The Little Book That Beats the Market
byJoel Greenblatt
The Little Book that Beats the market is a simple and short look into value investing and investing more passively with a focus on indexes and cheap (undervalued) stocks. The book also talks about a magic formula for investing or what to look for in good companies, which highlighted high earning yield (Low Price to Earnings P.E) and high return on capital invested (Net Profit divided by total invested capital). Greenbalt, back checks his formula on companies performance from the mid-1980s to 2004. I'm not sure how his formula stands up to the post-2008 macroeconomic changes, but he has some good economic and financial principles that can apply to novice investors.
Motivations to Read
I graduated from high school around the financial collapse. My senior year was the first time I took a finance class and I became very interested in the field. Having the housing bubble burst around that time, I wanted to ensure I had investment fundamentals to be able to navigate through the storm. I knew I needed to focus on principles so this book caught my attention, it also seemed like a short read; this was before I built up my reading stamina I have today.
3 Reasons to Read
- Learn basic concepts of investing
- You are interested in or want to learn more about value investing
- Joel Greenblat's "magic formula" to making consistent investment returns
