Note to readers: In this series, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing. Some of the articles are behind pay walls. However, it is often possible to read
One of the most compelling investing systems developed in recent years is Joel Greenblatt’s ‘Magic Formula’ approach which is documented on the magicformulainvesting.com website as well as Mr. Greenblatt’s The Little Book That Beats the Market. The formula ranks stocks based on two very simple and easily calculated figures: earnings yield and return on capital. Read this article to learn more about how The Manual of Ideas adds qualitative insight into magic formula stocks.
Joel Greenblatt outlined his “magic formula” for stock market investing in The Little Book That Beats the Market. Mr. Greenblatt’s formula ranks stocks based on two simple and easily calculated figures: earnings yield and return on capital. Rather than merely looking for the cheapest companies, the goal is to also find good businesses that achieve high returns on capital. In the interview shown below, Mr. Greenblatt discusses a new fund that he is introducing which will apply the magic formula to global markets. Read this article for more details and to view the video.