The Little Book That Beats the Market (Little Books. Big Profits)

Product Information

As for the Barron’s article, Greenblatt had actually responded to that in an interview. He claims that the database used by them (not sure which, Bloomberg’s?), does not exclude one time gains. He removed such gains from his analysis.

i am a pure quant/intraday (hedge4you.com), who started to invest on fundamental analysis for long term.investments.. Why was Greenblatt's system successful for so long, and why has it now failed spectacularly for ten years running? The [magic] formula is simple, it makes perfect sense, and with it, you can beat the market, the professionals, and the academics by a wide margin. And you can do it with low risk. The formula has worked for many years and will continue to work even after everyone knows it.” Joel Greenblatt

Customer reviews

For his quality factor, Greenblatt chose return on capital, defined as EBIT divided by the sum of working capital and fixed assets. For his value factor, Greenblatt chose EBIT divided by enterprise value. Earning yield how much money you can expect to make per year for each rupee you invest in the share. And the formulas made a lot of financial sense too. They were common-sense formulas that were transparent and fair. There seemed to be nothing at all up Greenblatt's sleeve - no complicated market-timing mechanisms, no opaque and complex accounting formulas. Just one numerator and two denominators, both easy to grasp and standard in the financial literature.

The simplicity is the book’s beauty. I am a wall street analyst and you’d be amazed at how many active (fundamental research based) portfolio managers do not have a structured process for sourcing ideas. They would do well to follow Greenblatt’s advice. If anyone—I don’t care if he’s the pope or she’s the queen—tells you something like this, run! There’s no such thing as a magic formula because there’s no such thing as magic. Greenblatt’s entire book is a fairy tale. Hocus Pocus

I used to be an editor, and I doubt that the redundant phrase “future prospects” would have evaded my red pencil.) Indeed. Greenblatt doesn’t consider growth at all, and the market has been especially good at predicting revenue growth lately: the correlation between price momentum and future revenue growth is astonishing. Many of the companies that pass the Greenblatt screen have low future sales growth. For example, if you had chosen the top 100 companies in September 2018, the median TTM sales growth of the surviving companies eighteen months later would have been –4.09%. But if you had chosen all 3,500 companies, regardless of their EBIT, their median TTM sales growth eighteen months later would have been 2.42%. A 2017 study from the markets in Sweden found application of the Greenblatt formula resulted in long-term outperformance of market averages in the periods 2005 to 2015, and 2007 to 2017. The authors also found the "magic formula" was also associated with short-term underperformance in some periods, and significantly increased volatility. [5] It’s sometimes a bit confusing that solid investing can be so simple. But this book, and all the statistics and historical data within it, show us that simple really can lead to great results. And results are all that matters in investing — not the level of difficulty or complexity of one's approach. A number of studies have found merit in Greenblatt's "magic investing formula" in various markets around the world. In 2005, Joel Greenblatt published a book called The Little Book that Beats the Market. Its explicit aim was to “explain how to make money in terms that even my kids could understand (the ones already in sixth and eighth grades, anyway).” Although it used language and examples that were aimed at children, it was widely read by folks of all ages. The first five chapters, before Greenblatt gets into his investment strategy, comprise an excellent introduction to value investing. Clearly written, easy to understand, it’s principled and right.

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. As for its ten-year failure, one could come up with any number of explanations. The relative failure of value investing, broadly speaking, ever since the initial recovery from the Great Financial Crisis has been the subject of a lot of articles and editorials lately (including one I wrote), and any of those could apply to the magic formula, which is a particularly austere distillation of the principles of value investing. Rank the companies according to the above two factors and combine them to find the best companies for investment. Negativt: en tredjedel uti boka var jeg lut lei av å høre de tre ordene "the magic formula". Halvveis uti boka var de tre ordene mitt personlige Vietnam, og mot slutten hadde jeg mer lyst til å hoppe utfor verandaen enn å høre de tre ordene én gang til. Jeg har ikke holdt tellinga, men min indre Lilli Bendriss sier meg at de tre ordene er nevnt ca. 4568 ganger ila. boka.Last quote: "The [magic] formula is simple, it makes perfect sense, and with it, you can beat the market, the professionals, and the academics by a wide margin. And you can do it with low risk. The formula has worked for many years and will continue to work even after everyone knows it." If anyone - I don't care if he's the pope or she's the queen - tells you something like this, run! There's no such thing as a magic formula because there's no such thing as magic. Greenblatt's entire book is a fairy tale. Forfatter kunne også spart seg for tiraden mot kvaliteten på det amerikanske skolesystemet og hva som kan gjøres for å bedre det. Det kommer litt utav det blå, og burde vært hagesakset ut. There's a blogger in Fort Worth who has chronicled his adventures using the magic formula. His latest post reads, "My MF Portfolio has lost thousands since early 2017, while the S&P 500 Index has risen nearly 35%." I would like to extend to him my sympathies. And the formulas made a lot of financial sense too. They were common-sense formulas that were transparent and fair. There seemed to be nothing at all up Greenblatt’s sleeve—no complicated market-timing mechanisms, no opaque and complex accounting formulas. Just one numerator and two denominators, both easy to grasp and standard in the financial literature.