This site is created by Joel Greenblatt, Founder and Managing Partner at Gotham Capital (with average annualized returns of 40% for over 20 years) shows you how "beating the market" can be made simple and easy.
The strategy is to buy 20 to 30 stocks and hold them for a year. If you cannot buy all stocks at one time, you can buy 2-3 stocks every month and hold them for a year.
The results of some of the studies conducted over the last 17 years (upto 2004) shows that holding a portfolio of stocks with the best combination of a high earnings yield and a high return on capital produced over 30% annual returns vs. just 12% for the overall market during the same period (see Table 1).
Table 1. The Magic Formula in Action
Magic Formula [Market Average] {S&P 500}
1988: 27.1% [24.8%] {16.6%}
1989: 44.6 [18.0] {31.7}
1990: 1.7 [-16.1] {-3.1}
1991: 70.6 [45.6] {30.5}
1992: 32.4 [11.4] {7.6}
1993: 17.2 [15.9] {10.1}
1994: 22.0 [-4.5] {1.3}
1995: 34.0 [29.1] {37.6}
1996: 17.3 [14.9] {23.0}
1997: 40.4 [16.8] {33.4}
1998: 25.5 [-2.0] {28.6}
1999: 53.0 [36.1] {21.0}
2000: 7.9 [-16.8] {-9.1}
2001: 69.6 [11.5] {-11.9}
2002: (4.0) [-24.2] {-22.1}
2003: 79.9 [68.8] {28.7}
2004: 19.3 [17.8] {10.9}
AVG 30.8% [12.3%] {12.4%}
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