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The Little Book That Beats the Market (Little Books. Big Profits)
written by Joel Greenblatt
Studio : Wiley
by Wiley
Publisher : Wiley
Released : 2005-11-19
Availability : Usually ships in 1-2 business days
Number of Items : 1
EAN : 9780471733065
Avg. Customer Rating: (based on 200 reviews)
List Price : $19.95
Our Price : $8.43
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Product Description |
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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 0.000000or over 20 years), does more than simply set out the basic principles for successful stock market investing. He provides a "magic formula" that is easy to use and makes buying good companies at bargain prices automatic. Though the formula has been extensively tested and is a breakthrough in the academic and professional world, Greenblatt explains it using 6th grade math, plain language and humor. You'll learn how to use this low risk method to beat the market and professional managers by a wide margin. You'll also learn how to view the stock market, why success eludes almost all individual and professional investors, and why the formula will continue to work even after everyone "knows" it. |
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Simplistic, Good Explanation of Basic Concepts for Novice Investors |
This brief text is a good read for the novice investor who wants to learn more about equity valuation. Basically, it distills the drivers of stock values into two components: return on assets and earnings yield. Buy stocks with strong numbers in both of these categories and, over time, you will outperform the market. Only problem with this approach is that stock values are based on expectations of FUTURE performance. Stocks often have high earnings yields today because professional stock pickers expect their finances to degrade in the future. Forecasting future performance is what is most important. The author fails to stress this concept.
For the novice investor, the author is able to explain some of the more fundamental concepts of equity valuation in a straightforward manner. Yet, this text would be only one of a several books someone should read before trading individual stocks instead of purchasing mutual funds. |
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Reviewers need a lesson in reading comprehension |
I read every chapter of this book while at Borders except the last one, so I cannot vouch for the effectiveness of the "Magic Formula" website that seems to generate so much controversy. I can, however, clarify a glaring misconception in what Goldblatt wrote in his book.
Contrary to what many of the reviewers wrote (especially the negative reviewers), Goldblatt was not insisting that people focus only on Return on Assets and P/E ratio. Goldblatt was also not insisting on a definition of "capital" (within his concept of "return on capital")that leads to an over-emphasis on services over manufacturing. He illustrated perfectly his two pieces of investment data in the following ways:
First, Return on Capital can be best interpreted as a return on invested capital. If it costs $1 million to build a retail store and that store, within a year, generates $2 million, then the ROC is 100%.
Second, his other measure is really a profit-yield per share. You get this measure by taking the amount of profit generated by a firm, dividing it by the number of shares outstanding, and then dividing that by the share price times 100. So, if a company has a $1 million profit and it's selling a million shares for $10 a share, then the profit-yield per share is 10%.
These two concepts seem to form the core of value investing in that they discipline a person to invest in the market as if they were buying a business or a partnership share in the business. The relevant question in any such investment is always "how much will my partnership share make?"
All other factors are just risk management.
The trick is finding data to generate these statistics. I don't know how well Goldblatt's website does that. |
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Excellent!! |
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Very insightful, and excellently written. Despite the name this is not another shallow book, full of cliches and nothings. In a really entertaining fashion Greenblatt explains in very simple easy to understand illustrations, what stocks are, how they are traded and the basic principles of the stock market and market fluctuations. He then builds on these principles to teach the fundementals of wealth building that most successful investors utilize. Alot of basic principles that somehow a lot of smart investors forget. Great reading for the experienced, and novice alike! This book should really be required reading in high school and/or college. |
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Understanding the stock market for idiots |
As someone who is not in the real savy in business and has little to no financial advisory background- this book is right up your alley if you just don't understand the complexity of the stock market but are still interested in investing.
My brother is a financial analyst for a fortune 500 company and could not get me to understand the stock market and mutual funds etc- for the life of him! He read this book and then forced me to read it as well. I am glad I did because it was easy to follow and made me excited about investing my money into avenues that will provide much higher yields that 5 to 8% a year.
The author wrote this book for his middle school children to help them understand investing in the adult world so to speak- Well he did a phenomenal job and published it for the rest of us-
A good pick for beginner investors or people who would like to invest their money in stocks and funds with little background in the field. This would also be a good "starter" book for someone who wants to get into the stock market. |
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A Great Starting Point for Value Investing |
The Little Book That Beats The Market is a great starting point for those interested in value investing. It's especially relevant for beginners. Greenblatt clearly and simply explains what makes a stock a good value investment, and the core theory of "buying great companies at low prices" is a simple definition of value investment. For beginners, following the strategy outlined in the book should offer excellent investment returns.
For more experienced investors, the "Magic Formula" makes a great initial screen. Using the "Magic Formula" results, you have a list of promising investments to research. In fact, there are websites like [...] that attempt to do just that.
A short, fun, and profitable read for beginners or experienced investors, I highly recommend this book. |
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