Following my post very favorabl the "small book that beats the market "by Joel Greenblatt, I have a shade.
The concept of the book is attractive. Furthermore, it is the fundamental principles, they have largely contributed to the success of its author.
Nevertheless, one point remains unclear in the book: the implementation
1) What user data?
The author recommends using the results of enterprises, and to proceed to a portfolio turnover at the beginning of each year . The main problem is that January 1 N, we do not know the EBIT for the year N-1 market companies.
way out? Maybe it is possible to have recourse to this the time to market estimates, which although they are not perfect, referred to the entire market should provide a relatively accurate classification.
Furthermore, the author offers the reader to use a site posted specially for the occasion, which allows select companies. But the exact methodology remains a little fuzzy.
2) What about non-US investors
the concept of the book has been tested on U.S. markets. Nevertheless, assuming that one is European or Japanese, the formula does she walk? It seems so, but again, here is a point that should be studied a little more thrust. For example, as an investor Francia, what is the symbol of Euronext has enough value that I apply for foolishly formula (assuming that I managed to get an exhaustive database), or do I widen my field of investigation has throughout Europe? Same issue with Japan. What about emerging countries? Does this method would have helped to weather the crises of 97 and 98, as well as widely outperform the emergence during the boom of recent years?
3) What impact will a finer selection
Joel Greenblatt explains that this method is hardy, and can refine it (that its funds practice). I have a problem. Indeed, it does not exist a risk that, in seeking to keep only the best companies (apparently), it has not come ultimately eliminate companies whose background explains itself in large part the outperformance? It should therefore be a study to investigate the distribution of generation performance and see what, if any, the best performing securities, are not those precisely auraioent could be most easily eliminated.
In the current state of my reflection, here are the limits that I see to this method.
Nevertheless, I noticed that many bloggers are testing this method with their own money. It seems that those who have applied methodically are quite satisfied.
http://www.magicformulainvesting.com/
(the book site, in English)
http://justadrone.blogspot.com/2007/01/major-insight.html
http://magic-formula-investing.blogspot.com/
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