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Joel Greenblatt

The Little Book That Beats the Market Audio CD – Unabridged, February 1, 2006

by Joel Greenblatt (Author), Adam Grupper (Reader)

651 ratings

Part of: Little Books. Big Profits (26 books)

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Can you spare three hours to learn how to beat the market? As unlikely as it may seem, hedge fund manager and professor Joel Greenblatt, whose investment firm has averaged 40% annual returns for over twenty years, can teach you how. You can achieve investment returns that beat the pants off even the best investment professionals and the top academics. In fact, you can learn how it's possible to more than double the annual returns of the stock market averages.

But there's more. You can do it all by yourself. You can do it with low risk. You can do it without making any predictions, and you can do it by following, step by step, a time-tested, proven "magic formula" that uses only common sense and two simple concepts. Best of all, once you are convinced that it really works you can choose to do it for the rest of your life.

A runaway bestseller even before it was published, The Little Book That Beats the Market shows how successful investing can be made easy for investors of any age. It's never too early or too late to start investing, and with Greenblatt as your guide you'll know exactly where to go and what to do. By following the clearly outlined simple steps and magic formula, you can achieve extraordinary long-term investment results with a very low level of risk.

Language

English
Publisher

Simon & Schuster Audio
Publication date

February 1, 2006
Dimensions

5.25 x 1.25 x 5.75 inches
ISBN-10

0743555856
ISBN-13

978-0743555852
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Editorial Reviews

About the Author

Joel Greenblatt is the founder and a managing partner of Gotham Capital, a private investment partnership that has achieved 40% annualized returns since its inception in 1985. He is a professor on the adjunct faculty of Columbia Business School, the former chairman of the board of a Fortune 500 company, the cofounder of ValueInvestorsClub.com, and the author of several books, including You Can Be a Stock Market Genius, The Big Secret for the Small Investor, and Common Sense. Greenblatt holds a BS and an MBA from the Wharton School.

From AudioFile

A Wharton-trained head of a successful investment partnership has a foolproof method for evaluating stocks: Companies are worth what they return to investors on a consistent basis. Trusting yourself to use this simple principle will work much better than any get-rich schemes, and much better than trusting other people to select stocks for you. The method requires some digging into a stock's fundamentals, understanding risk factors, and paying close attention to timing when buying and selling. An enhanced CD contains printable details of the author's "magic formula" for evaluating stocks. Adam Grupper does well with this material, projecting confidence and using vocal tones and pacing that are enjoyable for the entire program. T.W. © AudioFile 2006, Portland, Maine-- Copyright © AudioFile, Portland, Maine

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Product details

Publisher ‏ : ‎ Simon & Schuster Audio; Unabridged edition (February 1, 2006)
Language ‏ : ‎ English
ISBN-10 ‏ : ‎ 0743555856
ISBN-13 ‏ : ‎ 978-0743555852
Item Weight ‏ : ‎ 4 ounces
Dimensions ‏ : ‎ 5.25 x 1.25 x 5.75 inches

Best Sellers Rank: #2,455,560 in Books (See Top 100 in Books)
- #18,228 in Investing (Books)
- #18,912 in Books on CD
- #41,439 in Economics (Books)

Customer Reviews:
651 ratings

About the author

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Joel Greenblatt

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Joel Greenblatt is the founder and a managing partner of Gotham Capital, a private investment partnership that has achieved 40% annualized returns since its inception in 1985. He is a professor on the adjunct faculty of Columbia Business School, the former chairman of the board of a Fortune 500 company, the cofounder of the Value Investors Club website, and the author of You Can Be a Stock Market Genius. Greenblatt holds a BS and an MBA from the Wharton School.

Customer reviews

5 star		68%
4 star		18%
3 star		10%
2 star		2%
1 star		2%

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Top reviews from the United States

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jdreader

It’s worked for me

Reviewed in the United States on June 7, 2021

Verified Purchase

I follow the steps and have more than doubled my investment in under 2 years. It’s very easy just following the steps, but more details are given if you want to dive deeper. I’ve slowly been learning more but I still use the formula. I have recommended this method to others. I have read the book twice.

