Joel Greenblatt

Joel Greenblatt (born December 13, 1957) is an American academic, hedge fund manager, investor, and writer. He is a value investor, alumnus of the Wharton School of the University of Pennsylvania, and adjunct professor at the Columbia University Graduate School of Business. He runs Gotham Asset Management with his partner, Robert Goldstein. He is the former chairman of the board of Alliant Techsystems (1994–1995)[1] and founder of the New York Securities Auction Corporation. He was a director at Pzena Investment Management, a firm specializing in value investing and asset management for high net worth clients.[2]

Joel Greenblatt
Born (1957-12-13) December 13, 1957
Great Neck, New York
NationalityAmerican
Alma materWharton School of the University of Pennsylvania (BS)
Occupation(s)Managing Principal and Co-Chief Investment Officer of Gotham Asset Management
Former Adjunct Professor at Columbia Business School
WebsiteGotham Asset Management
Columbia Business School Faculty

Early life and education

Greenblatt was born in Great Neck, New York. Greenblatt is a graduate of The Wharton School at the University of Pennsylvania, receiving his B.S. summa cum laude in 1979 and M.B.A. in 1980.[1] At Wharton, his paper "How the small investor can beat the market" was published in The Journal of Portfolio Management.[3] Greenblatt spent one year studying law at Stanford Law School in California before dropping out to pursue a career in finance.[4]

Career in finance

From Gotham Capital To Gotham Asset Management

In 1985, Greenblatt started a hedge fund, Gotham Capital, with $7 million, most of which was provided by "junk-bond king" Michael Milken.[5] Robert Goldstein joined Gotham Capital in 1989.[1] At Gotham Capital between 1985 and 1994, Greenblatt presided over an annualized return of 50% "after all expenses" but "before general partner's incentive allocation" fees; or 30%, net of all fees.[6]) Gotham specialized in "special situations" like spinoffs and other corporate restructurings".[7][8] In January 1995 Gotham returned all capital of outside partners (approximately $500 million).[8]

From 1995 to 2009 Gotham Capital was closed to outside investors.[8]

In 2000 Gotham Capital helped Michael Burry create his hedge fund Scion Capital by buying 25% of its capital for one million dollars after taxes.[9] In October 2006, Gotham's investment in the funds managed by Scion amounted to $100 million.[9] Gotham exited its investments both in the managed funds by Scion Capital and as a shareholder.[9]

In 2008 Gotham Asset Management, LLC was created as "the successor to the investment advisory business of Gotham Capital".[1] In 2010, Gotham started four conventional mutual funds raising $360 million.[8] As of December 2021 Gotham Asset Management, LLC managed $3.74 billion.[10][11][12][13]

Value Investing Professor

Greenblatt served as an adjunt professor teaching value investing classes for MBA students at Columbia University's Graduate School of Business for over 20 years.[1][6]

Value Investors Club

Greenblatt co-founded a website with John Petry called the Value Investors Club,[14] where investors approved through an application process exchange value and special situation investment ideas. Membership is capped at 250 members and is considered highly prestigious.[15] A 2012 academic study showed that the recommendations of the members of the club do in fact appear to generate significant abnormal profits.[16] The club awards $5000 bimonthly to members who provide the best advice.[17]

Magic Formula Investing

Greenblatt's book The Little Book That Beats the Market (Wiley, 2005 & 2010) introduced the investment strategy of "magic formula investing", a method for determining which stocks to buy: "cheap and good companies" with a high earnings yield and a high return on invested capital. His strategy is featured in The Guru Investor by John P. Reese. Several studies from around the world have found Greenblat's formula tends to result in long-term outperformance relative to market averages, but is also associated with significantly higher short-term volatility and sharper drawdowns due to his concentrated approach of 20–30 stocks.[18][19][20][21]

In October 2009, Greenblatt launched a website for Formula Investing, providing an online tool that follows the investment strategy described in his book.[22][23]

Author

Greenblatt’s first book, You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits, was released in 1997. Greenblatt published his second book, The Little Book That Beats the Market in 2005, a New York Times Best-Seller that sold over 300,000 copies. After the 2007–2008 financial crisis, The Little Book was updated and re-released in 2010 as The Little Book that Still Beats the Market.[24]

Greenblatt’s book, The Big Secret for the Small Investor: A New Route to Long-Term Investment Success, was released in 2011.[25]

