Invest in 20–30 highest ranked companies, accumulating 2–3 positions per month over a 12-month period. As the title hints, this one is centered around a set of simple strategies (called the “magic formula”) that helps investors beat the market. The author pulls no punches here — he readily admits the pros and cons of such a strategy and invites readers to try their hand at it, despite the fact that it doesn’t necessarily win all the time. I appreciate the report that something doesn't work anymore. In academia, if you do not have results supporting that X causes Y, the research results are unlikely to be published. That wastes a lot of time by other researchers trying to show that X causes Y, because they don't know that it has been demonstrated that X does not cause Y. Negativt: en tredjedel uti boka var jeg lut lei av å høre de tre ordene "the magic formula". Halvveis uti boka var de tre ordene mitt personlige Vietnam, og mot slutten hadde jeg mer lyst til å hoppe utfor verandaen enn å høre de tre ordene én gang til. Jeg har ikke holdt tellinga, men min indre Lilli Bendriss sier meg at de tre ordene er nevnt ca. 4568 ganger ila. boka. There’s a blogger in Fort Worth who has chronicled his adventures using the magic formula. His latest post reads, “My MF Portfolio has lost thousands since early 2017, while the S&P 500 Index has risen nearly 35%.” I would like to extend him my sympathies. Why Greenblatt’s Magic Formula Stopped Working

I used to be an editor, and I doubt that the redundant phrase “future prospects” would have evaded my red pencil.) Indeed. Greenblatt doesn’t consider growth at all, and the market has been especially good at predicting revenue growth lately: the correlation between price momentum and future revenue growth is astonishing. Many of the companies that pass the Greenblatt screen have low future sales growth. For example, if you had chosen the top 100 companies in September 2018, the median TTM sales growth of the surviving companies eighteen months later would have been –4.09%. But if you had chosen all 3,500 companies, regardless of their EBIT, their median TTM sales growth eighteen months later would have been 2.42%. I tillegg er første del av boka litt dryg hvis man kjenner prinsippene rundt aksjehandel og markedspsykologien sånn noenlunde. Det er som å være ferdig med grunnskolen, og plutselig skal du tilbake til å høre på "Per har to epler. Så får han et eple til" osv. A 2017 study from the markets in Sweden found application of the Greenblatt formula resulted in long-term outperformance of market averages in the periods 2005 to 2015, and 2007 to 2017. The authors also found the "magic formula" was also associated with short-term underperformance in some periods, and significantly increased volatility. [5] Re-balance portfolio once per year, selling losers one week before the year-mark and winners one week after the year mark. In 2005, Joel Greenblatt published a book called The Little Book that Beats the Market. Its explicit aim was to "explain how to make money in terms that even my kids could understand (the ones already in sixth and eighth grades, anyway)." Although it used language and examples that were aimed at children, it was widely read by folks of all ages. The first five chapters, before Greenblatt gets into his investment strategy, comprise an excellent introduction to value investing. Clearly written, easy to understand, it's principled and right.the result is that, despite i get a huge dividend compared toSP500, my book lag awfully compared to sp500!!! how one can invest in companies which just continue to be burdened by debt, producing negative earnings just because analyst or balance sheet show you the promess of increasing earnings and/or sales!!!!

The book sold well enough that Greenblatt published a second edition in 2009, adding the word Still before Beats the Market, and adding a nice new afterword that updated his numbers. The [magic] formula is simple, it makes perfect sense, and with it, you can beat the market, the professionals, and the academics by a wide margin. And you can do it with low risk. The formula has worked for many years and will continue to work even after everyone knows it.” Joel Greenblatt Indeed, the two factors that Greenblatt focused on basically stopped working while other less-focused-on measures of quality and value continued to provide investors with arbitrage opportunities. Just as the price-to-book value ratio stopped “working” shortly after Fama and French popularized its use in the 1990s, so too with EBIT to EV and its cousin EV to EBITDA ten or fifteen years later.Luo, Min (2019). "Case Study of Magic Formula Based on Value Investment in Chinese A-shares Market". Advances in Computational Science and Computing. Advances in Intelligent Systems and Computing. Vol.877. pp.177–194. doi: 10.1007/978-3-030-02116-0_22. ISBN 978-3-030-02115-3. S2CID 158778392.

As for the Barron’s article, Greenblatt had actually responded to that in an interview. He claims that the database used by them (not sure which, Bloomberg’s?), does not exclude one time gains. He removed such gains from his analysis.The author is really humorous as well! Seriously sounds like he’s messing around with their kids while teaching them some important things, and thereby, the book wouldn’t feel boring at any point in time. I highly appreciate the author’s funny narration, and it genuinely does seem like the book and the formula taught in the book are extremely valuable and helpful if one is willing to be patient. Positivt: prinsippene er gode. Enkel og grei formel som bunner ut i at man skal kjøpe kvalitet til en billig penge, for så å vente til resten av tomsingene på markedet skjønner at aksjen er kvalitet. For det vil de skjønne, men det kan ta litt tid. Den er grei. Any time a book claims to beat the market, people line up to crap all over it. I mean, isn’t this just good ole’ Value investing? Traditionally this is done with other ratios like Book-to-Market ratios. Again, the data seems to support that the Little Book method does better than other ratios. And the formulas made a lot of financial sense too. They were common-sense formulas that were transparent and fair. There seemed to be nothing at all up Greenblatt's sleeve - no complicated market-timing mechanisms, no opaque and complex accounting formulas. Just one numerator and two denominators, both easy to grasp and standard in the financial literature. This book is just so damn good! It’s simple to read. Extreme laymen like me should find no difficulty in understanding the concepts of this book.

It’s sometimes a bit confusing that solid investing can be so simple. But this book, and all the statistics and historical data within it, show us that simple really can lead to great results. And results are all that matters in investing — not the level of difficulty or complexity of one's approach.

the only investment which was above expectation was my investment in genetic therapies biotech. investing in that kind of 'stuff' is completelly not natural, but i screw up my logic, realizing myself, that i was buying shit but i had no choice if i wanted to bet on the future. because gene therapy is the future. guess what: it paid above expecations. Earning yield how much money you can expect to make per year for each rupee you invest in the share. Why was Greenblatt’s system successful for so long, and why has it now failed spectacularly for ten years running? And the formulas made a lot of financial sense too. They were common-sense formulas that were transparent and fair. There seemed to be nothing at all up Greenblatt’s sleeve—no complicated market-timing mechanisms, no opaque and complex accounting formulas. Just one numerator and two denominators, both easy to grasp and standard in the financial literature. One time gains can artificially inflate the earnings yield of a company, and allow it to pop up on the list when it really shouldn’t belong because of a one time event.