When compiling reading lists from the world’s best investors, one book I see repeatedly is Joel Greenblatt’s You Can Be A Stock Market Genius.
In fact, Michael Burry, Dan Loeb, Bill Ackman, David Einhorn and Seth Klarman have all mentioned it.
In the back of You Can Be A Stock Market Genius, there’s a list of six books that Greenblatt recommends. In addition, he previously served as an adjunct professor at Columbia’s Business School, and I was able to find his syllabus online.
Below, you’ll find both lists, as well as a brief description of each book.
From You Can Be A Stock Market Genius
You Can Be a Stock Market Genius is Greenblatt’s most highly-regarded work, and one of the only books that discusses his specific style of investing, which involves looking for certain “special situations” in the market — such as bankruptcies and spinoffs
But to understand and effectively leverage Greenblatt’s investing approach, you must also grasp value investing philosophy — which involves picking stocks that are trading for less than they “should” be worth based on their financials.
As such, Greenblatt offers six recommendations that provide more context for his special situations investing strategy.
Here’s what he has to say about them:
Q: Are there any other investment books worth reading?
A: No. (Just kidding.) There are no books that I would recommend that exclusively discuss the special-investment situations found in this book. However, there are books that can give you excellent background information on the stock market and on value investing. All of this information can be helpful when applied to investments in the special-situation area. So, if you have the time and the inclination, here is a list of my all-time favorites.
- The New Contrarian Investment Strategy by David Dreman.
Dreman demonstrates through substantial documentation that stocks revert to the mean — meaning that underperforming stocks rise and over-performing stocks fall to become average, respectively. Following from this, Dreman advises buying companies with low prices and low expectations to get big gains.
- The Intelligent Investor: A Book of Practical Counsel by Benjamin Graham.
Considered a classic in value investing. Graham warns against the danger of emotional investing through the allegorical “Mr. Market,” an investor driven by panic (when the market’s down) and euphoria (when it’s up). Graham advises readers to seek out companies that appear undervalued based on their financial statements.
- The Warren Buffett Way: Investment Strategies of the World’s Greatest Investor by Robert Hagstrom.
In The Warren Buffett Way, Hagstrom explores how Buffett transformed his first $100 investment into a multi-billion dollar net worth, diving deep into Buffett’s value investing style and investigating each major investment the Berkshire chairman has made throughout his career.
- Margin of Safety by Seth Klarman.
If you want to learn the logic behind value investing and why it triumphs where other strategies fail, Klarman’s Margin of Safety is an excellent read. It explains how to understand why specific investing rules work and offers a blueprint that maximizes the chances of investment success while minimizing risk.
- The Only Investment Guide You’ll Ever Need by Andrew Tobias.
This book guides the ordinary saver/investor to achieve wealth slowly and steadily. The first half of the book teaches the reader how to get their finances in order, from living below your means to tax-advantaged accounts and more. Towards the end, Tobias offers some value investing basics.
- Money Masters of Our Time by John Train.
This book offers a quick look at nine legendary 20th-century investors. Each chapter offers biographical and anecdotal information about one of the nine, then dives into their investment strategies. Some of the names profiled include Jim Rogers, Peter Lynch, Michael Steinhardt and Philip Caret.
From His Columbia Investing Class
Value and Special Situations Investing is the title of the class Greenblatt taught alongside Daniel Yarsky at Columbia Business School — although Greenblatt has since stopped teaching. You can see the syllabus here.
Greenblatt’s aim with this course was to instill fundamental analysis concepts in his students and then teach them how to apply those concepts to various investing situations. In the course, students learned about business valuation, special situation investing, risk arbitrage and more.
The course has six required books and a list of recommendations for supplementary learning.
- Security Analysis and Business Valuation on Wall Street by Jeffrey Hooke.
The original version of this book gave readers an inside look at how Wall Street and big businesses analyzed and evaluated securities. After several market crashes, accounting scandals, monumental financial regulations, and the rise of hedge funds and private equity, this text has been updated to examine how those in the industry perform securities analysis and corporate valuation in today’s environment.
- Value Investing: From Graham to Buffett and Beyond by Bruce Greenwald.
Greenwald was a Columbia Business School professor alongside Greenblatt. This book introduces value investing philosophy and then shows it in action through other value investors (like Warren Buffett and Michael Price). Case studies supplement the main content to provide a better learning experience.
- What Works on Wall Street by James O’Shaughnessy.
This book explores several 20th-century investment strategies to find what worked then and what might continue to work today, with a focus on providing hard data to back up its assessments.
- The Essays of Warren Buffett: Lessons for Corporate America by Lawerence Cunningham.
This book is a collection of Buffett’s letters to Berkshire Hathaway shareholders over the past several decades. Consequently, it’s an excellent way to learn his investing philosophy. Throughout this text are numerous business, investing and management principles and lessons.
- The Intelligent Investor: A Book of Practical Counsel by Benjamin Graham.
The Intelligent Investor isn’t required in the class, as Value Investing by Bruce Greenwald demonstrates more practical applications of value investing. Still, Graham’s tome is recommended reading so students can solidify value investing fundamentals while understanding and appreciating the origins of the philosophy.
- Contrarian Investment Strategies: The Psychological Edge by David Dreman.
This book expands on Dreman’s earlier works by using recent psychological findings to explain phenomena such as market bubbles and panics. He also introduces new techniques for identifying stocks based on his contrarian methodology. Both of these aspects make this book excellent supplementary material to the required course reading.
- The New Finance: Overreaction, Complexity and Uniqueness by Robert Haugen.
In The New Finance, the late Robert Haugen argues against the efficient market hypothesis, showing that markets are more complex and chaotic than that hypothesis claims them to be. Such a theory is vital to value investing, as an inefficient market implies there are stocks priced lower than they should be in light of their financial performance.
Books Written by Greenblatt
Greenblatt himself is a value investor like Warren Buffet. However, Greenblatt enjoys looking for the “special situations” mentioned earlier, because they have less competition. Less competition means a lower price.
He explains it as follows:
“…you want to look a little off the beaten path because this is a little more obscure — it’s smaller market cap, something strange is going on, and the normal people that follow this aren’t going to look at it because it’s too complicated, or you’re going to have to read a 400-page thing.”
His three books explain this philosophy further.
- The Big Secret for the Small Investor – A New Route to Long-Term Investment Success.
Here, Greenblatt teaches the average investor how to value a stock based on its financials, explaining how these investors have the edge over institutional investors because the latter have more pressure for results.
- The Little Book That Still Beats the Market.
In the original version of this book — The Little Book That Beats the Market — Greenblatt introduced an investing method called the Magic Formula that helps less-experienced investors find good companies and low prices. In the updated version, Greenblatt examines the 2008-09 recession using these principles.
- You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits.
This is Greenblatt’s comprehensive guide to his personal investment philosophy. In it, he provides background and case studies illustrating the special situations of which he’s fond, and teaches you the basics of looking for these special situations.
Joel Greenblatt has beat the market (and many of his fellow professional fund managers) for decades by using his value investing and special situation strategies. If you plan on becoming a serious investor, reading his books and recommendations will give you a solid foundation.
Even if you don’t plan on becoming a professional investor, doing so could help you better understand how the stock market works.