The book will take readers on a step-by-step journey so

that they can learn the principles of value investing in

a way that will provide them with a long-term strategy

that they can understand and stick with through both

good and bad periods for the stock market.

As the Wall Street Journal stated about the original edi-

tion, Mr. Greenblatt says his goal was to provide

advice that, while sophisticated, could be understood

and followed by his fi ve children, ages six to fi fteen.

They are in luck. His Little Book is one of the best,

clearest guides to value investing out there.

In 2005, Joel Greenblatt published a book that is al-

ready considered one of the classics of fi nance litera-

ture. In The Little Book That Beats the Marketa New York Times

bestseller with 300,000 copies in printGreenblatt

explained how investors can outperform the popular

market averages by simply and systematically applying

a formula that seeks out good businesses when they are

available at bargain prices. Now, with a new Introduc-

tion and Afterword for 2010, The Little Book That Still Beats

the Market updates and expands upon the research fi nd-

ings from the original book. Included are data and

analysis covering the recent fi nancial crisis and model

performance through the end of 2009.

In a straightforward and accessible style, the book ex-

plores the basic principles of successful stock market

investing and then reveals the authors time-tested for-

mula that makes buying above-average companies at

below-average prices automatic. Though the formula

has been extensively tested and is a breakthrough in the

academic and professional world, Greenblatt explains

it using sixth-grade math, plain language, and humor.

He shows how to use his method to beat both the market

and professional managers by a wide margin. Youll

also learn why success eludes almost all individual and

professional investors, and why the formula will con-

tinue to work even after everyone knows it.

While the formula may be simple, understanding why

the formula works is the true key to success for investors.

Jacket Design: Paul McCarthyRibbon Image: Michael M. Schwab / Getty Images

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$19.95 USA / $23.95 CAN

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Simply perfect. One of the most important investment books of the last 50 years!Michael Price

A landmark booka stunningly simple and low-risk way to signifi cantly beat the market!

Michael Steinhardt, the Dean of Wall Street hedge fund managers

This book is the fi nest simple distillation of modern value investing principles ever written. It should be mandatory reading for all serious investors

from the fourth grade on up. Professor Bruce Greenwald, Director of the Heilbrunn Center for

Graham and Dodd Investing, Columbia Business School

The book unquestionably makes good on its promises.SmartMoney

Greenblatt delivers admirably . . . it contains one of the clearest, most entertaining explanations youll ever see of the ideas underlying value investing.

International Herald Tribune

C O N T I N U E D O N B A C K F L A P

C O N T I N U E D F R O M F R O N T F L A P

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JOEL GREENBLATT is the founder of Gotham Capital, an invest-

ment partnership that achieved 40%

annualized returns for the twenty years

after its founding in 1985. He is a

professor on the adjunct faculty of Columbia Business

School, the Chief Strategist for Formula Investing,

the former chairman of the board of a Fortune 500

company, and the author of You Can Be a Stock Market

Genius and The Little Book That Beats the Market. Greenblatt

holds a BS and an MBA from the Wharton School.U

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Praise for

T H E L I T T L E B O O K T H A TT H E L I T T L E B O O K T H A T BEATSBEATS T H ET H E MARKETMARKET

$LIT

TLE BOOK

BIG P R O F I TS

JOEL GR EENBLAT TJOEL GR EENBLAT TF O R E W O R D B YF O R E W O R D B Y A N D R E W T O B I A SA N D R E W T O B I A S

Updated with New Introduction and Afterword

NEW YORK TIMES

BESTSELLER

NEW YORK TIMES

BESTSELLER

The best book on the subject in years.

The best book on the subject in years. Financial Times

Financial Times

The Little Book [That Beats the Market ] is one of the best, clearest guides to value investing out there.

The Wall Street Journal

$

ffirs.qxd 7/30/10 2:01 PM Page ii

THE LITTLE BOOK

THAT STILL BEATS THE MARKET

THE LITTLE BOOK

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THAT

STILL BEATS THE MARKET

JOEL GREENBLATT

John Wiley & Sons, Inc.

THE LITTLE BOOK

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Copyright 2010 by Joel Greenblatt. All rights reserved

Published by John Wiley & Sons, Inc., Hoboken, New JerseyPublished simultaneously in Canada

No part of this publication may be reproduced, stored in a retrieval system, or trans-mitted in any form or by any means, electronic, mechanical, photocopying, record-ing, scanning, or otherwise, except as permitted under Section 107 or 108 of the1976 United States Copyright Act, without either the prior written permission ofthe Publisher, or authorization through payment of the appropriate per-copy fee tothe Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923,(978) 750-8400, fax (978) 750-4470, or on the web at www.copyright.com. Requeststo the Publisher for permission should be addressed to the Permissions Department,John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011,fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have usedtheir best efforts in preparing this book, they make no representations or warrantieswith respect to the accuracy or completeness of the contents of this book and specif-ically disclaim any implied warranties of merchantability or fitness for a particularpurpose. No warranty may be created or extended by sales representatives or writ-ten sales materials. The advice and strategies contained herein may not be suitablefor your situation. You should consult with a professional where appropriate. Nei-ther the publisher nor author shall be liable for any loss of profit or any other com-mercial damages, including but not limited to special, incidental, consequential, orother damages.

For general information on our other products and services or for technical support,please contact our Customer Care Department within the United States at (800)762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002.

Wiley also publishes its books in a variety of electronic formats. Some content thatappears in print may not be available in electronic books. For more informationabout Wiley products, visit our web site at www.wiley.com.

ISBN 978-0-470-62415-9 (cloth); 978-0-470-92671-0 (ebk); 978-0-470-92672-7 (ebk)

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

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http://www.wiley.com/go/permissionswww.wiley.com

To my wonderful wife, Julie, and our five magnificent spin-offs

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Contents

Acknowledgments ix

Foreword by Andrew Tobias xiii

Introduction to the 2010 Edition xvii

Introduction to the Original Edition xxi

Chapter One 1Chapter Two 9Chapter Three 17Chapter Four 27Chapter Five 39Chapter Six 51Chapter Seven 61

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Chapter Eight 71Chapter Nine 81Chapter Ten 93Chapter Eleven 105Chapter Twelve 115Chapter Thirteen 127

Step-by-Step Instructions 137

Afterword to the 2010 Edition 145

Appendix 165

[vi i i ] CO N T E N TS

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Acknowledgments

I AM GRATEFUL TO THE MANY FRIENDS, colleagues, andfamily who have contributed to this project. In particular,special thanks are due to my partners at Gotham Capital,Rob Goldstein and John Petry. Not only are they the truecoauthors of the Magic Formula study that appears in thisbook, but it is also a rare privilege to be associated withsuch brilliant, talented, and generous people. Their con-tributions to this bookand to the success of GothamCapitalcannot be overstated and are appreciated morethan they know. I would also like to give special thanks toEdward Ramsden at Caburn Capital for his extraordinarilyinsightful com