Bests & Worsts Reviews from Amazon

As a portfolio manager at a large New York based hedge fund I have read more investment books than I care to admit. With that being said, The Little Book That Beat the Market is the first book I have felt compelled to review on Amazon (of course, I am not really going out on a limb recommending a book that legendary investor Michael Price describes as "One of the most important investment books of the last 50 years.") Professor Greenblatt's first book, You Can Be a Stock Market Genius, is widely regarded as the seminal text on special situations investing and the strategies contained in the book are employed by multiple hedge funds and investment professional. While I recommend Stock Market Genius to anyone who has the time and desire to analyze stocks in detail (at least 3 hours a week) I highly recommend The Little Book That Beat the Market to ALL investors of ALL ages and to ANYONE who wants to understand how businesses create value. The beauty of the Little Book is a follows: 1) It is simple 2) It works 3) Most investment professionals cannot follow the Little Book's strategy and that makes this strategy one of the only instances where small investors have a HUGE advantage over professionals. 4) The people who have recommended this book are some of the most successful investors in the history of Wall Street (myself excluded, maybe someday!) 1) It is Simple While some of the reviews on Amazon have argued that the Little Book is too simply, I completely disagree. The reason this book is great is that it takes a very complicated subject matter (investment success) and makes it simple and easy to understand. Bottom line, I don't really care if something is difficult or easy, if I can use it to make money I like it. The fact that the Little Book works AND it is easy, is really the best of both worlds. 2) It Works The actual results of the Little Book describe in the book are astonishing. While I agree with others that reproducing the exact results of Professor Greenblatt's study is difficult for non-professionals, using Compustats real-time database gets remarkably close to the results described in the book and detailed on his web site. However, what I find to be more valuable than the results themselves is Professor Greenblatt's explanation on why the formula works. Yes, everyone wants to buy cheap stocks but understanding how to distinguish between which cheap stocks are just cheap and which are good businesses worth owning is critical to investment success. While these concepts might not be entirely new (Warren Buffett writes about them annually), never before have I seen them described so completely and simply in one place. 3) Most Professionals Can't Follow Strategy Most investors (especially hedge funds) are monitored closely on yearly, quarterly and monthly performance. For a hedge fund, having stable monthly numbers is considered critical to attracting new capital and preventing redemptions. Despite the fact that the Magic Formula has excellent long-term performance (30% annually over 17 years) the monthly volatility (down 5 out of every 12 months on average) makes it impossible for most hedge funds and professional investors to follow strictly without fear of investor redemptions. As a hedge fund manager I plan on incorporating the concepts of the Little Book into my investing but I am establishing a fund for my children that will invest strictly based on Professor Greenblatt's Magic Formula. 4) Recommended by Highly Successful Investors As I stated above, I am not really putting myself out on a limb recommending a book written by Professor Greenblatt (his 20 year track record of 40% annual returns speaks for itself) and endorsed by Michael Price, Andrew Tobias, Professor Bruce Greenwald, Michael Steinhardt, the Wall Street Journal and the Financial Times. With that being said, I highly recommend The Little Book that Beat the Market and believe it is a great read for anyone interested in investing and business. FYI, other investing books I highly recommend are The Essays of Warren Buffett: Lessons for Corporate America edited by Lawrence Cunningham; The Intelligent Investor, by Benjamin Graham; Margin of Safety by Seth A. Klarman; Value Investing with the Masters by Kirk Kazanjian and Money Ball by Michael Lewis.