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Use a simple formula to pick stocks from "summary" of The Little Book That Beats the Market by Joel Greenblatt
The idea behind the simple formula for picking stocks is to find good companies that are priced at bargain levels. The formula consists of two factors: return on capital and earnings yield. Return on capital is a measure of how well a company is using its capital to generate profits. Earnings yield, on the other hand, is a measure of how cheap a company's stock is relative to its earnings. By combining these two factors, a list of good companies at bargain prices can be generated. The formula works by ranking companies based on their return on capital and earnings yield, and then investing in the top-ranked companies. This approach is based on the principles of value investing, which involves buying good companies at bargain prices. By focusing on these two factors, the formula is able to identify companies that are both high quality and attractively priced. The simplicity of the formula is one of its key strengths. By focusing on just two factors, investors can quickly and easily identify potential investment opportunities. This simplicity also helps to avoid the pitfalls of overcomplicating the investment process. By sticking to the basics, investors can stay focused on what real...
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