Joel Greenblatt Says Todays Investors Can Win By Zigging When The Market’s Zagging

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Joel Greenblatt Says Todays Investors Can Win By Zigging When The Market’s Zagging

In a recent article at Bloomberg, Joel Greenblatt said, “Passive investing suits some, but isn’t discerning”, and “Investors can win by zigging when markets zag”.

Here’s an excerpt from that article:

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The shift to passive strategies that hug stock market indexes is likely to continue, but that’s not all bad for active stock pickers, said Joel Greenblatt, the co-chief investment officer of Gotham Asset Management.

"When people aren’t discerning among stocks that have different fundamentals, you can create opportunities,” he said Wednesday at the Bloomberg Invest New York summit.

Greenblatt, who’s written popular investing books and has been managing money for decades, is joining a chorus of active money managers signaling the potentially distorting effects of index funds on markets. Earlier this year, Seth Klarman, who runs the $30 billion Baupost Group, said that the tilt to passive investing will make markets more inefficient. In April, the managers of FPA Capital Fund called index trackers “weapons of mass destruction” because they led investors to blindly purchase securities.

You can read the full article here.

This article was originally published at The Acquirer's Multiple - Stock Screener.

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The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates. It examines several financial statement items that other multiples like the price-to-earnings ratio do not, including debt, preferred stock, and minority interests; and interest, tax, depreciation, amortization. The Acquirer’s Multiple® is calculated as follows: Enterprise Value / Operating Earnings* It is based on the investment strategy described in the book Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, written by Tobias Carlisle, founder of acquirersmultiple.com. The Acquirer’s Multiple® differs from The Magic Formula® Earnings Yield because The Acquirer’s Multiple® uses operating earnings in place of EBIT. Operating earnings is constructed from the top of the income statement down, where EBIT is constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–earnings that a company does not expect to recur in future years–ensures that these earnings are related only to operations. Similarly, The Acquirer’s Multiple® differs from the ordinary enterprise multiple because it uses operating earnings in place of EBITDA, which is also constructed from the bottom up. Tobias Carlisle is also the Chief Investment Officer of Carbon Beach Asset Management LLC. He's best known as the author of the well regarded Deep Value website Greenbackd, the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance), and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law. Articles written for Seeking Alpha are provided by the team of analysts at acquirersmultiple.com, home of The Acquirer's Multiple Deep Value Stock Screener. All metrics use trailing twelve month or most recent quarter data. * The screener uses the CRSP/Compustat merged database “OIADP” line item defined as “Operating Income After Depreciation.”
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