Known for the invention of Magic Formula Investing, and founder of the New York Securities Auction Corporation (NYSAC). Greenblatt is founder and managing partner of Gotham Capital. He is the author of two investment books, including Joel Greenblatt: The little Book that Beats the Market. He is also an Adjunct Professor with Columbia Business School.
Investing Philosophy:
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%.
Joel Greenblatt author of "The Little Book that Beats the Market" was interviewed by Morningstar.com to discuss his magic formula and value investing.[i] More...
In the past two days, Hedge Fund Manager and Professor Joel Greenblatt appeared to all the major media to promote his magic formula investing and his investment management firm www.formulainvesting.com. More...
Joel Greenblatt, of “Magic Formula” fame, gave a rare interview yesterday on CNBC. The interview had Greenblatt talking about the components of his magic formula as well as recapping its phenomenal performance to date. What Greenblatt stressed multiple times in the interview is that the formula selects many stocks that are currently out of favour with the market, and as such it is important to implement the formula in the context of a “basket”. That is, as Greenblatt is not looking into each company on his screen individually, he recommends buying a basket of 25-30 stocks and expects that on average the basket will outperform. The historical outperformance of Greenblatt’s formula can not be disputed, but I truly believe that the diligent value investor can do even better. This is what I try to accomplish through the individual company analysis I conduct on this site. More...
Joel Greenblatt's Magic Formula Investing (MFI) strategy is a very simple but very effective design. The two screen components are earnings yield (basically the inverse of P/E, using operating earnings) and return on capital. Stocks with a high earnings yield indicate that they may be under-priced based on past levels of profitability. Stocks with high returns on capital indicate good businesses - ones that possess some kind of competitive advantage, be it structural or managerial, that allows them to earn outstanding returns on shareholders' capital. Combine the two and you get "good companies at cheap prices" - a winning investment recipe, proven through numerous back-tested studies to outperform the market at large. More...
Last week, Joel Greenblatt, the founder and "godfather" of Magic Formula Investing (MFI), gave an interview to value investing supersite GuruFocus.com. In the interview, he answered a number of questions relating to Magic Formula Investing, his new FormulaTrading venture (which MagicDiligence reviewed here), and on the market and his investing principles in general. I encourage all MagicDiligence readers to take a look at the interview, as it is an enlightening read. Some common themes ran through his answers, and I wanted to comment on a couple of them in this article. Joel's comments to GF are italicized, with my comments below. All comments belong to GuruFocus, and are reprinted with permission. More...
(GuruFocus, June 30, 2009) Back in early June, when we became aware of Investment Guru, Joel Greenblatt became the strategist for the money management firm FormulaTrading.com, we reached out and requested an opportunity for our users to ask Joel questions. To our delight, the good professor (Joel is also an Adjunct Professor with Columbia University) agreed. More...
Since we announced the Q&A Session with Investment Guru, Columbia University Professor Joel Greenblatt last Friday, we have received 50 questions (listed below). More...
Since we announced Investment Guru Joel Greenblatt will conduct a Q&A with our users last Friday, we have had overwhelmingly positive response. So far, twenty questions have been raised (including some loaded ones). Here is the un-edited summary: More...
GuruFocus is pleased to announce that Investment Guru, Columbia University Professor Joel Greenblatt has agreed to conduct an email Q&A with GuruFocus users. More...
Joel Greenblatt must be distracted by something else or on his way out of the picture of investment management. His portfolio that we track has dwindled to just two stocks and $1.2 million or reported assets. But that is two mighty stocks, for since the quarter end of 1Q09, his two-stock portfolio is on fire, shooting up 54% in about two months. More...
Warren Buffett is a legend in the investing world. The chairman of Berkshire Hathaway (BRK-B), he has amassed a fortune of over $60 billion dollars, using his company as a vehicle for investing in stocks, fixed income instruments, and buying entire businesses. As of the last list, he was the 2nd richest man in the world according to the Forbes 400. Berkshire has evolved from a textile mill in the northeast into a huge conglomerate, with operations ranging from car insurance (GEICO) to underwear (Fruit of the Loom) to paint (Benjamin Moore). Moreover, some of Warren's stock investments, such as his positions in Moody's (MCO), Coca-Cola (KO), and Gillette (now Proctor & Gamble) (PG) are textbook examples of buying quality at bargain prices. Berkshire's performance has been remarkable - since 1965, the company has grown book value at an annualized 20.3%, vs. the S&P 500's 8.9% annual gain, outperforming the market in 39 of those 44 years. So it is with baited breath that value investors await his annual letter to shareholders. These have been Warren's principal method of passing his wisdom along to the general public, More...
MagicDiligence believes primarily in fundamental stock analysis. The share price of a company is dependent, more than anything else, on underlying corporate performance metrics such as net profit, book value, revenue growth, and so forth. The view of short term technical analysis here, paraphrasing a quote by Warren Buffett, is "technical analysis is great at predicting the past". However, it's clear over the past year that macro-economic conditions are very important when the final performance of investments are calculated. The purpose of the Magic Formula Investing strategy, and of the MagicDiligence Top Buys portfolio, is to outperform the market over the long term. When devising an equity-only strategy, this is the primary goal. However, the purpose of most investors is to earn as high a return on their investments as possible, while keeping risk in check. Therefore, a stock strategy can outperform the market but still deliver poor returns over a period of time. This is exactly the situation over the past year, where the Magic Formula and MagicDiligence have More...
All 2912 individual investment decisions of professional fundamental value investors on Value Investors Club (ValueInvestingClub.com) are analyzed. We answer a simple question: do professional value investors have stock picking skills? More...
We made it to the final installment of our Graham vs. Greenblatt series. Throughout the series we examined each of the ratios that Greenblatt recommended in his book The Little Book that Beats the Market. The final posting will look at how Greenblatt draws the ratios together and bring this all back around, so lets get into it. More...
Joel Greenblatt is a modern value investor, his approach as we outlined in our previous post was to find value companies like Graham, but he also wanted a company that has potential for the future. The first set of criteria looks very similar to Graham. More...
Graham passed away in September 21, 1976 well before Joel Greenblatt graduated from Wharton in 1979 but a linkage between the two men's investment theories is not difficult to find. Greenblatt during his time at Wharton went to great lengths to study the value approach that Graham had devised (there are stories that Greenblatt entered vast amounts of stock data by hand into a mainframe and then ran tests on it using Graham's system). He saw the benefit that could be returned from purchasing companies that were inexpensive. More...
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. He is also an Adjunct Professor with Columbia Business School.
