Joel Greenblatt
Joel Greenblatt
Joel Greenblatt Bio from Wikipedia
Joel Greenblatt (born December 13, 1957 in Great Neck, New York) is avalue investor, and adjunct professor at the Columbia UniversityGraduate School of Business. He is the former chairman of the board ofAlliant Techsystems and founder of the New York Securities Auction Corporation.
Greenblatt is a graduate of the The Wharton School at the University of Pennsylvania, receiving his B.S. in 1979 and M.B.A. in 1980
In 1985, Greenblatt started a hedge fund, Gotham Capital, with $7 million, most of which was provided by junk-bond king Michael Milken. He has achieved returned 40% returns annually since its inception, giving Greenblatt one of the best investing records ever.
Investing Philosophy: From Gurufocus.com
Greenblatt tries to find cheap and good companies. He looks for value with a catalyst, so nice things happen sooner. Greenblatt likes special situations, and thinks that they are simply different places to find cheap stocks. In his own hedge fund, Greenblatt uses the basic principals in the Magic Formula: Look for high ROC and high earnings yield. He tries to figure out what “normalized earnings” will be 3-4 years into the future. Greenblatt makes sure the stock is very cheap based on normalized earnings. He is very concentrated in investing, 5 to 8 securities can make up 80% of his portfolio. One position could be as high as 30%.
Greenblatt in addition to being a famous investor is also a Professor at Columbia’s Business School.
Below are books listed on the syllabus of the value and special situation investing course Greenblatt teaches at Columbia Business School:
Greenwald, Bruce, Value Investing: From Graham to Buffett and Beyond
Haugen, Robert, New Finance, The (4th Edition)
Greenblatt, Joel, You Can Be a Stock Market Genius
Greenblatt, Joel, The Little Book That Beats the Market (Little Books. Big Profits)
Cunningham, Larry, The Essays of Warren Buffett: Lessons for Corporate America, Second Edition
Hooke, Jeffrey,Security Analysis on Wall Street
O’Shaughnessy, James, What Works on Wall Street
Dreman, David, Contrarian Investment Strategies – The Next Generation
Graham, Ben, The Intelligent Investor
Plus – selections from Benjamin Graham
Quotes from Joel Greenblatt
“There’s a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions. You can’t be a good value investor without being an independent thinker – you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value you do. The back and forth that goes on in the investment process helps you get at that.”
I still believe that for good business analysts a concentrated portfolio is a good strategy combined with a long term horizon.Once again, the secret to success in following the formula strategy is patience, a quality in short supply for both professionals and individual investors alike.I think investors should have a large portion of their assets in equities over time.
I don’t know too many people that are good at timing the market relative to macro-economic events.
I think the exercise of trying to figure out how to simplify concepts has been incredibly helpful to me over the last 13 years of teaching and I hope my students have benefited from it.
I do plan to write another book. It will also be about a basic framework for successful investing written in a way I hope my kids can understand.
The Magic Formula works on average. It can either be used as a screening device to find companies to do more work on to determine whether earnings are sustainable and predictable or as a way to accumulate a basket of 20 or 30 companies that on average are cheap and good. If you don’t plan on doing additional research, buying individual companies without further research would obviously be imprudent.(Responding to question on future opportunities for capital investment)
The big picture is: the main thing you should be concerned about in the future are incremental returns on capital going forward. As it turns out, past history of a good return on capital is a good proxy for this but obviously not foolproof. I think this is an area where thoughtful analysis can add value to any simple ranking/screening strategy such as the magic formula.When doing in depth analysis of companies, I care very much about long term earnings power, not necessarily so much about the volatility of that earnings power but about my certainty of “normal” earnings power over time.
My goal is to buy a company at a low multiple to normal earnings power several years out and that the company earns good returns on capital at that level of normal earnings.A holding period of more than one year also works quite well as the factors are persistent in years 2 and 3.
“There are three types of people in the world–those who can count, and those who can’t.”
“maybe I’m assuming something, but…” Perhaps!
Articles about Joel Greenblatt
2010
Magic Formula Investing – results after 2 years
2009
Formula Investing with a Value Mindset Joel Greenblatt
Seth Klarman Vs Joel Greenblatt the $1200 vs $10 Book An Article by yours truly comparing Joel Greenblatt’s book You can be a stock Market Genius with Seth Klarman’s Margin of Safety
2008
To invest with success, know your limitations
Bullish markets make investment clubs the flavour of the season
Hands Off This Simple Strategy
2007
How they made millions in the stock market
BusinessWeek’s online archive is a hidden gem
Beat The Market With ‘Magic’ Stocks
Get Greedy When They’re Fearful
2006
GE, Biggest U.S. Stocks Lure Buyers After Lagging
How Is a Hedge Fund Like a School?
Best US stock bargains are in big caps: Greenblatt
Here’s a magic formula to put a spell on you
2005
The Church Of Graham, Dodd And Buffett
Apprenticed Investor: There Are No Shortcuts
Joel Greenblatt Speaking At NYSSA
Greenblatt runs several Websites
www.magicformulainvesting.com Site devoted to stocks described in Joel Greenblatt’s book The Little Book that Beats the Market. The book describes a simple formula of buying stocks with low P/E (earning yields) and High ROC Returns on Capital. The site contains a screener that ranks the stocks with the highest ROC and earning yields.
wwww.valueinvestorclub.com This site is an exclusive club of 250 investors chosen by a committee who write at least two articles a week. To get into the club you have to write an article about a current investment which is undervalued and a committee must approve you. This is a great site to get investment ideas.
Books Authored by Joel Greenblatt
The Little Book That Beats the Market (Little Books. Big Profits)
You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits
Books about Joel Greenblatt
The Guru Investor
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Joel Greenblatt Speach at Value Investing Congress Half Hour Great Speach
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