354 of 384 people found the following review helpful
Excellent! A Must Read for Every Investor,
This review is from: The Little Book That Beats the Market (Hardcover)
As a portfolio manager at a large New York based hedge fund I have read more investment books than I care to admit. With that being said, The Little Book That Beat the Market is the first book I have felt compelled to review on Amazon (of course, I am not really going out on a limb recommending a book that legendary investor Michael Price describes as "One of the most important investment books of the last 50 years.")
Professor Greenblatt's first book, You Can Be a Stock Market Genius, is widely regarded as the seminal text on special situations investing and the strategies contained in the book are employed by multiple hedge funds and investment professional. While I recommend Stock Market Genius to anyone who has the time and desire to analyze stocks in detail (at least 3 hours a week) I highly recommend The Little Book That Beat the Market to ALL investors of ALL ages and to ANYONE who wants to understand how businesses create value.
The beauty of the Little Book is a follows:
1) It is simple
2) It works
3) Most investment professionals cannot follow the Little Book's strategy and that makes this strategy one of the only instances where small investors have a HUGE advantage over professionals.
4) The people who have recommended this book are some of the most successful investors in the history of Wall Street (myself excluded, maybe someday!)
1) It is Simple
While some of the reviews on Amazon have argued that the Little Book is too simply, I completely disagree. The reason this book is great is that it takes a very complicated subject matter (investment success) and makes it simple and easy to understand. Bottom line, I don't really care if something is difficult or easy, if I can use it to make money I like it. The fact that the Little Book works AND it is easy, is really the best of both worlds.
2) It Works
The actual results of the Little Book describe in the book are astonishing. While I agree with others that reproducing the exact results of Professor Greenblatt's study is difficult for non-professionals, using Compustats real-time database gets remarkably close to the results described in the book and detailed on his web site.
However, what I find to be more valuable than the results themselves is Professor Greenblatt's explanation on why the formula works. Yes, everyone wants to buy cheap stocks but understanding how to distinguish between which cheap stocks are just cheap and which are good businesses worth owning is critical to investment success. While these concepts might not be entirely new (Warren Buffett writes about them annually), never before have I seen them described so completely and simply in one place.
3) Most Professionals Can't Follow Strategy
Most investors (especially hedge funds) are monitored closely on yearly, quarterly and monthly performance. For a hedge fund, having stable monthly numbers is considered critical to attracting new capital and preventing redemptions. Despite the fact that the Magic Formula has excellent long-term performance (30% annually over 17 years) the monthly volatility (down 5 out of every 12 months on average) makes it impossible for most hedge funds and professional investors to follow strictly without fear of investor redemptions. As a hedge fund manager I plan on incorporating the concepts of the Little Book into my investing but I am establishing a fund for my children that will invest strictly based on Professor Greenblatt's Magic Formula.
4) Recommended by Highly Successful Investors
As I stated above, I am not really putting myself out on a limb recommending a book written by Professor Greenblatt (his 20 year track record of 40% annual returns speaks for itself) and endorsed by Michael Price, Andrew Tobias, Professor Bruce Greenwald, Michael Steinhardt, the Wall Street Journal and the Financial Times.
With that being said, I highly recommend The Little Book that Beat the Market and believe it is a great read for anyone interested in investing and business. FYI, other investing books I highly recommend are The Essays of Warren Buffett: Lessons for Corporate America edited by Lawrence Cunningham; The Intelligent Investor, by Benjamin Graham; Margin of Safety by Seth A. Klarman; Value Investing with the Masters by Kirk Kazanjian and Money Ball by Michael Lewis.
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Showing 1-4 of 4 posts in this discussion
Initial post: Apr 13, 2011 6:28:51 PM PDT
J. Seidman says:
You have had an Amazon account for at least 6 years, and the only two reviews you've written are both glowing recommendations of books by Greenblatt. Both reviews came out just after the book was published. Best of all, you're using a screen name rather than a real name. Is there some reason we should believe that you're an impartial reviewer, and not just a shill?
Posted on Jun 9, 2012 6:40:32 PM PDT
Benjamin Ramsey says:
I have to agree with J. Seidman and say that this "review" really comes across as strongly staged and too pro-Greenblatt to be from an actual genuine third party. This is either the man himself, or publishing staff, or someone like that. That's not to say the book isn't great - it probably is (haven't read it yet), but I don't like fake reviews, I REALLY don't like them.
Posted on Jun 24, 2012 3:22:23 AM PDT
That's kinda sad the guy's gotta review his own stuff, but I understand. I mean you get some idiots who don't even read the book and post negative reviews so that's not fair either. I read the book and thought it was alright, but I don't get how someone with only a thousand or a few thousand bucks is supposed to employ this strategy when it costs you $10 each time you buy into and sell out of a position. Do I buy 10 shares of IBM, and sell them a year later for maybe a $5 profit on each share after paying $10 to buy the shares and $10 to sell? That part was not really addressed in the book.
In reply to an earlier post on Dec 29, 2012 11:34:24 PM PST
Last edited by the author on Dec 29, 2012 11:35:50 PM PST
William S. Kalenborn says:
A guy with a thousand bucks is not a good candidate for this method. With that, you find one or two good companies with solid management that have of room to expand; like Whole Foods or Amazon. Read Peter Lynch's book on how to do that. I've got $60,000 I'm slowly moving from a Mutual Fund, $2500 each into two Magic Formula Stocks a month. I'll see how it compares against my Motley Fool Great America Fund. Greenblatt's thesis is that if you pick 20 or 30 good companies at cheap prices, you will soundly beat the S&P, a conglomeration of good, bad, and indifferent companies at cheap, expensive, and middling prices over a three-year period, rolling your money out of each stock after a year. The record for the S&P is about a 10% average gain a year.
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