- Hardcover: 208 pages
- Publisher: John Wiley & Sons Ltd; Updated ed. edition (August 18, 2010)
- Language: English
- ISBN-10: 0471733067
- ISBN-13: 978-0470624159
- ASIN: 0470624159
- Product Dimensions: 5.1 x 0.8 x 7.1 inches
- Shipping Weight: 227 g
- Average Customer Review: Be the first to review this item
- Amazon Best Sellers Rank: #1.605 in Books (See Top 100 in Books)
The Little Book That Still Beats the Market Hardcover – 18 August 2010
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From the Inside Flap
In 2005, Joel Greenblatt published a book that is already considered one of the classics of finance literature. In The Little Book That Beats the Market--a New York Times bestseller with 300,000 copies in print--Greenblatt explained how investors can outperform the popular market averages by simply and systematically applying a formula that seeks out good businesses when they are available at bargain prices. Now, with a new Introduction and Afterword for 2010, The Little Book That Still Beats the Market updates and expands upon the research findings from the original book. Included are data and analysis covering the recent financial crisis and model performance through the end of 2009.
In a straightforward and accessible style, the book explores the basic principles of successful stock market investing and then reveals the author's time-tested formula that makes buying above-average companies at below-average prices automatic. Though the formula has been extensively tested and is a breakthrough in the academic and professional world, Greenblatt explains it using sixth-grade math, plain language, and humor. He shows how to use his method to beat both the market and professional managers by a wide margin. You'll also learn why success eludes almost all individual and professional investors, and why the formula will continue to work even after everyone "knows" it.
While the formula may be simple, understanding why the formula works is the true key to success for investors. The book will take readers on a step-by-step journey so that they can learn the principles of value investing in a way that will provide them with a long-term strategy that they can understand and stick with through both good and bad periods for the stock market.
As the Wall Street Journal stated about the original edition, "Mr. Greenblatt says his goal was to provide advice that, while sophisticated, could be understood and followed by his five children, ages six to fifteen. They are in luck. His Little Book is one of the best, clearest guides to value investing out there."
From the Back Cover
Praise for THE LITTLE BOOK THAT BEATS THE MARKET
"Simply perfect. One of the most important investment books of the last 50 years!"
"A landmark book--a stunningly simple and low-risk way to significantly beat the market!"
--Michael Steinhardt, the Dean of Wall Street hedge fund managers
"This book is the finest simple distillation of modern value investing principles ever written. It should be mandatory reading for all serious investorsfrom the fourth grade on up."
--Professor Bruce Greenwald, Director of the Heilbrunn Center for Graham and Dodd Investing, Columbia Business School
"The book unquestionably makes good on its promises."
"Greenblatt delivers admirably . . . it contains one of the clearest, most entertaining explanations you'll ever see of the ideas underlying value investing."
--International Herald Tribune
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Most helpful customer reviews on Amazon.com
As I write this review, there are already 266 reviews of Joel Greenblatt's "The Little Book..." on Amazon. Why bother? One reason is that since first published in 2005, Greenblatt's investment accomplishments have become even more widely appreciated, giving added credibility to his advice. For example, he is featured as one of the "Hedge Fund Market Wizards" in Jack Schwager's recently published book of the same name Hedge Fund Market Wizards (please see my review of that book). Additionally, at present returns on traditional savings accounts are very close to zero and the US Treasury Note yields a mere 1.7 percent. Any of us who envisioned living in retirement from the interest on our savings were sadly mistaken. Greenblatt's investment system as presented in this book may be one of very few, or the only, approach that is likely to generate low-risk investment results that might really help savers and seniors meet their previous expectations.
The writing style is clear and simple. The author explains investment terms like return on capital and earnings yield in a conversational tone without condescention. He uses a couple of example fantasy businesses in an entertaining manner to illustrate the concepts. As the book progresses, he uses these basic examples as the foundation for more advanced concepts (not complex, but necessary). Necessary for what? For the reader to believe in the investment system that Greenblatt presents in the book to a degree that the reader will stick to the system without variance for a period of years in order to enjoy the benefits that accrue to long-term investors (think Buffett, Rogers, Graham, Bogle, Templeton).
I urge you to read the book review by "Value Investor" on these pages. He lays out the reasons why this system is very likely to perform well over a period of years. In a nutshell, it is likely to work because the author has done extensive testing of the system, uses it as the basis for his own hedge fund's portfolio management, and because it takes considerable patience and fortitude to follow (traits not found in excess on Wall Street).
One aspect that I really appreciate is the author's willingness to concede that many investors want a higher degree of involvement in selecting the stocks for their portfolios. They may be uncomfortable following a more mechanical system. He addresses this issue by giving clear guidance on how one may still follow the system even with the addition of an element of personal discretion, depending on the investor's level of expertise, time commitment and available capital.
Finally, the author maintains a free website (now for 7+ years) to aid investors with portfolio selection. This is a high value service in my opinion.
I highly recommend this book to any saver or investor, or speculator or trader for that matter, who wishes to increase their returns on investment and improve their overall portfolio performance. Five stars.
Would you laugh? Probably. You might even say "It can't possibly be that easy!" And the thing is, normally, you'd be right. There are so many books and services selling the snake oil of easy stock market wealth that you'd be wise to ignore them.
And that should be that. Except ... except that unlike the Wade Cooks of the world, the author happens to be an investor whose fund has grown at a compound rate of 40% over the last two decades. That's the equivalent of turning $1 into $800. Not even Warren Buffett has achieved that over any 20-year period (though Berkshire Hathaway has averaged a still-bodacious 22% over its history). Not only that, but this book is based on the same core values that the author has used to seek out stocks during his investing career.
So Joel Greenblatt's new book, The Little Book That Beats the Market, is better than your run-of-the-mill "get rich quick" entry. Were that the extent of its utility, I wouldn't be wasting your time. Instead, this is a book that should be read by anyone serious about investing. And the shocking thing is, unlike the hard-to-grasp intricacies of the Benjamin Graham value-investing classics, this is a quick, entertaining read.
Greenblatt's goal was to write a book that would describe to his young children what he does for a living. Basically, his investing methods are based upon two elements: pre-tax earnings yield (the percent of the stock's price that comprises current earnings) and return on capital. Shove every company above a certain size into the transmogrifier, and it generates a list ranking companies on the combination of those attributes. Investing in the top 30 companies on these lists each year has generated an average annual return of 30.8% over the last 17 years.
Of course, here is where you say exactly what I said when I first read the book. "But this is data-mining, right?" It's pretty easy to go back in time and try a bunch of various elements until you show one that offers awesome returns, including things like investing each year on April 22 in the top 77 stocks that don't have 'e' in their names. And you'd be right, except for two things. First, and foremost, these are the only two elements that Greenblatt tried. Second, the two data points used are imminently defensible as reasonable measurements for potential investments: How much do they make? And how much do they cost?
As Greenblatt notes in the book, one of the great things about the formula is that occasionally it doesn't work.
Oh, you want me to explain why that could possibly be good? Well, one of the most hallowed truths in investing is that something that works all of the time will immediately be rendered neutral by the market. A company cannot be priced at $1 per share while earning $17. Not for long. For those who might think that Greenblatt immediately renders his magic forumla useless by writing about it, take heart. In an age of attention spans measured in seconds rather than years, the formula's occasional failure means that many investors won't stick with it.