Joel Greenblatt appears on Forbes, and discusses his new book, the Big Secret for the Small Investor. He is more commonly known for his Little Book of Investing that Beats the Market, part of the little book series. More on that here.
He explains why, among other things, while the stock market is forward looking, why studying backward looking financials can make sense, and why opportunities can arise such as companies with strong return on capital and earnings yield can be selling cheap. He feels that when such opportunities arise, it is because the market is pricing in low expectations. Hence if there is any neutral to good news coming out of that company, it would be rewarded while since negative expectations are already priced in, it would not have much further downside. Have a watch, he also has some interesting insights into how short-term-inism can sideline one's portfolio.
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