We made it to the final installment of our Graham vs. Greenblatt series. Throughout the series we examined each of the ratios that Greenblatt recommended in his book The Little Book that Beats the Market. The final posting will look at how Greenblatt draws the ratios together and bring this all back around, so lets get into it.
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In our last post we looked at Greenblatt’s use of Return on Capital as a means of identifying quality companies that know how to turn a small investment into a substantial return. In this posting we will look at his next criteria earnings yield.
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 Greenblatt in his book The Little Book that Beats the Market advocated a simple method for attaining substantial stock returns. In this series we are looking at the particulars of this investing theory to both understand why he advocated the elements of this theory and what Benjamin Graham would have thought of the approach that Greenblatt was advocating. The next part in this series looks at Return on Capital or ROC.
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 Joel Greenblatt is a modern value investor, his approach as we outlined in our previous post was to find value companies like Graham, but he also wanted a company that has potential for the future. The first set of criteria looks very similar to Graham.
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 Graham passed away in September 21, 1976 well before Joel Greenblatt graduated from Wharton in 1979 but a linkage between the two men’s investment theories is not difficult to find. Greenblatt during his time at Wharton went to great lengths to study the value approach that Graham had devised (there are stories that Greenblatt entered vast amounts of stock data by hand into a mainframe and then ran tests on it using Graham’s system). He saw the benefit that could be returned from purchasing companies that were inexpensive.
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