an extremely easy read.
Inderpal Singh
initially, i was really excited. and then suddenly the book finishes, leaving me with incomplete knowledge. the method described is incredibally simple, thereby creating doubts of it's competence in today's fierce market. a nice read, quick and short, simple to understand, but inadequate.
Robert J.
A terrific and very short vision of investing marred only by the author's juvenile sense of humor. But if you can't be funny in your own book, where the hell else can you? If it makes me money, he can make all the bad jokes he wants. A bit more detail on the details would be nice, too.
tnicholson Nicholson
Once a year I adjust my investments and I remember how much I actually like finance and investing. So this is one of the books that I recently read and actually liked. No new information but a good review of basic fundamentals.
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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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“Graham figured that always using the margin of safety principle when deciding whether to purchase shares of a business from a crazy partner like Mr. Market was the secret to making safe and reliable investment profits.” 0 likes
“Somehow, when ownership interests are divided into shares that bounce around with Mr. Market’s moods, individuals and professionals start to think about and measure risk in strange ways. When short-term thinking and overly complicated statistics get involved, owning many companies that you know very little about starts to sound safer than owning stakes in five to eight companies that have good businesses, predictable futures, and bargain prices.” 0 likes
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