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 The Little Book That Beats the Market (Little Books. Big Profits)
The Little Book That Beats the Market (Little Books. Big Profits)
Larger image 		List Price: $19.95
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Manufacturer: Wiley
Average Customer Rating: Average rating of 4.0/5Average rating of 4.0/5Average rating of 4.0/5Average rating of 4.0/5Average rating of 4.0/5

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Binding: Hardcover
Dewey Decimal Number: 332.63228
EAN: 9780471733065
ISBN: 0471733067
Label: Wiley
Manufacturer: Wiley
Number Of Items: 1
Number Of Pages: 176
Publication Date: 2005-11-19
Publisher: Wiley
Studio: Wiley
Accessories
The Little Book of Value Investing (Little Books. Big Profits)
The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits)
The Little Book That Makes You Rich: A Proven Market-Beating Formula for Growth Investing (Little Books. Big Profits)
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Editorial Reviews:
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.
Spotlight customer reviews:
Customer Rating: Average rating of 3/5Average rating of 3/5Average rating of 3/5Average rating of 3/5Average rating of 3/5
Summary: Read it as I would read The Bible
Comment: This is one of the many investment / trading books that I've read, but unfortunately NOT kept on my bookshelf. Don't get me wrong -- it's a very readable book that does a good job of teaching some fundamental (no pun intended) concepts.

But the "magic formula" thing worries me. I've done my own research on "magic formulas" that screen stocks based on fundamental measures like P/E, PEG, and Dividend Yield and found them to be not so magic after all. See Stock Fundamentals On Trial: Do Dividend Yield, P/E and PEG Really Work?

They seem to work well in a bull market (the onset of which you can determine from a price chart) and then often break down spectacularly when the tide turns (as recent events have shown).

In fact, Joel says on page 6 of the book that:

"If everyone knows the magic formula and everyone can't be rich, pretty soon the formula will stop working."

(and then he goes on to present a magic formula)

The above quote states a good case for "trend following" or "market timing" if ever there was one. Even if the formula does help you to identify good stocks to buy (and it might); do make sure you get off when the music stops.

The author's use of the word "belief" also worries me a little: like, if you believe in the formula then it will work. I'm sure that if enough people believe in it, then it will work, for a while. And maybe if I start believing in fairies, Tinkerbell won't die.

So read this book as I would read The Bible: enjoy it, maybe learn some lessons from it, but don't take it literally.

Tony Loton, author --
Stock Fundamentals On Trial: Do Dividend Yield, P/E and PEG Really Work?
Customer Rating: Average rating of 4/5Average rating of 4/5Average rating of 4/5Average rating of 4/5Average rating of 4/5
Summary: Great book, well explained, a little repetitive
Comment: This book can be read by teenagers, as well as people with little education. It explains everything with a simple example, and it repeats the main message across the sections to help you memorize. Because of these same reasons, it reads very slowly and may make you tired of its pace.
However, it provides a summary section in the end of every chapter that allows you to quickly get a gist. Later chapters actually have more detailed contents.
I recommend it if you know nothing about investing, as well as to give to your kids.
Customer Rating: Average rating of 5/5Average rating of 5/5Average rating of 5/5Average rating of 5/5Average rating of 5/5
Summary: Great Book to start learning about investing
Comment: First book I ever read about the market. Very simple and to the point. Great place to start your reading about investing.
Customer Rating: Average rating of 5/5Average rating of 5/5Average rating of 5/5Average rating of 5/5Average rating of 5/5
Summary: Great Reading for People Contemplating Value Investing
Comment: Great info with a humorous touch and a link to data to use in applying what you learn. I am not going to apply it until a more normal market comes along though.
Customer Rating: Average rating of 3/5Average rating of 3/5Average rating of 3/5Average rating of 3/5Average rating of 3/5
Summary: Simplistic, Good Explanation of Basic Concepts for Novice Investors
Comment: This brief text is a good read for the novice investor who wants to learn more about equity valuation. Basically, it distills the drivers of stock values into two components: return on assets and earnings yield. Buy stocks with strong numbers in both of these categories and, over time, you will outperform the market. Only problem with this approach is that stock values are based on expectations of FUTURE performance. Stocks often have high earnings yields today because professional stock pickers expect their finances to degrade in the future. Forecasting future performance is what is most important. The author fails to stress this concept.

For the novice investor, the author is able to explain some of the more fundamental concepts of equity valuation in a straightforward manner. Yet, this text would be only one of a several books someone should read before trading individual stocks instead of purchasing mutual funds.
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