Unless you’re an absolute beginner in the stock-market arena, forget buying the latest books, magazines, Wall Street Journal, IBD, etc. – unless you can borrow them from your local library – and stick with free Internet-based advice and your own resultant research. 

Much of what need to know you can be had for free at Morningstar.

Basically, buy companies with high ROC (return on assets or “ROA”) and high earnings yield (inverse of P/E ratio — the E/P ratio).

Keep the results of your research — e.g. winning stocks from small lesser-known companies —  to yourself. If the word leaks out, money-hungry investors will flock to that stock in hordes. 

A ”MAGIC FORMULA”? There ain’t no such thing…

One recent popular investment book claims to give it to you: the author’s ”magic formula” emphasizes stocks that have both a high return on capital and a high earnings yield. That is the book in a nut-shell.

The magic formula will lead investors to stocks the market has temporarily placed on sale. However, there are a number of caveats to be aware of and additional research is required before blindly buying the stocks identified by the formula. This book does provide a solid argument for self-directed investing, and a framework for doing so. The trick, as always, is how to apply the wisdom found in books …  and having the guts to stick with it even in periods of underperformance.