The Little Book That Still Beats the Market: Your Safe Haven in Good Times or Bad 精装 – 2010年9月24日
Praise for THE LITTLE BOOK THAT BEATS THE MARKET
"Simply perfect. One of the most important investment books of the last 50 years!"
"A landmark book—a stunningly simple and low-risk way to significantly beat the market!"
—Michael Steinhardt, the Dean of Wall Street hedge fund managers
"This book is the finest simple distillation of modern value investing principles ever written. It should be mandatory reading for all serious investorsfrom the fourth grade on up."
—Professor Bruce Greenwald, Director of the Heilbrunn Center for Graham and Dodd Investing, Columbia Business School
"The book unquestionably makes good on its promises."
"Greenblatt delivers admirably . . . it contains one of the clearest, most entertaining explanations you'll ever see of the ideas underlying value investing."
—International Herald Tribune
An Exclusive Q&A with Author Joel Greenblatt
It's been five years since you first published The Little Book That Beats the Market. Have your thoughts changed at all about the effectiveness of value investing?
In my mind, the principles of value investing have not changed. As we've learned yet again, markets can be volatile and emotional. They often go to extremes of pessimism and optimism, and prices can and often do fluctuate wildly and significantly over short periods of time. As a result, Mr. Market can provide some excellent opportunities to purchase bargain priced stocks when people are unduly pessimistic. This is where value investing comes in. Buying companies below their true value is the road to being a successful investor. The magic formula found in the Little Book seeks to buy a group of above average companies but only when they are available at below average prices. Because it is a formula, it seeks to do this in an unemotional way that can take advantage of the market's mood swings. Ben Graham taught us these lessons in the 1930s and the principles still hold as well today as when he first wrote them down more than 70 years ago.
Do you think individual investors should re-think their investment strategy as a result of the recent market crash and recession?
I think the best lesson that can be learned from the recent price drop and partial recovery is that stocks are volatile. For most people, stocks should represent a portion of their investment portfolio because I still believe that over the long term they will provide superior returns relative to most alternative investments. However, whether that portion of an investment portfolio devoted to stock investments should be 40% of an investor's portfolio or 80% is a very individual decision. How much are you willing (or able) to lose before you panic out? There's no sense investing such a large portion of your assets in a long-term strategy if you can't take the pain when your chosen strategy doesn't work out for a period of years. The "magic formula" found in the book can underperform the market for years. It can also lose money if the market goes down. But it is also a strategy that makes a lot of sense and that should work well for investors over the long term.
Can you explain the Magic Formula's basic strategy in one sentence?
The Magic Formula strategy is a long-term investment strategy designed to help investors buy a group of above-average companies but only when they are available at below-average prices.
You make reference in the new afterword to receiving a number of emails from readers after the The Little Book That Beats the Market was published. Could you share with us some of the comments you received?
I received many emails after the first edition of the book was published. Some suggested that the strategy was working great for them while others reported that they had waited over a year and the strategy was underperforming. These results and emails are consistent with the message of the book. Over the five years since the book was published, the strategy earned very nice returns for investors, but the ride was bumpy. Not only did the formula underperform for a period of time, in 2008 it lost money along with the market. Overall, the formula performed quite well but only for those who maintained a true long-term perspective. This is easier said than done. In the new afterword, I try to give more facts, color and information about the strategy that I hope will help investors be successful in taking full advantage of the magic formula over the long term. Of course, I also got plenty of emails where investors just asked us to do it all for them. Other emails asked us to apply the formula internationally. As a result, we have worked on both of these projects over the last several years.
In the new afterword, you write "Beating the market isn't the same thing as making money." Can you elaborate on this and why it's a difficult concept to swallow at times?
Since the strategy involves buying a portfolio that is 100% long the stock market, if the stock market goes down, our portfolio may well go down, too. If the market drops 40% and we beat the market by losing only 38%, this is small consolation. As I say in the afterword, while I firmly believe that for most people an investment in the stock market should represent a substantial portion of your investment portfolio, how big that portion should be can vary widely. For some it can be well over half of assets, for others well less than half might be appropriate. The magic formula strategy is a wonderful strategy for that portion of your portfolio that you choose to invest in the stock market. In fact, I truly believe that the magic formula remains one of your best options. How much to invest in the stock market, however, is a very personal decision that should be partially based on your ability to withstand short-term negative price movements. One encouraging fact, though, discussed in the afterword is the performance of our large cap portfolio over the last decade. Over that period, the market as measured by the S&P 500 was actually down, yet our backtests showed that following the formula over those same ten years would have resulted in a more than tripling of your money. Unfortunately, those great long-term returns came with plenty of bumps, including some not so short periods of losses and underperformance. But once again, if the formula worked every day, every month and every year, everyone would follow it and it would be ruined. Fortunately, it's not so great, and as a result I strongly believe that long-term investors should continue to benefit from the magic formula for many years to come.
From Publishers Weekly
Contrary to efficient-market naysayers, this engaging investment primer contends that ordinary stock-market investors can indeed get better-than-market returns over the long haul. Greenblatt (You Can Be a Stock Market Genius), a Columbia Business School adjunct professor, touts a "value-oriented" approach that looks for bargain stocks whose share price is cheap relative to the company's profitability. His version is a "magic formula" that ranks stocks on the basis of two variables—the earnings yield and the business's return on capital. His Web site, magicformulainvesting.com, virtually automates the procedure for novices. Greenblatt offers lots of statistical proof of the formula's success, but emphasizes the importance of faith in seeing the investor through inevitable short-term downturns: "It will be your belief in the overwhelming logic of the magic formula that will make the formula work for you in the long run." He conveys his ideas through a lucid if rudimentary and rather corny explanation of basic investment concepts about risk, return, interest and business valuation. Although the fabulous returns he touts seem too good to be true, Greenblatt's formula is a reasonable variant of mainstream value-investing methods. Investors seeking a little more hands-on excitement than the average mutual fund offers won't go too far wrong following his advice. (Jan.) Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved. --This text refers to an alternate Hardcover edition.
