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The Little Book That Beats the Market

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3.96  ·  Rating details ·  4,417 ratings  ·  270 reviews
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 "mag ...more
Hardcover, 155 pages
Published November 28th 2005 by John Wiley & Sons (first published December 31st 1999)
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Justin Availability of financial data differs in different countries. Accounting reporting standards also differ. This makes the data less reliable to build…moreAvailability of financial data differs in different countries. Accounting reporting standards also differ. This makes the data less reliable to build a strategy on. However accounting standards are becoming more global these days as companies move to international standards, so foreign company data is becoming more reliable.(less)

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Average rating 3.96  · 
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Marko
Aug 10, 2014 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.
ScienceOfSuccess
Oct 25, 2019 rated it really liked it
Shelves: waiting
Quite interesting, written as simple as possible, not sure how good the formula would be tho.
Jon
Apr 26, 2013 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 obligatory reading
...more
Matt
Jan 15, 2013 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
Saugat Banerjee
Jul 18, 2011 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
Merdan Tekayev
Feb 18, 2017 rated it really liked it
Great book about investing supported by facts(didn't check it myself though).It concentrates on the two main factors of businesses( earning yield and return on capital) which could be an accurate indicators of its success or failure. Author illustrates what could be the best number of stocks in ones portfolio, gives step-by-step guidance and so on! Overall "straight-to-the-point" kind of book!
Pulkit Goel
Jul 11, 2015 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, a
...more
Todd Wood
Jun 19, 2015 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
J. Sebastian
Jul 08, 2017 rated it liked it
Shelves: finance
This was a good book for me to read because it describes an important method for the valuation of companies and for making smart investments; this is usually a difficult subject that fills people with anxiety or puts them to sleep, but Greenblatt has written in a light and easy manner, with generous humour, and in such simple language that it removes anxiety, encourages the reader, and gets him excited to learn more, pick the right stocks, and give it a start. The book is easy to follow and unde ...more
Kenneth
Jun 23, 2018 rated it it was ok
Good but essentially a value investing white paper stretched to book-length.
Eileen reisin
Oct 03, 2018 rated it it was amazing
Fucking tiptop. A 12-year-old could get this read and understood over a Sunday afternoon. Would recommend.
Abhinav
Aug 24, 2019 rated it really liked it
Meant for people who really want to automate all of their investments. Some of these companies have an irreversible path to destruction that can destroy a portfolio, but some stocks in the formula can net 40 percent returns. The main goal is to diversify your portfolio so one company can't destroy it
Anuk Yingrotetarakul
This book provides a good overview of some core value investing principles. The magic formula, a simple tool for filtering stocks based on earnings yield and return on capital, is a good starting point for selecting stocks. However, for readers who crave a deeper understanding and richer perspective on value investing may be left disapppointed by the lack of depth.
Sandeep Kumar
Aug 10, 2017 rated it it was amazing
Shelves: finance
Love the way things are explained. Even if you are not looking to do any investment this book is fun to read.
Manas Saloi
Jul 08, 2018 rated it it was amazing
Really good investing framework for beginners but could have been a blog post.
Antonio
Aug 09, 2019 rated it it was amazing
Before and after reading this book, I read a lot of reviews, both praising and hating it, but all with the same point in common: simplicity.

Because say one thing about this book, say it is easy to comprehend. But therein lies its greatness. Detractors critizicing it seem to have missed the point or have read it with a different objective. It is not an insightful recipe for wannabe investing gurus, but rather an humorous, humble and simple approach to investing with common sense, both
...more
Santosh Patil
Mar 04, 2017 rated it it was amazing
If you are a beginner in the market and need something to start with which is effective as well as easy to understand, pick this book. Whole 'little' book revolves around 'Magic Formula' which tells people to invest in stocks with high earning yield and high return on capital.

Four stars for the book and one more for simplicity and humor with which it is presented.
Rae
Dec 01, 2017 rated it liked it
Shelves: nonfiction, 2017
Read this review and others on my blog: https://thriftybibliophile.com

Joel Greenblatt’s The Little Book That Beats the Market is an easy to read financial book that discusses his magical formula for stock market picks. The beauty of this book lies in its simplicity–it’s simple enough for a teenager to understand but useful enough for adults to reread again and again.

This book was recommended to me by a dear friend who’s a bit of a financial guru himself. It’s short but sweet. Greenblatt explains his magi
...more
Elroy Galbraith
Mar 22, 2016 rated it really liked it
As a beginner investor with no real experience, I was looking for a text that would provide me with a sound system for identifying a good stock purchase. I wasn't looking for "get-rich-quick" methods, but sound principles. With references to a "magic formula" it's very easy to feel unsure about Greenblatt's suggestions, especially because it's all in relation to a notoriously insecure arena: the stock market. But his logic seems sound and reliable and just make sense. In fact, while reading this ...more
NiveusT
Feb 09, 2016 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.
...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.
...more
Danm
Aug 05, 2014 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
Mimi
Jun 21, 2014 rated it liked it
Shelves: market-finance
9/12/2014: I didn't like the book as much as expected. The information provided wasn't anything new, nor did the author contribute any additional insightful perspective into the matter. The content could have been condensed into half a page or even less. This is not a novel so all the nonsensical descriptions of the Gum Shops could have been omitted as the analogies they provided didn't create a clearer understanding of this so called "formula". I would have preferred a less superficial approach ...more
Jaison Abraham
Apr 24, 2015 rated it really liked it
The author does a good job of taking some important economic concepts around competitive strategy and valuation in investing and making them easy to understand for those not well versed in the industry.

On the downside, I'm always skeptical of "magic" things in investing, and the author nearly guarantees alpha from his strategy. Though the strategy is fundamentally sound, this is dangerous and could drive some to blindly invest in the strategy.

Also, I think the book derive
...more
Paul
Feb 27, 2010 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
...more
Desiree Wills Velazco
Mar 07, 2015 rated it it was amazing
Being someone new to the financial world, this book was really helpful, informative and simple to understand. The author used easy to identify with examples. This is definitely one I want to refer to again.
Hellkitten
Dec 21, 2011 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.
Geoff
Sep 24, 2014 rated it liked it
buy good companies at bargain prices. duh
Mike
Jul 03, 2015 rated it really liked it
interesting book. its a simple explanation of value investing

deleted d
Feb 12, 2015 rated it liked it
use tax wisely. and also he has a formula for making money. Although the data looks inconclusive
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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.
“Choosing individual stocks without any idea of what you're looking for is like running through a dynamite factory with a burning match. You may live, but you're still an idiot.” 8 likes
“In short, 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.” 1 likes
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