The Neatest Little Guide to Stock Market Investing

Review by Susanna Hutcheson for The Neatest Little Guide to Stock Market Investing
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I just finished reading the 2008 edition of this book and found it terrific. Some of the material was basic so I skipped it. But if someone is new to investing, this information would be worth its weight in gold to them.

Kelly gives the reader the investing strategies of several top investors. While they’re different in some very substantial ways, it allows the reader to choose his own style or begin to develop one.

For example, one famous investor keeps a stock no matter what. It can go very low and he’ll buy even more. He says that by buying more, his average cost goes down. Which it does if you watch it in your own portfolio.

Yet another investor sells when a stock goes down eight percent and another sells at fifteen percent loss.

I think knowing when to sell is perhaps harder than knowing when to buy. I have to problems buying a stock and doing the research. It’s knowing when to sell that gives me trouble. So I enjoyed reading about the different styles and trying to get a grip on it. The main thing, according the book, is to know in advance when you’ll sell. Decide why you bought the stock in the first place. Then, when and if the stock no longer meets those criteria, sell.

I had one small issue with the book and that’s the fact it didn’t deal much with ETFs. Of course, ETFs are stocks to a large extent. But one can’t judge them by the same criteria in that some of the inner holdings may retain your criteria while one or two others may not.

But this small, easy to read book covers it all. It’s a full course in the stock market and is good for investors at all levels. There are very few investors who would not benefit from reading this book.

Highly recommended.

Review by M. Wang for The Neatest Little Guide to Stock Market Investing
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I like this book because it is a good summary on many different things and reader friendly to those who don’t have much knowledge on stocks.

However, author strongly recommended on using leveraged index fund. This is a very dangerous move and could be devastating. In the recent down turn, we already saw the problem with this strategy. So far we are still lucky because Dow didn’t drop more than 50%. If next time, it drops 60-70%, the leveraged fund may never get back to previous levels. And your most of your life savings could be wiped out. This is certainly not a good recommendation for beginners.

The reasoning in the book is also flawed. For example, it says the down turn in 2001 is probably the worst in life time because the Nasdaq drops 78%. But the trading strategy is not about Nasdaq, it is about Dow or mid cap 400. These two were not hit very hard in 2001.

If you are a beginner, just use the book as a starting guide, don’t really invest the money as the book suggested.

Review by Anon….. for You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits
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Okay, so the title of the book leaves something to be desired, but that is the ONLY part of this book that falls short. Joel Greenblatt has written an excellent book on profiting from special situations. That’s fortunate for the rest of us, since so far as I can tell, this is the ONLY book that provides an overview of event-driven investing. Note that I said “overview”–it’s by no means definitive, nor does it claim to be. Certainly more rigorous treatments of risk arbitrage exist. However, this is the only book I’m aware of that is dedicated to explaining merger securities, spinoffs, recapitalizations, bankruptcy and yes, risk arbitrage.The book’s format is well thought out: each chapter explains the how and why of investing in one particular corporate event, and then utilizes case studies to ram the point home. The case studies are interesting, reading at times like a novel. The tone is lighthearted and endearing throughout, and the frequent jokes, although usually kitschy, hit the mark nonetheless. (One gem: “There are three types of people in the world–those who can count, and those who can’t.”)This book is not for everyone, however. Beginners should first read Peter Lynch, Ben Graham, and Phillip Fisher before tackling this one. Greenblatt assumes a reasonable degree of comfort with financial statements and value investing strategies on the part of the reader. The use of LEAPS and options in special situations is covered, but should be avoided by all save for the most advanced investors (as per the author’s advice). Also, professionals working in the field of event-driven investments would probably find little they did not already know. That being said, the book reads quickly, so a pro would be little disadvantaged for reading it.Finally, it’s nice to know that the author can walk the walk as well as talk the talk. Greenblatt publishes his firm’s audited returns over a ten-year period at the end of the book, and they are out of this world. We’re talking an average annual return of 50% for ten years. This book is not a case of “Those who can, do; those who can’t, teach.” Greenblatt can, and he does.Highly recommended.

