How to get Super Returns?

Hi all,i came across this interesting article from the Business times,which is a local daily newspaper that reports about the ongoings in the local stock market and regional happenings.In this article, the author describes how one can use a simple ratio such as ROE/Price to Book to generate excellent returns.The method is actually a variation of Greenblatt's magic formula.

The article

"But without any detailed analysis other than simply grouping stocks based on ROE/PTB, I found that investors can actually generate super returns.

By investing in the 10 per cent of stocks with the highest ROE/PTB every year between 1990 and 2006, and holding each portfolio for a year, one could have turned $100 into $34,000 over the past 17 years. That's a compounded return of 41 per cent a year. All the calculations exclude transaction costs.

If we assume that the investor had lost 10 per cent of the portfolio value to transaction costs every year, the return is still a respectable 27 per cent a year. But in absolute terms the portfolio value today, at $5,678, is significantly less than the $34,000 which excludes transaction costs."

The full article is here

Cheers,
Manpreet