2 people found this helpful

Helpful

Will

Avoid the Audiobook CD (except perhaps the unabridged version)

Reviewed in the United States on September 29, 2012

Verified Purchase

This review pertains to the Audiobook CD.

It was extremely simplistic and devoid of material information. If you know absolutely nothing about investing, and you are a teenager, it might be a useful story to listen to. But for anyone else I recommend you don't waste your time.

The audio CD makes really big claims (about unhelpful other sources of information are, and how superior this simple strategy is) but then fails to provide any substantial amount of information. There seems to be an "unabridged version" which might have some meatier information, but this CD was extremely wordy to make a simple point.

There were perhaps just a few bullet points:
you want to compare companies by their earnings yield or % earnings per dollars invested.
you should expect to earn a greater return than low-risk investments, such as held-to-maturity treasury bonds.
you should be careful because some companies destroy value when they expand.
earnings can be volatile.
prices of stocks can be extremely volatile.

The first point and last point are his main points. Obviously, you want to buy a company you think will continue to have solid earnings, but whose price has sunk during market volatility, and hence you get a bargain. You look at a company's earnings yield, to tell whether it is a bargain or not. Does it get a 10% return on capital while another stock gets only a 2% return on capital?

The story he uses is really long and lame for anyone older than 18. (again: the unabridged version might be meatier, as might the book)

One big thing he doesn't expound upon is what time frame are you looking at, for earnings? Presumably last 4 quarters.

Others prefer to go upon analysts' expected earnings for next year. I haven't figured out how much more reliable using those figures are than past earnings, but I hope I can figure that out.

Some other reviewers of the book talk about EBIT. The audio CD doesn't go into different measures of earnings (dividends vs NI vs EBIT vs EBITDA) or dollars invested (common stock value vs enterprise value). The audiobook also doesn't explain why some high-growth company's have extremely poor earnings yields (like Amazon) which is b/c people are anticipating/speculating that at some point in the future it (after it has established so much market-share and well-developed products and product-spaces and infrastructure) it will be able churn out big earnings. Clearly, he advocates finding companies that are "bargains". However, he doesn't warn you about "value traps", where a company occasionally has rapidly declining earnings, but the company is a bargain based on past earnings. Good examples would be a company whose few patents have expired, its mineral resources have been depleted, or its technological product line is at a dead-end (1990s' wordprocessors or CRT monitors, for example) without a modern successor.

Back to the issue of growth stocks, there is always the hope that the company's assets (tangible and intangible, book and non-book) can far outlive their book depreciation expenses which dock earnings in their periods of rapid growth. For example, Google, according to one article expenses all its software R&D costs the year it incurs them, instead of capitalizing them as assets and depreciating them over time. This potentially means that future earnings might benefit from software product segments that have greatly reduced future development/maintenance costs. If competitive pressure is too great than this may never actually happen, and the company might always struggle to make earnings.

The risk of growth stocks is that there is much speculation about how much future earnings the rapidly growing company might be able to churn out in the future. This is not so easy, b/c sometimes competitive pressure forces margins to stay ultra-low or even force them to become unsustainable. I am still looking for a good book that will explain all these nuances in greater detail. I am starting to chew on Damodaran's books and the Wiley CFA series, as well as some Buffet books, and I recommend others to likewise.

4 people found this helpful

Helpful

Shannon Gaw

Good intro to value investing

Reviewed in the United States on June 29, 2006

Verified Purchase

"The Little Book That Beats the Market" is a quick, enjoyable read. It provides a good introduction to value investing and is much easier to grasp than philosophies of Graham, Fisher, and Buffett. Consequently, it may be a bit too dumbed-down for some, but he plainly states who his audience is in the intro and book dustcover. If you have read "The Intelligent Investor" or Greenblatt's earlier book, you might want to just read the last 25 pages and you'll get all the real content. He appears to have done the research to prove his strategy works for both large and small cap stocks independent of biases usually attributed to proofs of such theories.

Greenblatt uses his own version of the earnings yield and return on capital formulas, and excludes financial, utility, and ADR equity. This makes applying the screen to stock research websites difficult, but fortunately the author has brought up his own customized (if rather Spartan) website.

I wish there had been a little more meat, but overall it was worth my time and money.