Joel Greenblatt is the founder of Gotham Capital, an invest–ment partnership that achieved 40% annualized returns for the twenty years after its founding in 1985. He is a professor on the adjunct faculty of Columbia Business School, the Chief Strategist for Formula Investing, the former chairman of the board of a Fortune 500 company, and the author of You Can Be a Stock Market Genius and The Little Book That Beats the Market. Greenblatt holds a BS and an MBA from the Wharton School.
As I write this review, there are already 266 reviews of Joel Greenblatt's "The Little Book..." on Amazon. Why bother? One reason is that since first published in 2005, Greenblatt's investment accomplishments have become even more widely appreciated, giving added credibility to his advice. For example, he is featured as one of the "Hedge Fund Market Wizards" in Jack Schwager's recently published book of the same name Hedge Fund Market Wizards (please see my review of that book). Additionally, at present returns on traditional savings accounts are very close to zero and the US Treasury Note yields a mere 1.7 percent. Any of us who envisioned living in retirement from the interest on our savings were sadly mistaken. Greenblatt's investment system as presented in this book may be one of very few, or the only, approach that is likely to generate low-risk investment results that might really help savers and seniors meet their previous expectations.
The writing style is clear and simple. The author explains investment terms like return on capital and earnings yield in a conversational tone without condescention. He uses a couple of example fantasy businesses in an entertaining manner to illustrate the concepts. As the book progresses, he uses these basic examples as the foundation for more advanced concepts (not complex, but necessary). Necessary for what? For the reader to believe in the investment system that Greenblatt presents in the book to a degree that the reader will stick to the system without variance for a period of years in order to enjoy the benefits that accrue to long-term investors (think Buffett, Rogers, Graham, Bogle, Templeton).
I urge you to read the book review by "Value Investor" on these pages. He lays out the reasons why this system is very likely to perform well over a period of years. In a nutshell, it is likely to work because the author has done extensive testing of the system, uses it as the basis for his own hedge fund's portfolio management, and because it takes considerable patience and fortitude to follow (traits not found in excess on Wall Street).
One aspect that I really appreciate is the author's willingness to concede that many investors want a higher degree of involvement in selecting the stocks for their portfolios. They may be uncomfortable following a more mechanical system. He addresses this issue by giving clear guidance on how one may still follow the system even with the addition of an element of personal discretion, depending on the investor's level of expertise, time commitment and available capital.
Finally, the author maintains a free website (now for 7+ years) to aid investors with portfolio selection. This is a high value service in my opinion.
I highly recommend this book to any saver or investor, or speculator or trader for that matter, who wishes to increase their returns on investment and improve their overall portfolio performance. Five stars.
Would you laugh? Probably. You might even say "It can't possibly be that easy!" And the thing is, normally, you'd be right. There are so many books and services selling the snake oil of easy stock market wealth that you'd be wise to ignore them.
And that should be that. Except ... except that unlike the Wade Cooks of the world, the author happens to be an investor whose fund has grown at a compound rate of 40% over the last two decades. That's the equivalent of turning $1 into $800. Not even Warren Buffett has achieved that over any 20-year period (though Berkshire Hathaway has averaged a still-bodacious 22% over its history). Not only that, but this book is based on the same core values that the author has used to seek out stocks during his investing career.
So Joel Greenblatt's new book, The Little Book That Beats the Market, is better than your run-of-the-mill "get rich quick" entry. Were that the extent of its utility, I wouldn't be wasting your time. Instead, this is a book that should be read by anyone serious about investing. And the shocking thing is, unlike the hard-to-grasp intricacies of the Benjamin Graham value-investing classics, this is a quick, entertaining read.
Greenblatt's goal was to write a book that would describe to his young children what he does for a living. Basically, his investing methods are based upon two elements: pre-tax earnings yield (the percent of the stock's price that comprises current earnings) and return on capital. Shove every company above a certain size into the transmogrifier, and it generates a list ranking companies on the combination of those attributes. Investing in the top 30 companies on these lists each year has generated an average annual return of 30.8% over the last 17 years.
Of course, here is where you say exactly what I said when I first read the book. "But this is data-mining, right?" It's pretty easy to go back in time and try a bunch of various elements until you show one that offers awesome returns, including things like investing each year on April 22 in the top 77 stocks that don't have 'e' in their names. And you'd be right, except for two things. First, and foremost, these are the only two elements that Greenblatt tried. Second, the two data points used are imminently defensible as reasonable measurements for potential investments: How much do they make? And how much do they cost?
As Greenblatt notes in the book, one of the great things about the formula is that occasionally it doesn't work.
Oh, you want me to explain why that could possibly be good? Well, one of the most hallowed truths in investing is that something that works all of the time will immediately be rendered neutral by the market. A company cannot be priced at $1 per share while earning $17. Not for long. For those who might think that Greenblatt immediately renders his magic forumla useless by writing about it, take heart. In an age of attention spans measured in seconds rather than years, the formula's occasional failure means that many investors won't stick with it.