Greenblatt’s logic is a blend of Warren Buffett’s "quality" and Benjamin Graham’s "value." He argues that you don't need to be a genius; you just need to find businesses that: relative to what they cost to buy. Generate high returns on the capital they invest. 🛠️ The Two Pillars of the Magic Formula The formula ranks every company on two specific metrics:
This measures how "good" the business is. It shows how efficiently the company turns its investments into profits. You want a high ROC. Joel Greenblatt - The Little Book That Beats th...
Explain how to (like utilities or banks) that the formula usually ignores. Greenblatt’s logic is a blend of Warren Buffett’s
This tells you how "cheap" a stock is. It compares a company's profits to its enterprise value. You want a high yield—more bang for your buck. It shows how efficiently the company turns its
The historical data is staggering. From 1988 to 2004, the Magic Formula returned roughly , compared to the S&P 500’s 12.4%. While it may not always hit those heights today, the core principle—buying quality on sale—remains a foundational pillar of value investing. ⚠️ The "Catch" (Why Everyone Doesn't Do It) If it’s so simple, why isn't everyone a millionaire?