Joel Greenblatt and the Magic Formula of Investing
Channel: InformedTrades
Date: 2012-10-25

See our thread on Joel's book, including key excerpts from it: http://www.informedtrades.com/555459-little-book-still-beats-market-review-highlights.html

Visit Greenblatt's web site: http://www.magicformulainvesting.com

Purchase his book: http://bitly.com/R3FgQU

Greenblatt is a value investor. His approach basically involves ranking the universe of stocks according to two factors: return on capital -- the earnings a company generates based on its assets -- and its earnings yield, which is a way of measuring a company's profits relative to its market price (similar to the more commonly utilized price/earnings ratio). Greenblatt invests in the stocks that have the best combination of return on capital and earnings yield. 

He believes this "magic formula" is so simple virtually anyone could do it, but that the hard part is the patience needed to realize returns and the discipline to stick with the position when it is losing. Greenblatt notes "the magic formula" could have stocks that are losing money for years at a time -- especially if the market as a whole is declining.