He describes this as a simplified version of the strategy employed by Warren Buffett and Charlie Munger of Berkshire Hathaway.
"From here, Greenblatt recommends selecting 20 to 30 of the better-ranked companies, selling them at predetermined intervals and replacing with new stocks that fit the formula.
Greenblatt's analysis found when applied to the largest 1,000 stocks the formula underperformed the market (defined as the S&P 500) for an average of five months out of each year.
The formula can thus be a contrarian investing strategy, focused sometimes on staying committed to stocks that might be temporarily unattractive or with sub-par performance.
The study finds that all four formulas generate significant raw and risk-adjusted returns, primarily by providing efficient exposure to well-established style factors.