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The Little Book That Beats the Market (精装)
by Joel Greenblatt
| Category:
Investing, Investment guide |
| Market price: ¥ 218.00
MSL price:
¥ 178.00
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| Stock:
In Stock |
MSL rating:
 Good for Gifts |
| MSL Pointer Review:
A Wharton-trained head of a successful investment firm has a foolproof method for evaluating stocks: Companies are worth what they return to investors on a consistent basis. |
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AllReviews |
  1 2 Total 2 pages 14 items |
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Laljee (MSL quote), USA
<2007-01-16 00:00>
The Little Book that Beats the Market by Joel Greenblatt is a humorous book for individual investors, that talks about a simple, value-based and scientific way to buy and sell stocks. The author discusses a magic formula that he claims has enabled him to average 40% returns over 20 years. This formula ranks stocks by combining the best result of two numbers: Return on Capital and Earnings Yield (inverse of the more popular P/E ratio).
Furthermore, the author provides a link to his site, where buyers of the book can easily scout for stocks using the magic formula and he suggests that investors can make money using his formula, as long as they follow a couple of simple rules like holding on to a stock for exactly 1 year (no more and no less) and staying away from foreign stocks.
This book is a casual read - in fact, the author wrote it so one can read it in bed and/or to their kids. After every chapter (there are 13 of them), he bullet-points a summary of what was discussed. The material and depth in this book is just as simple as the style of writing. Often times, it over simplifies things and tries to convince the reader that this method of investing works, but over a period of time.
Personally, I liked the book. I tend to stay away from books and prefer magazines and publications for their current information, but I could not stop myself from reading this book quickly and eagerly. It is exciting, a little insightful and educational to say the least and the author managed to drive his point home. Many readers will find it ordinary, and read it with skepticism (as they should), but in the end, it gives you a valuable tool to mine for stocks. At the end of the day, thats what I like!
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A reader (MSL quote), USA
<2007-01-16 00:00>
I read the book back in January and have been following along with the formula that was described. I agree with many of the reviewers in that even though the book says you don't have to do any additional research, just use the formula, I would use the book with caution. Historical Success or Depressed Stocks don't necessarily equate to future gains. In tracking my stocks based on the formula I have lost $6,200 (including $300 in commissions) on $29,000 put in. Even though it's been a tough 6 months, this is a 22% loss when the Dow is up slightly, the S&P 500 is flat, and the NASDAQ is down about 8%. Luckily I bailed out of some of them early before they really plunged (take a peek at the PLAY, FORD, or SGTL charts to get a good idea... all on the list in the early part of the year). Just doing a little more investigation into any of them would yield that they did well in the past for a reason, they are also depressed for a reason and that doesn't necessarily equate to making a reasonable purchase.
Use caution and do some additional research regardless of what the book says (Cheap doesn't necessarily equate to Value). As someone just looking for a long term steady investment strategy, it's still hard to beat an Old Fashioned Index Fund.
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A reader (MSL quote), USA
<2007-01-16 00:00>
In this book, Greenblatt, introduces you to a relatively simple formula for looking/sorting through thousands of available stocks. He ranks his picks based on earnings yield (basically inverse of P/E) and Return on Assets. So you are taking companies that, based on the most recent financial reports, are making a lot of money compared to assets and, for whatever reason, are cheap compared to those earnings (Thanks to "Mr. Market").
The book is written for someone who has very little knowledge of the stock market, which was Greenblatt's primary goal (he had some criticism that his previous book You Can Be a Stock Market Genius was too difficult). However, if you are a more saavy investor you will still find the book intriguing. There are more detailed explanations of his formula in the appendix section and also the FAQ section of the website (I highly recommend you read through this).
Greenblatt answers his critics who worry about the backtesting by stating that he did not search through many different formulas until he "found one that worked". In fact, this was the very first formula he tried. Why did he try it? Because this mirrors the approach he uses when he puts together his hedge funds (he has a 40% average return). Interestingly, there was an article in Barron's recently which stated that the formula held up when tested by an independent researcher using the same database.
The website is truly a gift. In addition to his simple ranking system, he applies some proprietary calculations (again see the FAQ section of the website). He also talks about concerns regarding the future of the website in the FAQ section. You can use a simple stock screener (there are many available online) to run your own screen using Greenblatt's basic principles (Again read the FAQ section the website - he suggests that you try this. This is also a key reason why he stresses the importance of UNDERSTANDING the formula in his book). I did this 3 months ago and the companies generated from this screen, as a whole, are beating the market. The bottom line is that I think there is too much focus on Greenblatt's website rather then on the book and the principles.
In the book (and in interviews about the book), Greenblatt states that if you take the time to do some additional research, you can improve the performance of the formula. However this is certainly not necessary. I have personally used some techniques to refine the list generated by his website (I try to wean out the companies that are mismanaging the revenue). Over the past 3 months, I've been able to return about 20%. Thank you Mr. Greenblatt.
Finally, Mr. Greenblatt finally had a chance to meet Buffett personally (along with some of Greenblatt's Columbia business students). Obviously, the book/formula was inspired by Buffett. When asked about the book, Buffett stated "Terrific book. Buying great businesses at cheap prices. Doesn't it seem so simple?" |
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A reader (MSL quote), USA
<2007-01-16 00:00>
There are some red flags in this book that make me suspicious of it. The first is the use of the name "Magic Formula". So, what grade level is this written for? There are no magic formulas or we would all be rich. I find it difficult to tell how this Magic Formula differs substantially from Dogs of the Dow or from using P/E ratios or from any of numerous other such formulae.
Second, the book makes a huge point of believing in the plan and remaining dedicated to it through thick and thin no matter what. You have to believe that you are going to win. You must remain committed even in the face of losses. Isn't that what compulsive gamblers do until they go broke? Faith in this formula will not necessarily make it work.
Third, proving that the Magic Formula works by applying it to historical databases is suspect. Such proofs have been used many times in the past for various schemes. They usually have severe flaws in them such as leaving out companies that did not survive to the present... companies that would have left you broke had you invested in them. You have to be very cautious with such proofs.
Fourth, you must use the book's web site in order to make use of this hazy "magic formula". Right now it is free. But years down the road, while you are still being commited to your investment scheme, is a fee going to suddenly appear?
(A negative review. MSL remarks.) |
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