You Can Be a STOCK MARKET GENIUS: Book Review
You Can Be a STOCK MARKET GENIUS: Uncover the Secret Hiding Places of Stock Market Profits
Review
You Can Be a STOCK MARKET GENIUS is the first book written by Joel Greenblatt. This book is probably the most advanced of the three books he has now written (his second book is The Little Book that Beats the Market; and his third book is THE BIG SECRET for the Small Investor).
Greenblatt starts by explaining “why” an individual investor can beat the market averages even though the vast majority of both professional and individual investors actually underperform the market. The basic premise is that the stock market is not efficient – particularly in the short term. This means some securities will, from time to time, trade at compelling prices that do not reflect the true underlying value. Greenblatt also explains that there are areas of the stock market which larger investors ignore for a variety of reasons – it is these areas where an individual investor has an opportunity to uncover bargains.
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Greenblatt also takes an interesting view on diversification. Greenblatt proposes that purchasing 6 to 8 stocks in different industries is usually sufficient to substantially reduce the nonmarket risk of owning just one stock. Overall stock market risk, however, is not eliminated and the investor is still subject to this risk. (It is equally interesting to note, however, that one of Greenblatt’s latest investing undertakings is value-weighted indexing which actually involves the purchase of several hundred stocks).
Moving on to “how” to achieve success in the stock market, Greenblatt explains that dedication, hard work and patience are all prerequisites. Greenblatt also stresses the importance of, first and foremost, selecting investments that provide the investor with downside protection – rather than focusing on how much of a return is possible.
Some of the secret places to make money in the stock market are listed below but you’ll have to read the book to understand how and why. Here’s a listing of the secret investing places that Greenblatt discusses:
- spinoffs;
- following insiders;
- risk arbitrage and merger securities;
- bankruptcies;
- restructurings;
- recaps;
- stub stocks;
- leaps;
- warrants; and
- options.
Greenblatt also lists specific resources you can use to help find opportunities. This includes raw data sources such as regulatory filings but also selected secondary sources from newsletters and other publishers. (Of course, you can also sign-up for our free Deep Value Investing newsletter here).
For those willing to engage in hard work, dedicate themselves and their time, and demonstrate the required patience, You Can Be a STOCK MARKET GENIUS is a must-read.
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Book Information
Title: You Can Be a STOCK MARKET GENIUS
Author: Joel Greenblatt
Publisher: Simon & Schuster, New York
Publication date: 1997
Number of pages: 285
Review Information
Reveiwer: DeepValueInvestor.com
Date of First Review: April 2011
Updated:
Stars (9/10)
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