The Little Book That Beats the Market
by Joel Greenblatt
A hedge-fund manager explains value investing to his children: buy good companies (high return on capital) at bargain prices (high earnings yield), via a 'magic formula' ranking. It is clear, short and honest that the formula underperforms for years at a time, which is why most people cannot stick with it.
Read it if…
you want value investing explained simply and a systematic approach to try.
Skip it if…
you want index funds and nothing more; this is active.
Three things you will actually use
- Good businesses at cheap prices, systematically.
- Any strategy that always works would stop working.
- Patience through underperformance is the real edge.
Do this first
Read the chapter on why the formula is hard to follow before deciding to follow it.
Our verdict
Clear, short, honest.
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