Joel Greenblatt's "The Little Book That Still Beats The Market" is a concise and easy-to-read book that presents a simple yet effective investing strategy called the Magic Formula. The book focuses on the practical application of this strategy in the stock market and how it can help investors achieve better returns than the overall market.
The Magic Formula, as described in the book, is a two-step process that involves ranking stocks based on their earnings yield and return on capital, and then investing in the top-ranked stocks. Greenblatt argues that this strategy works because it focuses on investing in high-quality companies that are undervalued by the market, and therefore have the potential for significant price appreciation.
One of the key takeaways from the book is the importance of investing in high-quality companies. Greenblatt argues that companies with high returns on capital are more likely to be successful in the long run and generate significant profits for investors. He also emphasizes the importance of investing in companies that are undervalued by the market, as this provides an opportunity for price appreciation.
Another important message in the book is the need to be patient and disciplined in investing. Greenblatt stresses the importance of sticking to the Magic Formula strategy over the long term, and not getting distracted by short-term market fluctuations. He also advises investors to focus on their own investment goals and risk tolerance, rather than trying to chase after the latest hot stock or investment trend.
Overall, "The Little Book That Still Beats The Market" is a valuable resource for investors who are looking for a simple and effective investing strategy. The Magic Formula is easy to understand and apply, and the book provides practical advice for implementing this strategy in the stock market. While no investment strategy is foolproof, Greenblatt's approach has been shown to generate impressive returns over the long term, and is definitely worth considering for anyone looking to improve their investment performance.