The Little Book That Still Beats the Market
Joel Greenblatt · 2010
The Little Book That Still Beats the Market (2010) is a book by Joel Greenblatt on money & investing. Hedge-fund manager Joel Greenblatt reveals a simple, rules-based "Magic Formula" for buying good companies at bargain prices, ranking stocks by earnings yield and return on capital, and explains why its temporary pain is exactly what keeps it working.
A hedge-fund legend distills value investing into a two-number "Magic Formula" that a sixth-grader could run and most professionals still can't beat.
Three of the ideas you’ll keep
The Clif summary of The Little Book That Still Beats the Market pulls out 7 insights. Here are the first three.
- The Magic Formula ranks stocks on just two metrics: buy above-average companies (high return on capital) at below-average prices (high earnings yield), then combine the two ranks.
- Greenblatt measures cheapness with earnings yield defined as EBIT / Enterprise Value, not the simple P/E ratio, because it accounts for debt and cash and lets you compare businesses fairly.
- He measures business quality with return on capital defined as EBIT / (net working capital + net fixed assets), which reveals how much profit a company squeezes from the tangible capital it actually needs to operate.
The other 4 — and the full 11-minute summary — are in the app.
What’s inside: 8 chapters
The whole summary runs about 11 minutes, read or listened to.
- Jason's Gum and the Value of a Business
- Meet Mr. Market, Your Moody Partner
- The Two Questions That Matter
- Earnings Yield the Right Way: EBIT over Enterprise Value
- Return on Capital: Spotting a Genuinely Good Business
- How the Magic Formula Actually Works
- The Proof: Backtesting the Numbers
- Why It Keeps Working: Pain Is the Price of Admission
Finish The Little Book That Still Beats the Market tonight.
Read or listen to the full summary in about 11 minutes, then keep the ideas with a minute of review a day. Start with the 2-minute quiz — no card required.
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