The Little Book That Beats the Market: How to Invest Like Warren Buffett

Introduction

In "The Little Book That Beats the Market," Joel Greenblatt reveals the secrets to Warren Buffett's investing success. Greenblatt, a successful investor in his own right, has spent years studying Buffett's methods and has distilled them into a simple, easy-to-follow formula that anyone can use to achieve market-beating returns.

The Magic Formula

At the heart of Greenblatt's formula is the "magic formula," a combination of two key financial ratios: earnings yield and return on capital. By focusing on companies with high earnings yields and high returns on capital, Greenblatt has found that investors can consistently outperform the market.

The earnings yield is calculated by dividing a company's earnings per share by its stock price. The return on capital is calculated by dividing a company's net income by its total capital.

Greenblatt's research has shown that companies with high earnings yields and high returns on capital tend to be undervalued by the market. This is because these companies are often overlooked by investors who focus on more traditional metrics, such as price-to-earnings ratios.

By focusing on companies with high earnings yields and high returns on capital, Greenblatt has been able to achieve market-beating returns for his investors. In fact, his formula has outperformed the S&P 500 by an average of 10% per year over the past 20 years.

The Little Book That Beats the Market

In "The Little Book That Beats the Market," Greenblatt provides a step-by-step guide to using his formula to invest like Warren Buffett. He explains how to find companies with high earnings yields and high returns on capital, and how to construct a portfolio that will maximize your chances of success.

Greenblatt also provides valuable insights into Buffett's investing philosophy. He discusses Buffett's focus on long-term investing, his aversion to debt, and his preference for buying stocks that are trading at a discount to their intrinsic value.

"The Little Book That Beats the Market" is a must-read for any investor who wants to achieve market-beating returns. Greenblatt's formula is simple, easy to follow, and has been proven to work. If you're looking for a way to improve your investment results, I highly recommend reading this book.

Why You Should Read This Book

If you're serious about investing, you need to read "The Little Book That Beats the Market." Here are a few reasons why:

• It's based on sound research. Greenblatt's formula is based on years of research into the factors that drive stock prices. It's not just a hunch or a guess; it's a proven method that has been shown to work.
• It's easy to follow. Greenblatt's formula is simple enough for anyone to understand. You don't need to be a financial expert to use it.
• It's proven to work. Greenblatt's formula has been used by investors of all levels to achieve market-beating returns. If you follow his instructions, you can too.

Conclusion

"The Little Book That Beats the Market" is a valuable resource for any investor who wants to achieve market-beating returns. Greenblatt's formula is simple, easy to follow, and has been proven to work. If you're looking for a way to improve your investment results, I highly recommend reading this book.