The Little Book That Beats The Market
by Joel Greenblatt
August 29 2007
3 out 5
After finish the book, my take on it is that it might as well be called “intelligent investor: the dummy version.” Nevertheless, if you know nothing about investing and want to plant the right footing, this is an excellent start. For any investor with a little background, they might as well read intelligent investor, then again, I wouldn’t label them as “investor” if they haven’t read the “bible” yet.
Okay let’s go over some of topics covered in this little book that claim to beat the market. Oh, Greenblatt, admit, although there are no tooth fairies in the Wall Street, but he has a magic formula that is. Okay, so he didn’t say his magic formula is the tooth fairy, but he might as well. To his defense, he did say investing is like reading a life-long book, which I find much more merit than his “acclaimed” magic formula.”
Ok here are some items he covered, which you can also find in typical value investing books like in Graham’s or Buffet’s.
Mr. Market
Margin of Safety
Great Company at bargain price, value and price
Investing attitude
Do it yourself, you can beat any expert
Be patient, Long-Term investing, min. 1 year. Normally 3-5 yrs.
Buy index, if you not a dedicated investor.
And here are some other topics.
One Magic Formula that can make you rich, which is a screener on his website, focus on two things, Return on capital and Earning Yield.
US treasure yield is your no-risk benchmark, or use 6%, investment yield less than this is not worth your money.
Investments, about 90% ~ 95% stocks transaction are unnecessary and do not really stimulate actual economics, so we need to help with actual growth when we rich. Good point.
A good tax advice: Sell (loss) stock a few days before the year mark to reduce your investment income and keep the stock with gains at least few days over a year mark so it will fall under long-term capital investment which will enjoy 15% tax benefit.
They are values in small cap stocks
Now I need to say a few good things about the book
While it is aiming at beginners, he does a good job making the appropriated readers understand. He used good analogies and provide good summaries at end of each chapter.