Joel Greenblatt Interview - His Magic Formula For Stock Market Investing

Aug. 24, 2018 8:29 AM ET8 Comments
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There aren't many Wall Street legends who command respect like Joel Greenblatt. After starting his money management firm, Gotham Capital in 1985, he and his business partner, Rob Goldstein, spent the next decade delivering returns that took Wall Street by storm.

Yet, the nature of Greenblatt's strategy meant long periods of super-high returns would be interrupted by spells of underperformance. For him, these periodic drawdowns were simply a mathematical consequence of running concentrated value portfolios. It was a philosophy inspired by his original investing hero, Ben Graham.

While Greenblatt was content to ride these waves with his own money, it was harder to do the same for others. So, in 1994, he wrapped up the first chapter of his investment career by returning Gotham's outside capital.

In the years since, he and Goldstein have continued to pursue their strategy of buying good, cheap stocks and selling expensive junk. They've also built a suite of new long and long/short funds that are less volatile and once again opened the doors to external capital.

While Greenblatt's investing skills have earned him superstar status, he has also spent his career sharing his expertise with individual investors everywhere.

In a series of books -- including the hugely popular 'Little Book That Beats the Market' -- he outlined an incredibly accessible and intuitive investment strategy based on his favoured principle of focusing on 'good' and 'cheap' stocks. He called it the Magic Formula, and it is arguably responsible for educating a generation of investors about how a blend of value and quality can be used to construct portfolios that outperform on average.

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I met Joel Greenblatt at Gotham Asset Management's offices in New York City first thing on a sunny Monday morning in June. We'd only agreed the precise details of the interview the previous Friday. Happily, he

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