Geoff Gannon: Is There Really A Magic Formula For Investing?

Recently I have been reacquainted with Geoff Gannon of Gannon On Investing, as he has written some very helpful responses to posts at Value Investing News and posted some articles of significant interest. His blog shouldn't be new to you; I have linked to it in my "blog links" since I started blogging. With any luck he'll start posting more frequently again.

Anyway, I came across this excellent article, by Geoff that contrasts three formulaic investing techniques including Greenblatt's Magic Formula. I hope you enjoy it! Here is an excerpt and a link:

Is There Really A Magic Formula For Investing?
Geoff Gannon

This article looks at investing formulas proposed by three men: Benjamin Graham, David Dreman, and Joel Greenblatt. It then asks whether any of these formulas will lead to above market returns.

One question almost every investor asks at some point is whether it is possible to achieve above market returns by selecting a diversified group of stocks according to some formula, rather than having to evaluate each stock from every angle.

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Excerpt:

As Warren Buffett has said, the three most important words in investing are "margin of safety." Although small-cap companies offer the highest potential reward -- small-caps that graduate to large-caps offer multiple 1,000% returns -- they also are most likely to fall apart and become worthless.