The Magic Formula that beats the market

I was reading a book titled "The Little Book That Beats The Market" by Joel GreenBlatt over the weekend and it detailed a step by step instruction on how to beat the market.

The strategy or "magic formula" that the book was talking about is actually pretty similar to the strategy that I was trying to follow here. The only difference is the method of valuation.

In the book, Joel used Return on Capital and Earnings yield to determine if the Company is good and cheap whereas the "formula" I was following uses P/B, consecutive div yield, debt/equity and EV/EBIT to determine if the Company is cheap and well managed.

Regardless of the valuation method, both strategies believe that retail investor like me and you (if you are reading this, i assume you are a retail investor) do not have enough time to do a detailed analysis on companies to accurately predict the future. Hence buying 20 to 30 good and cheap companies is the best bet to beat the market in a long run.

I will touch on more details on Joel's "The Little Book That Beats The Market" and strategy in later post. Stay tune.