Great Book, Good Ideas, Weak In Some Areas

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	• The Little Book That Beats the Market (Little Books. Big Profits) Joel Greenblatt Wiley, 2005 - 176 pages average customer review:based on 200 reviews view larger image
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highly recommended

Great Book, Good Ideas, Weak In Some Areas

Really enjoyed the audiobook version of this one. Listened to it twice.

Mr. Greenblatt focuses on two variables in evaluating stocks: 1) the earnings-to-price ratio (like the PE ratio, but Earnings/Price rather than Price/Earnings); and 2) the return on investment (e.g. how well has the company's investments done recently?).

The approach is to rank companies based on #1 above, then rank all companies based on #2 above. Then combine the rankings and pick the best companies from those. The hypothesis is that this approach will find companies that should generate high returns in the short term but that are also priced at a discount for some reason.

The author tested his approach using data from the past 17 years, and found strong support for it. But here, too, is a weakness. In terms of the stock market, 17 years is a very short period of time. To provide strong support for his ideas, he really needs to go back at least 50 or 100 years, in my view.

With such limited data to validate his approach, investors should be forewarned that the next 17 years may be different from the last 17 years, and the approach may not always work.

Also, the book focuses only on US stocks. For US investors who want to diversify out of the dollar by investing in foreign stocks, this book won't help.

That being said, this book is a very solid effort, and a great place to start to learn the value approach to investing. The author introduces the greatest-of-all-time teacher of value investing, Benjamin Graham, and gives a nutshell summary of Graham's ideas.

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Make Sense Guide For Investing

A very logical plan for investors who have the desire to make significant returns over a five to ten year time frame. It doesn't take a large amount of money, but does require disipline to stay with the program through the ups and downs of the market. An easy read and the author furnishes all the tools with very little work for the reader to do on his own.

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Well worth a read

I did not like the simple writing style of this book. It is like a kid's book. Also it could have been written in one chapter because he has little to say.

However having said this, the writer writes what many studies have shown to be true, that to invest on the share market successfully you need patience and look to value. He is saying buy shares with high ROA and high earning yields. I think he underestimates P/E and dividends but anyway.

If you are too caught up in the random walk theory or index funds please give this book a read.

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Sounds good to me

It's difficult to rate an investment advice book without actually taking the advice and seeing how successful it is. What I can say about this small tome is:
-It's written in a very straightforward, accessible manner
-It contains some very goofy, dorky humor that, while making me groan, also made me appreciate the author more
-Its underlying premises seem quite logical and sound
-I plan on taking the advice provided.

One thing I was especially happy to see was that when I went to the associated website, I was certain that I would be charged for a "membership" to search for appropriately capitalized companies. This didn't happen - after a quick registration process, I was rewarded with a complete list of companies. I was so relieved that the book didn't turn out to be a 100-plus page ad for the site.

I'll come back in a few years and tell you how it all worked.

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Stocks

Nice book to have to refer to from time to time, when you want to remember the basics.

reviews: 1, 2, 3, 4, 5, 6, 7, page 8, 9, 10, 11, 12, 13, 14, 15, 16, 17

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