Joel Greenblatt is an American investor, author, and academic. He is the founder and managing partner of Gotham Capital, a private investment partnership that he started in 1985. Joel Greenblatt is also a professor at Columbia Business School, where he teaches value investing and has authored several books on the topic.
Joel Greenblatt is known for his investment strategy called “The Little Book That Beats the Market,” which he outlines in his book of the same name. The strategy involves buying high-quality, undervalued companies and holding them for a period of time. It uses a formula that ranks stocks based on their earnings yield and return on capital, and then selects the top-ranked stocks for investment.
As per reports, Joel Greenblatt Net Worth is estimated to be upwards of $1billion. Joel Greenblatt is one of the top investors in the world today and author of five books focused on investment strategy, including You Can Be A Stock Market Genius and The Little Book that Beats the Market.
His Professional Career
Joel Greenblatt started his professional career in finance in 1985 when he founded Gotham Capital, a private investment partnership. He served as the managing partner of Gotham Capital until 1995 when he returned outside capital to focus on managing his own assets.
During his time at Gotham Capital, Greenblatt’s investment strategy was highly successful. The firm achieved an annualized return of over 40% for more than 20 years, making it one of the most successful hedge funds in history.
In addition to his work at Gotham Capital, Greenblatt is a professor at Columbia Business School, where he teaches value investing. He has been teaching at Columbia since 1996 and has received several teaching awards.He is also a frequent speaker on the topic of value investing and has been featured in various media outlets, including CNBC and The Wall Street Journal.
His Personal Life
Joel Greenblatt is a relatively private individual when it comes to his personal life, and he tends to keep his personal details out of the public eye. However, some details about his life are public. Joel Greenblatt was born on December 13, 1957, in Great Neck, New York. He attended the Wharton School at the University of Pennsylvania, where he earned his Bachelor of Science in Economics. He later went on to earn his MBA from the Wharton School as well.
Joel Greenblatt is married to Julia Greenblatt, and they have three children together. Julia is also actively involved in philanthropy, and together, they have supported several educational initiatives, including the Success Academy Charter Schools.
In addition to his work in finance and education, Joel Greenblatt is known to be an avid fan of the New York Mets and is a part-owner of the team. He is also a collector of contemporary art and has been known to lend pieces from his collection to various museums and galleries.
His Books
Joel Greenblatt has authored several books on the topic of investing, including:
You Can Be a Stock Market Genius: This book provides a comprehensive guide to investing in special situations, such as spin-offs, restructurings, and bankruptcies.
The Little Book That Beats the Market: This book outlines Greenblatt’s investment strategy, which involves buying high-quality, undervalued companies and holding them for a period of time. The book also includes a formula for ranking stocks based on their earnings yield and return on capital.
The Big Secret for the Small Investor: This book is a follow-up to “The Little Book That Beats the Market” and provides additional insights and strategies for individual investors.
The Little Book That Still Beats the Market: This updated version of “The Little Book That Beats the Market” includes new research and data to support Greenblatt’s investment strategy.
Common Sense: The Investor’s Guide to Equality, Opportunity, and Growth: This book discusses the importance of investing in businesses that prioritize equality and opportunity, and includes a framework for evaluating companies based on these criteria.
Joel’s books are highly regarded in the world of investing and have been praised for their clear and accessible writing style and practical advice.
The Little Book That Still Beats the Market Book Summary
- The concepts covered in book seem simple, perhaps too simple for sophisticated investors. Joel mentions that if you really want to “beat the market,” most professionals and academics can’t help you, and that leaves only one real alternative.You must do it yourself The truth is that you don’t need an MBA to beat the market. Knowing lots of sophisticated formulas or financial terms isn’t what makes the difference.
- The catch is that you have to listen to a long story, you have to take the time to understand the story, and most important, you have to actually believe that the story is true.
- There is no guaranteed returns in the stock market, if you seek a guaranteed return then put your money in the bank or buy US government bonds.
- Buying a share in a business means you are purchasing a portion (or percentage interest) of that business. You are then entitled to a portion of that business’s future earnings.
