The Little Book That Beats the Market, continued

The moral of the story is that buying stocks that have a high return on capital investment (in other words if you can set up a gum store for $400,000 and make $200,000 in revenue on that store in one year--which is 50% return on capital), AND that have a high earnings yield (meaning that if you spending $10 to make something, and you can sell it for $20 you have a 100% margin), then you will always do well, especially if those stocks belong to companies with a high capitalization to start with. Joel Greenblatt provides lots of stories, statistics, and history to prove his point, and he even provides a website so that other people can test it for themselves. That website is www.magicformulainvesting.com. Check it out.