If you haven’t read The Little Book That Still Beats the Market (Little Books. Big Profits) then you have missed a masterpiece by a great academic, investor and writer. Joel Greenblatt is an adjunct professor at the Columbia University graduate school of business. He is a value investor in nature, and his passion for value investing led him to co-found the “Value Investors Club” with John Petry.
This book is also part of highly popular the “Little books big profits” series. I will write reviews on many books from this series, because I found them to be excellent. These small books can compress a treasure load of information advice in a concise format. Like they say, small can be big as well.
I usually recommend this book to almost any investor or potential investor. I do that because the book is a very easy read. I also have a sentimental reason for recommending the book. When I first joined Caravel Management LLC in 2009 my boss and mentor, M. Caglar Somek sent me this book to read from USA to Bangladesh via Fedex.
The book basically uses simple language in explaining what the stock market is and why it goes up and down. Greenblatt does a great job at using Benjamin Graham’s concept of Mister Market, about why stocks might get overvalued or undervalued at times. The rest of the book touches upon key concepts like price multiples and return on capital. Finally, the book introduces Greenblatt’s ‘magic formula investing’. Personally I do not endorse any sort of formula based investing because any alpha it generates will ultimately erode over time. Nevertheless, Greenblatt’s track record with this formula based investing is quite phenomenal.
If you were to read one single book on the stock market I would highly recommend that it’s one.