The Magic Investment Formula
The magic venture investing formula is simple:
in young, good,
companies while they are cheap.
But what is "good", and what is "cheap"?
Joel Greenblatt, who has been
incredibly successful running a hedge fund in part according to this
Buffett-like approach, defines good and cheap companies as follows.
His proxies for these
criteria are return on capital (operating profit as a percentage of net
working capital and net fixed assets) and earnings yield (pretax operating
earnings compared with enterprise value, which is the market value plus the
strategy that has a strong
price per share