The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.
When Joel Greenblatt's The Little Book That Beats the Market was published in 2005, it quickly became a best seller, not necessarily because investors were clamoring for the book's content, but because Greenblatt was already somewhat of a legend in the investment business. His track record of 50 percent annualized returns during the 10 years he ran a hedge fund, Gotham Partners, was virtually unmatched in the industry. The rewards to Greenblatt and his partners had been so high that after a decade of managing other people's money, he had the luxury of returning all outside capital and focusing exclusively on managing his own wealth. While reliable data on Greenblatt's investment performance since the dissolution of his hedge fund are hard to come by, his track record of outperformance probably continued in the two decades since 1994.
Whereas mystique surrounding Joel Greenblatt may have catapulted The Little Book onto best-seller lists after it was initially published, the simple yet powerful message of the book has kept it relevant. The advice to buy good ...