Sunday, May 6, 2007

The Little Book That Beats the Market

I have finished reading Pabrai's book and got a lot of new ideas from him, I have talked about them in some of my recent posts, especially the way to look at downside risk, return and uncertainty.

Pabrai recommended "The Little Book That Beats the Market" by Joel Greenblatt, whose method is simply using P/E and ROIC to figure out which stock to buy. He calls it 'Magic Formula'.

Frankly speaking, I don't believe in any simple formula that can beat the market without further research. If you have read the majority of my posts here, you do know I care about causality much more than pure numbers.

However since I not only trust, but also admire Pabrai, I went ahead and checked out Joel's website

What a nice discovery! I used 50 stock filter mkt cap>100M. I found my OVTI there, I also found zzpt's NXG, my recent coal play pick FDG. and one interesting pick AVCI I have been doing research on.

Another one I am familiar with is USNA, however my position on it will be short, since its multi-level marketing empire is going down and I just don't think it will come back given a series of negative developments recently.

It seems that this formula works nicely with my style. and I probably need to buy the book and read it.


brisk said...

interesting, I will try to get this book to see see.

bobby said...

Robin, I agree FDG is a good pick but disagree on your summer play rationale for this one.
"Fording, which mines mostly metallurgical coal, is in the steel business, Popowich(CEO) says. ...the metallurgical coal goes into steel-producing blast furnaces."
Recent run-up of FDG is closely related to the strong iron and steel industry. Performance of FDG is more correlated with steel industry than with the utility sector.

Robin said...

thanks for the insight about FDG, I will rethink about it, today's Coal sector action clearly proved you are right.