Joel Greenblatt – Thoughts on Capital Allocation

Joel Greenblatt – Thoughts on Capital Allocation

Having talked about taking on a diversified versus concentrated portfolio, this interview with Joel Greenblatt shared some great insights that we believe is useful regarding capital allocation – Cheapness vs Quality.

My largest positions are not the ones I think I’m going to make the most money from. My largest positions are the ones I don’t think I’m going to lose money in.

— Joel Greenblatt

Abacab Fund Sees Mispricing In Options As Black-Scholes Has Become “Inadequate”

Abacab Asset Management's flagship investment fund, the Abacab Fund, had a "very strong" 2020, returning 25.9% net, that's according to a copy of the firm's year-end letter to investors, which ValueWalk has been able to review. Commenting on the investment environment last year, the fund manager noted that, due to the accelerated adoption of many Read More

The quote essentially drives home the key idea about value investing. It is never about the upside potential but rather limiting the downside risk. There is nothing wrong buying companies that are more complex or may seem like a seven foot hurdle, but the key would be keeping these positions small. The “bread and butter” portion of our investments should be allocated to companies that we see limited downside and if we every so happen to see that one company where all the stars are aligned, we allocate a larger portion of our capital to it.

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I developed my passion for investment management especially equity research at a relatively young age. My investment journey began when I was 20, at a point in time where markets were still recovering from the Global Financial Crisis. My portfolio started from money I saved over the past years and through working during the holidays. I was fortunate to have a good friend with common investing mentality to began my journey towards value investing. To date, we still research and invest in companies together, discussing valuations and potential risks of a company. To date, I manage a fund with a value investing style. Positions are decided upon via a bottom-up approach or smart speculation (a term I came up with when buying a stock for quick profit due to a mismatch in prices in the market due to takeovers/selling of a subsidiary or associate). Apart from managing my own portfolio, I enjoy sharing my research with family and friends, seeking their opinions and views towards the stock. Reading Economics in London, I constantly keep up with the financial news in Singapore & Hong Kong. Despite my busy schedule, it has not stopped me from enjoying other aspects of life. I enjoy a variety of activities in whatever free time I may have – endurance running, marathons, traveling, fine dining, whiskey appreciation, fashion. Lastly, I enjoy meeting new people, discussing ideas and gaining new perspectives towards issues in the world.

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