Review by Professor Donald Mitchell for You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits
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This book is for those who cannot resist the idea of wanting to outperform the market averages. For most people, that’s dumb idea . . . and indexed mutual funds would be a better choice.

But if you are willing to roll up your sleeves, put on your green eyeshade and look at things differently, Mr. Greenblatt’s approach is a very valid one.

If you read only one of Mr. Greenblatt’s books about investing (the other one is The Little Book That Beats the Market), read this one. You’ll make more money with this one.

You can be a Stock Market Genius has the simplest explanation for special situations investing involving unusual securities that I have seen for the lay person.

For most people, this book will be a lot to chew on. I suggest that you start by simply trying to understand and apply one idea in the book . . . such as finding under priced small spin-off stocks. After you get the handle on that one, go on to another approach that interests you.

I have worked for over three decades helping companies design these new securities that fascinate Mr. Greenblatt so much. From that experience, I’m constantly amazed at how stupidly most corporate finance departments and investment banks pursue these new structures. I suspect that the answer is that the heavy brainpower is saved for more profitable work like M&A.

As a result, you will almost always find a great investment opportunity if you look at unusual securities. I encourage you to begin by spending a half hour getting the background on any unusual transaction you read about.

You can also improve on this book by doing more precise measurements of securities values (if you have the background to do that), but for many severely undervalued securities Mr. Greenblatt’s approach of taking guesses about what a reasonable value is will work just fine.

Although the examples are older, these kinds of opportunities still abound in most categories he discusses (stub stocks are the exception). Mr. Greenblatt has a real talent for putting his cases together to make them easier to understand.

Have a ball!

Review by Befragt for You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits
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The ONLY reason I read this book was that it was recommended by some trusted sources – as others have noticed, the title is horrendous and highlighted when coupled with the gaudy yellow cover. In particular, the title makes me think of late night informercials promising easy rewards in real estate with no money down. Fortunately, the content of the book more than makes up for the title.

Greenblatt’s methods ultimately stem from the “intrinsic value” and “margin of safety” ideas developed by Benjamen Graham (see “Security Analysis” and “the Intelligent Investor”). However, in somewhat of a nod to adherents of the efficient market theory, Greenblatt focuses his energies on areas that are subject to less scrutiny, and hence, less likely to be efficiently priced by the stock market. He notes, for example, that many institutional investors are prohibited from owning certain kinds of securities (e.g., a stock index fund can’t own bonds), and that investors that receive securities in some transactions may not desire to hold them. By researching companies that are involved in “special situations,” Greenblatt theorizes that investors can uncover stocks that are worth more than their current market value. To this end, the book covers opportunities with spin-offs, bankruptcies, restructurings, rights offerings, re-capitalizations, merger securities and companies going private.

Although Greenblatt is clearly an intellectual heir to Benjamin Graham, one of the great things about this book is that is provides a theory, albeit a time-consuming one, whereby investors can uncover their own opportunities. IMHO, formulaic investing is unlikely to work over the long-haul, because a sucessful formula that is too simple to replicate will tend to draw competition. Rather than relying on formulas, Greenblatt tells readers how to identify situations that MAY present opportunities. It is up to the individual investor to research those potential opportunities and determine whether they are worth pursuing.

Although Greenblatt is a solid writer and the book is highly entertaining, I believe most readers would benefit from an understanding of value investing principles before trying to read this book. It might be a good idea to read Graham’s “Intelligent Investor” at the very least (although this is a much tougher read than Greenblatt’s book, and Graham’s approach is not entirely compatible with Greenblatt’s). Moreover, Greenblatt assumes that readers have a working familiarity of financial statements.

One last point of note – some of the ideas that Greenblatt sets forth are somewhat similar to those propounded by Marty Whitman in “the Aggressive Convervative Investor” and in “Value Investing – a Balanced Approach” (Greenblatt mentions Whitman’s Third Avenue Value Fund as a possible source of investment ideas in the book). Both of these are good reads, particularly along with Greenblatt’s book. Another good book to read is Dreman’s “Contrarian Investing.”

In all, this book is a great read, and I’d highly recommend it, but I would not recommend it for beginners.