The Little Book That Beats the Market

November 14, 2005
Contrary to efficient-market naysayers, this engaging investment primer contends that ordinary stock-market investors can indeed get better-than-market returns over the long haul. Greenblatt (You Can Be a Stock Market Genius
), a Columbia Business School adjunct professor, touts a "value-oriented" approach that looks for bargain stocks whose share price is cheap relative to the company's profitability. His version is a "magic formula" that ranks stocks on the basis of two variables—the earnings yield and the business's return on capital. His Web site, magicformulainvesting.com, virtually automates the procedure for novices. Greenblatt offers lots of statistical proof of the formula's success, but emphasizes the importance of faith in seeing the investor through inevitable short-term downturns: "It will be your belief in the overwhelming logic of the magic formula that will make the formula work for you in the long run." He conveys his ideas through a lucid if rudimentary and rather corny explanation of basic investment concepts about risk, return, interest and business valuation. Although the fabulous returns he touts seem too good to be true, Greenblatt's formula is a reasonable variant of mainstream value-investing methods. Investors seeking a little more hands-on excitement than the average mutual fund offers won't go too far wrong following his advice.

January 15, 2006
Greenblatt is renowned for his spectacular business prowess; among his many accomplishments are averaging returns of 40 percent or better for more than a decade; starting his own lucrative private investment firm, Gotham Capital; and currently serving as an adjunct professor at Columbia Business School. Here he shares his stock selection wisdom with the novice investor. His writing is never condescending or beyond comprehension. In fact, he takes great joy in explaining ideas in simple terms and using arithmetic that he claims even his young children can understand. He also delights in sharing with readers his -magic formula - of finding quality bargain stocks. Lighthearted, witty, and humorous, the overall presentation is a great start for learning about investing and can be used as an alternative to comparable titles in the Dummies series. Recommended for public libraries as well as undergraduate collections for a non-textbook understanding of investing principles; readers who like Greenblatt's style may then continue with his earlier and more advanced work, You Can Be a Stock Market Genius." -C. Geck, Kean Univ., Union, N.J."

Copyright 2006 Library Journal, LLC Used with permission.