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Greenblatt advocates buying stocks at a low price using two factors, earnings on investment (EBIT) and return on assets (ROA). He calculates these two numbers for stocks, adds them, and buys the top 20 or so, selling off in a year. This is his "magic formula". If you can't calculate these numbers, you go to his website and currently get his for free. The rest of his book is fluff, although it may be of use to people who currently have no idea how to select an undervalued stock. The Appendix notes where he got his idea: from analyzing real data posted on the internet provided by Professor Robert Haugen at his website. Haugen has long argued that securities are not fairly priced and that you can beat the market, but using mathematical techniques is not so simple as suggested. Price movements include event, error, and price-driven volatility. For example, rising oil prices affect the price of GM, which gives rise to event-driven volatility. Lower-than-expected earnings for Google leads to a lower price when investors mistakenly think they may perform more poorly in the future, leading to error-driven volatility. Price-driven volatility is investors watching prices alone. The first two factor categories can largely be predicted with a factor model. (See Haugen, The Inefficient Stock Market: What Pays Off and Why. ) Haugen and other factor models typically have 50 ore more factors, so they won't be subject to extreme price volatility that Greenblatt's two factors will give you. Greenblatt has perhaps datamined Haugen returns to select two factors which may perform well, if you can tolerate 2 to 3 years of down returns. Few individuals can psychologically tolerate these losses; most want losses controlled. Unless you are a large investor who can purchase and use databases, your investment is based on blind trust in Greenblatt's selections. (Had he really wanted to help you, he would have told you how to access databases and calculate his factors--note that this is missing from his book--the how to do it!) And you must invest the same day he calculates these factors at the open of the market, since daily price fluctuations will change the list. It is unlikely that the smaller investors--say those with a hundred thousand or less---will be able to timely and in a cost-effective manner invest in and follow their portfolio if they have some other job and the hectic life most of us lead. So unless you fall into the category of a large investor who has money to lose and time to quickly invest and follow your investments, AND you like the idea of quantitative investing, you are better off investing in a quantitatively-controlled no-load investment fund, preferably in a tax-deferred vehicle such as a Keogh or IRA.