Name: The Little Book That Beats the Market
ISBN: 9780471733065

The Little Book That Beats the Market

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% for 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.

What Hacker News says

TheAlchemistJun 2023

You have a point, but by that reasoning it's pretty much impossible to prove the contrary. Long term investing in good companies, that are 'cheap' works. Not easy to prove though.

2 of my favorites on this topic:

Warren Buffet's "The superinvestors of Graham-and-Doddsville" - https://www8.gsb.columbia.edu/sites/valueinvesting/files/fil...

Joel Greenblatt "Little book that beats the Market" - https://www.magicformulainvesting.com/Home/AboutTheBook

thread

raguileraDec 2022

Interest rates are decent for cash right now (able to get 4.5% in the states as of Dec).

If you want a relatively hands off approach what everyone has already suggested is your best bet, index funds.

If you like individual stock picking then I recommend in terms of personalities Lyn Alden (twitter, and personal website), Unrivaled Investing (youtube, also has a paid membership), also interviews/Berkshire investor days with Buffet and Munger on youtube. In terms of the classic resources you have "The Intelligent Investor", "One Up on Wall Street", "Security Analysis", "The Little Book that Beats the Market", etc. Please be mindful that this option is a long journey with lots of reading, making mistakes that results in "paying tuition to the market", and not for those who can't control their emotions when it comes to the stock market. However, if like me you find this fun for whatever insane reason then that's where I'd recommend starting FWIW.

thread

blippageJan 2022

"The Little Book That Beats The Market", by Joel Greenblatt.

Why? Because hopefully it will get you interested in saving and investing.

thread

ldboothFeb 2021

This is a subjective question, but I'll summarize what I know.

-no one can give you this advice, you have to listen and learn to discern the best decisions for yourself.

-investing is a full time job, 99% of investors will be better off not investing the time in valuing and picking stocks.

-less is more - the serious equity investors have 10-20 stock picks, and confidence in their analysis

-if it's in the media, it's being hyped, and often you're buying the uptick

-investing in yourself (certifications, your business) will have the greatest return on investment.

-don't time the market, compounding interest requires your stay in the market (I can't stop this myself, and missed the 2020 asset price bull/inflation? run)

-the easiest strategy and what I plan to move to myself is monthly dollar cost averaging of an index stock purchase, buy & hold (idea being - your time is the most valueable commodity you have)

-if you want some excitement on top of that boring strategy have 5-10% of your investments in stock picks you think are in the money long term.

-learn about the concept of "Mr. Market": the price you see is the perceived value, or the actual value +/- perceived future cash flows.

-buy a stock because you like the business and its prospects, not because you think you'll be able to sell it for more later and you'll pick better stocks. Businesses produce cash flows, and that's what you want to buy into.

-have a margin of safety.

-think for yourself, write down your stock thesis, and revisit it later - if you don't - you'll never improve without the feedback

-currency speculation is just that: speculation. Bitcoin & anything without an actual cash flow is controversial right now but it's a mix of a virtual land grab and currency speculation.

a couple resources: The Intelligent Investor -Ben Graham (Buffett's Bible)

The Little Book that beats the Market -Greenblatt

intangibles regarding wealth: The Algebra of Wealth -Galloway https://www.youtube.com/watch?v=uNrjrDV9-YQ

Oh and investopedia has a neat stock simulator if you want to speculate

thread

sonimanNov 2019

I agree that learning how to read a financial statement is valuable, but you might want to look further than just "is this company making an acccounting profit." Uber's core business is highly profitable, that's why it's valued at $45 billion.

When you're reading a financial statement, look at each business unit's profitability separately, especially if those units are in fact separate businesses. Ubereats is not Uber's bread and butter. Look at cash flow and compare it with investment in growth via R&D and marketing. Look at how much cash the business requires in the form of working capital and on-going maintenance capex vs growth capex.

I would suggest googling Warren Buffett's primer on look through earnings. Greenblatt's "Little Book that Beats the Market" can also be read quickly.

thread

aaavl2821Jun 2018

Your idea of "earnings per dollar of market cap" is essentially the same as "earnings yield", or inverse of the P/E ratio, which is indeed much more meaningful than EPS

Earnings yield is a measure of how expensive a unit of earnings is, and can be compared across companies as a heuristic for "cheapness".

Another metric is free cash flow yield: free cash flow / market cap. Using operating free cash or operating profit like EBITDA gets you the cost of operating cash flow excluding non-operating stuff like interest, taxes and non cash depreciation expense

You can also use enterprise value as the denominator (market cap plus debt less cash) to capture the full picture of a company's capitalization

By buying groups of stocks based on these metrics, rather than just index funds, you can blend aspects of passive and active investing. This is called "smart beta" and is an interesting emerging strategy

A good primer is "the little book that beats the market". The strategy is to buy "cheap and good" stocks and just hold them. Cheap is defined by high EBIT / EV (lots of earning power per unit of capital) and good by high ROIC (the business can turn money into more money). So you filter by these two metrics, then buy the top x companies, buying one stock / month over a year to mitigate timing risk, and hold

thread