★★★ A million-selling bestseller with over 1 million copies sold worldwide ★★★
★★★ Recommendations: Park Sung-jin of Ian Investment Advisory, Sukhyang of "Warren Buffett Next Door," and Sang-geon Lee of Mirae Asset Investment & Pension. ★★★
★★★ Amazon Bestseller for 20 Consecutive Years ★★★

“Foolish investors are obsessed with change,
“A wise investor seeks answers in what never changes.”

It has achieved an average annual return of 40% over 20 years.
The Complete Guide to Value Investing from a Modern-Day Graham

As in any field, there are people in investing who are called 'masters' or 'gurus'.
Joel Greenblatt, founder of Gotham Capital and author of this book, is a guru in the investment world, following in the footsteps of Warren Buffett and John Templeton.
Also known as the 'Guru of Value Investing' and the 'Modern Benjamin Graham', he reveals in this book the 'magic formula' that can help even beginners who know nothing about investing earn an annual return of more than 6%.
Greenblatt's investment secret is simple.
"Buy good stocks at bargain prices!" He says that most people repeat investment failures simply because they don't know exactly what constitutes a "good stock" and what constitutes a "cheap price." He explains the "return on capital" and "earnings yield," which are the criteria for judging this.


Joel Greenblatt, in his "Little Book," which is about 300 pages long and can be read in an hour, explains how these two criteria enrich our stock investments. He also guides us through the "Magic Formula Site," which he created, on how to apply the Magic Formula to real-world investments.
Of course, it may be hard to believe that you can make a profit based on just two criteria: return on capital and profit yield.
In fact, if you use this magic formula, you will get stocks that are completely different from the stocks that are currently the most popular and are talked about among people.
Greenblatt dispels countless doubts about the magic formula, one by one, and explains in detail how it generates magical profits in such a simple way.


Even though it's been 20 years since its publication, "The Little Book That Beats the Stock Market" is still widely sold in 16 countries around the world, including the United States, France, the United Kingdom, and Japan.
This may be evidence that the 'magic formula' is still valid and not outdated.
Park Sung-jin, the CEO of Ian Investment Consulting, a renowned expert in value investing in Korea, and Sook Hyang, the "Warren Buffett next door neighbor," also praised this book.
In the chaotic stock market, where you go back and forth between red and blue lights hundreds of times, "The Little Book That Beats the Stock Market" will guide you on a comfortable yet sure path.

Investing is, of course, difficult.
That's why a rational, disciplined, organized, and long-term investment strategy is essential for success.
In any market environment.
And that strategy must not stop at being rational.
That means it has to make sense to you.
Deep understanding and acceptance is the only way to stick to a long-term strategy that may not work in the short term.
---From the "2010 Edition Preface"

“No, Ben.
I don't mean to say I sell gum.
My dad works on figuring out how much companies are worth, like we just looked at with Jason's business.
So if I can buy the company for a lot less than I think it's worth, I'll buy it!" "Wait a minute," Ben blurted out.
“That’s ridiculous.
“If a company is worth $1,000, why would you sell it to your dad for $500?”
---From "Chapter 1, Lessons Taught by a 13-Year-Old Rich Boy"

What would happen if you bought stocks in companies that simultaneously yield high earnings and high returns on capital? In other words, what would happen if you only bought stocks in good companies when they were cheap? To put it another way, what if you only bought stocks in companies with high returns on capital when they yield high earnings? I'll tell you the answer.
'You'll make a lot of money!'
---From "Chapter 6, Magic Formula"

Unfortunately, in today's markets, few companies meet the criteria required by Graham's original formula: stocks trading below their net liquidation value.
If so, then Graham's formula is not as useful as it once was.
Fortunately, our magic formula doesn't seem to have that problem.
Because the magic formula is a formula for assigning ‘ranks’.
There are bound to be stocks that clearly rank highest at any given time.
Moreover, since the stocks perform well in the order of the official rankings, our investments are not limited to just the stocks of the top 30 companies.
Since all stocks in the group with high rankings perform well, there is a wide range of stock choices.

---From "Chapter 7, Can We Trust the Magic Formula?"

The point is, if the magic formula always worked, everyone would use it.
If everyone uses it, the formula will eventually cease to be successful.
If too many people buy the cheap stocks chosen by the magic formula, the price of these stocks will rise almost immediately.
In other words, if everyone uses the magic formula, the price will disappear, and the magic formula will eventually lose its effectiveness! This is why it's fortunate that the magic formula isn't all that great.

---From "Chapter 8, How Luck Comes to Those Who Persevere"

If you don't believe the magic formula will work for you, you're very likely to quit before it even has a chance to succeed! At least that's what statistics from the past 17 years suggest.
The magic formula works.
The magic formula delivers long-term annual returns that are twice, and sometimes three times, the market average.
The point is that such good performance is not always maintained.
In the short term, the magic formula may or may not work.
And when discussing magic formulas, 'short term' sometimes means 'years' rather than days or months.
It may sound strange, but logically speaking, this is good news.
If you believe in the magic formula enough to stick with it for the long term, then this is good news.
But to stick with a strategy that doesn't work year after year, you have to believe in it, deep down, and truly.

---From "Chapter 8, How Luck Comes to Those Who Persevere"

Mr. Market, who may seem crazy in the short term, is actually a very sensible person in the long term.
It may take weeks or months, or (not infrequently) years, but Mr. Market will eventually pay the "fair price" for our stock.
I actually make a promise to my business school students at the beginning of every semester.
If they do a good job of evaluating the value of a company, Mr. Market will eventually agree with them.
I would say that if their assessment is correct, Mr. Market will reward you for buying a stock at a bargain price within about two to three years, although it may take a little longer.
How can that be? Aren't Mr. Market's emotions incurable? Well, in the short term, it's true that Mr. Market is often swayed by emotions, but over time, these emotions are replaced by "facts and reality."

---From "Chapter 10, Mr. Market, Who Will Definitely Come to His Sane"

The magic formula picks stocks from multiple companies at once.
When you look at a portfolio of companies as a whole, last year's earnings are often a good indicator of future earnings.
On the other hand, this is not the case for individual companies.
However, when it comes to averages across multiple companies, last year's earnings often serve as a good baseline for estimating what a normal year's earnings might be like.
That's why, when you actually use the magic formula, you buy stocks of 20 or 30 companies at a time.
In the case of the magic formula, we seek the average (i.e., the average return that a portfolio of stocks selected by the magic formula would return).
Therefore, since the average return that the magic formula will produce will hopefully be excellent, owning stocks in many of the companies selected by the magic formula will allow us to get very close to the average we are seeking.

---From "Chapter 11, How to Use the Minimum Magic Formula to Prevent an Explosion"