- Figuring out what a business is worth involves estimating how much will the business earn in future.
- The earnings from your share of the profits in the company must be more than the amount received from a 10Y US govt. bond. If it does not generate more than this cut-off, then it’s better to park in treasury bonds and earn a risk-free return.
- Joel mentions in the book that it makes no sense for valuation of companies to be volatile across the year, swinging widly, and making lows and high as per sentiments and liquidity conditions in the economy. This happens as people go nuts a lot. This is probably because it’s hard to predict future earnings. and probably even harder to decide what a fair rate of return on purchase price is. People get a bit depressed sometimes and want to pay a lot less for stuff. Maybe people get excited sometimes and are willing to pay a lot. So maybe people simply justify high prices by making high estimates for future earnings when they are happy and justify low prices by making low estimates when they are sad. This irrational market behavior presents an opportunity for the astute investor.
- Joel argues that investors are never required to act. They can choose and should rather act only when the price offered by Mr. Market appears very low. This provides investors with significant margin of safety, a concept popularized by the legendary value investor Ben Graham.
- Joel discusses the concept of earnings yield (earnings yield is inverse of P/E ratio). If earnings yield is substantially higher than prevailing govt bond yield (10Y treasury yield) then the respective company needs to be further analyzed to see if it can be an investment candidate. The company should also earn high rates of return on capital.
- One should also look at the quality of its products or services, the loyalty of its customers, the value of its brands, the efficiency of its operations, the talent of its management, the strength of its competitors, or the long-term prospects of its business. Simply, looking at financial metrics will not suffice as many companies might turn out to be value-traps.
- Joel discusses a study done by him, that over the last 17 years, owning a portfolio of approximately 30 stocks that had the best combination of a high return on capital and a high earnings yield would have returned approximately 30.8 percent per year. This is substantially higher than returns generated by the index. Joel describes this as the magic formula for investing and beating the markets. However, this magic formula often does not work for several years in a row but works very well over the long term.
- As most investors cannot stick with a simple strategy over long periods of time, hence they end up losing money or underperforming the markets over long periods of time. They are busy catching the new fads, some of which might work but eventually losing a lot of capital in the not so good ones.
Key Takeaways
Here are some key takeaways from ‘The Little Book That Still Beats the Market’ by Joel Greenblatt:
Focus on the fundamentals: Greenblatt’s investment strategy is based on selecting high-quality companies that are undervalued based on their earnings yield and return on capital. By focusing on the fundamentals of the underlying businesses, investors can identify companies that have a strong competitive advantage and are likely to generate long-term value.
Patience is key: Successful investing requires patience and discipline. Greenblatt recommends holding stocks for a minimum of one year, in order to give the market time to recognize the underlying value of the business.
Avoid common mistakes: Greenblatt cautions against common investing mistakes, such as buying into popular trends or chasing high-flying stocks. Instead, investors should focus on finding undervalued companies with strong fundamentals.
Long-term perspective: Greenblatt emphasizes the importance of having a long-term perspective when investing. Short-term market fluctuations can be unpredictable, but over the long term, value will be recognized and rewarded.
Implementation: Greenblatt provides detailed instructions on how to implement his investment strategy, including how to select stocks, when to buy and sell, and how to construct a portfolio. By following these guidelines, investors can create a well-diversified portfolio of high-quality, undervalued companies.
The Book provides a clear and practical approach to value investing, emphasizing the importance of focusing on the fundamentals of the underlying businesses and maintaining a long-term perspective.
Final Thoughts
Joel Greenblatt is a highly respected investor and author who has had a significant impact on the world of finance. Through his books, he has provided a clear and practical approach to value investing that has resonated with many investors.
His investment strategy, which focuses on selecting high-quality, undervalued companies with strong fundamentals, has been proven to be effective over the long term. His emphasis on discipline, patience, and a long-term perspective is also valuable advice for any investor.
Overall, Greenblatt’s contributions to the field of finance have been significant, and his books are highly recommended for anyone interested in learning more about value investing and how to build a successful investment portfolio.
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