I finished reading The Big Secret for the Small Investor: A New Route to Long-Term Investment Success which is written by Joel Greenblatt last Sunday.
Before this I’ve read Greenblatt’s The Little Book That Beats The Market, and liked it quite a bit.
However, this book was very disappointing, and I wouldn’t recommend it to most people. The book is very short, some 150 pages or so, and even those are small pages, yet it feels like you’re just dragging along while reading most of it.
I felt that most of the book was just a very very long lead towards the central idea in it that comes at Chapter 8 (there are a total of 9 chapters).
The idea itself is not all that new, and it’s not very clear to me how a small investor can even go about implementing it.
I say the idea is not all that new because I feel it deeply draws from the concepts of value investing, and diversification, and the author doesn’t do much to build on those ideas for you to feel that you’ve discovered something new.
However, if you ask me if I’ve ever heard of it in the exact form as he describes, then no, I haven’t heard it in exactly that form.
This reminds me of a conversation that I had with someone a few years ago. We were discussing what a “new car” was.
If you buy a used car then is that a new car? It’s new for you, but it’s not really a new car. But surely, if you drove a car right out of a showroom – it’s brand new – isn’t it?
Well, yes and no. It’s definitely a new car if you’re looking at it from the perspective of a customer.
But, if you’re looking at it from the perspective of an Operations head in a factory (which I think is close to what the he was) it’s not a new car. It’s just coming from the existing line – and there is nothing new about it.
You don’t have to make new dyes, find new suppliers, establish quality parameters or do anything of the sort if just one more car is coming out. If you had to come up with a new model then you would have to do all this and that’s what his definition of a new car was.
You can go back and forth on this for hours together and I only take this example to say that I realize how someone could treat Greenblatt’s idea as new and find value in it, but I’m not that someone.
The Good Parts
I did read the whole book, and maybe I was disappointed because of the content in the earlier book and the high expectation it set for me.
There is nothing in the book that I disagree with, or find misleading. It’s a good, quick and simple read and if you’re just starting out your career in investing and lean towards value investing then this can prove to be a very useful resource.
However, if you have read a few books on investing, and valuing companies then you can give this a skip, and you won’t be losing out on much.
Disclosure: Link is affiliate.