5 people found this helpful

Helpful

M. Strong

Controversial book that doesn't need to be

Reviewed in the United States on March 17, 2006

Verified Purchase

The reviews on this book range all over the place, which is understandable. Making and losing money is very emotional and people get pretty worked up about it. Furthermore, Greenblatt sets out in this book to boil a successful stock investment strategy down to something simple enough and short enough to be read by a child. It's a recipe that invites criticism from people of varied investment skill levels.

First off, there is merit to any criticism of a math-driven investment strategy that is derived by determing that it would have worked well had it been applied in the past. Second, the point that this strategy actually is quite difficult to implement yon your own without Greenblatt's website (which may or may not remain free or in existence in the future) is also true.

That said, this book trancends those very real problems in its accomplshment of its stated goal. To begin with, this book can be read and understood by fairly young kids, which is impressive (you try explaining the absract world of investments to young folks, trust me, it's hard). More than that, however, the investment strategy Greenblatt lays out in this book is fundamentally sound. Furthermore, Greenblatt's convincing argument around the idea that you need to stick with this strategy (or any other for that matter) through good times and bad is an important idea lost on most investors these days.

The flaws keep this book from being five stars, but its good attributes weigh far more heavily. Recommended reading.

8 people found this helpful

Helpful

Top reviews from other countries

Badger Number 1

System no longer works?

Reviewed in the United Kingdom on October 31, 2017

Verified Purchase

All these 5-star reviews! Has anyone actually tried it? Hint: It'll be 3-5 years before you can honestly say that you have. Enjoyed the book for the background narrative. But the Internet suggests the Magic Formula hasn't worked in recent years.

8 people found this helpful

Stan

Quite interesting

Reviewed in the United Kingdom on July 4, 2017

Verified Purchase

I was intrigued by this book and by its shortness. It is short and to the point and delivers a very compelling and simple approach to picking stocks using a simple formula. It is aimed at an American audience and some of its advice does not relate to non US taxpayers. Aside from that I thought it was a good read and presents a formula that has many merits.

One person found this helpful

Bluespot Knee Clinic

Essential reading for all surgeons

Reviewed in the United Kingdom on April 18, 2016

Verified Purchase

Crystallises experience gained in the stock market over many years and presents it in a logical eminently readable entertaining format

One person found this helpful

Parth

Teaches importance of RoCE & Earnings Yield. Gives the Magic Formula. Easy to read & understand.

Reviewed in India on September 14, 2019

Verified Purchase

Beating the stock-market returns is extremely difficult even for professional money managers. For beating the market over a long-term, the investor must find high quality companies and purchase them at low prices. To achieve this, the author describes a simple strategy and calls it the Magic Formula. The book explains that if you prepare a portfolio of 20-30 stocks that have (1) high Return on Capital Employed (RoCE) in the past AND (2) have high Earnings Yield, and update such portfolio every year, you will beat the market over the long term, i.e., at least more than 3-5 years. The author has extensively tested the formula for 17 years. He elaborates exactly why the formula works so well.

If something is so simple and effective, it would be used by a lot of people; and that itself should reduce its effectiveness. However, Joel Greenblatt explains why majority of the investors cannot stick to the formula, and therefore, it will continue to remain effective for those who can invest according to the Magic Formula for a long term.

From the reasoning described in the book as well as the credibility of the author himself on account of his exceptional investment track-record, it seems convincing that the strategy should work. However, the only way to know whether it will work or not is by putting it to use for a long term. Alternatively, the investor can simply take the learning from the book that high RoCE and Earnings Yield are the two most important factors while analysing a stock, and give high importance to these two factors while selecting individual stocks for investment. But it is a well known fact that it is extremely difficult to beat the market by selecting stocks individually. The reader is reminded of this fact by the author.

9 people found this helpful

Kamaljeet Singh Raturi

Great book

Reviewed in India on February 23, 2020

Verified Purchase

Liked the simplicity of the book. Very simple yet effective concept.

Anyone interested in building his/her own stock portfolio should consider this book.

4 people found this helpful

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The Little Book That Beats the Market Audio CD – Unabridged, February 1, 2006

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Joel Greenblatt

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