In 2020, Greenblatt shared an investor’s perspective on building an economy that works for all in his book Common Sense: The Investor’s Guide to Equality, Opportunity, and Growth.[26]

Philanthropy

In 2002, Greenblatt donated $2.5 million to P.S. 65Q, a public elementary school in the borough of Queens, whose students come largely from the neighborhood's South American and South Asian immigrant communities. This investment was equal to about $1,000 per student per year over five years.[27]

In 2006, Greenblatt co-founded the Success Academy Charter Schools, then known as the Harlem Success Academy Charter School, an elementary school in the city's historically African-American neighborhood.[28]

He has also served on the boards of the Institute for Student Achievement and the Davidson School of the Jewish Theological Seminary.[29]

During 2007 and 2008, Joel Greenblatt, Robert Goldstein and Gary Curhan created a website, inspired by the Value Investors Club, to spur idea sharing in order to advance cancer research.[30][31] The $1 million Gotham Prize for Cancer Research was awarded in 2008 to Alexander Varshavsky for trying to find a potentially vulnerable feature of cancer cells that won't change during tumor progression.[32]

Greenblatt is a founding Master Player of the Portfolios with Purpose virtual stock trading contest.[33]

Bibliography
  • Greenblatt, Joel (1997). You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits. New York: Simon & Schuster. ISBN 0-684-83213-5.
  • Greenblatt, Joel (2006). The Little Book That Beats the Market. Hoboken, NJ: John Wiley & Sons. ISBN 0-471-73306-7. Updated 2010 version : The Little Book that Still Beats the Market. ISBN 978-0470624159.
  • Greenblatt, Joel (2011). The Big Secret for the Small Investor: A New Route to Long-Term Investment Success. New York: Crown Publishing Group. ISBN 978-0-385-52507-7.[34]
  • Greenblatt, Joel (2011). Le petit livre qui bat le marché [The Little Book That Beats the Market] (in French). Translated by Monet, Roland. Hendaye, France: Valor Editions. ISBN 978-2-36117-001-1.

References
  1. ADV Part2 Brochure (PDF) source: https://www.adviserinfo.sec.gov/Firm/149335
  2. http://www.bidnessetc.com/hedge-fund/JOEL-GREENBLATT/ Archived 2016-07-14 at the Wayback Machine Greenblatt's Life
  3. Newberg, Bruce L.; Pzena, Richard; Greenblatt, Joel M. (1981-07-31). "How the small investor can beat the market". The Journal of Portfolio Management. 7 (4): 48–52. doi:10.3905/jpm.1981.408811. ISSN 0095-4918. S2CID 153544502.
  4. Ted Seides (22 November 2020). "Joel Greenblatt – Common Sense for Value at Gotham Capital (EP.165)" (Podcast). Event occurs at 7:00. Retrieved 28 November 2020.
  5. Gannon, Geoff. "Value Investing Encyclopedia: Joel Greenblatt". December 28, 2005.
  6. Stockopedia (2018-08-24). "Joel Greenblatt Interview - His Magic Formula For Stock Market Investing". Seeking Alpha. Retrieved 2020-01-18.
  7. Greenblatt, Joel (1997). You can be a stock market genius : (even if you're not too smart) : uncover the secret hiding places of stock market profits. Internet Archive. New York : Simon & Schuster. pp. 271. ISBN 9780684832135.
  8. Smith, Randall (2014-10-22). "A Book, Four Funds and a Flood of Cash". The New York Times. ISSN 0362-4331. Retrieved 2020-01-18.
  9. Michael, Lewis (2010). The Big Short: Inside the Doomsday Machine. pp. Ch. 2, 8 & 9. ISBN 978-0-393-07223-5.
  10. "SEC FORM 13F-HR". www.sec.gov. Retrieved 2020-01-18.
  11. "EDGAR Search Results". www.sec.gov. Retrieved 2020-01-18.
  12. "Gotham Asset Management, LLC - 13F Holdings - Joel Greenblatt - Fintel.io". fintel.io. Retrieved 2020-01-18.
  13. "How One Value InvestorIs Weathering the Strategy's Underperformance". Institutional Investor. Retrieved 2023-03-01.
  14. Value Investors Club
  15. "Exclusive investor club reveals the value of ideas" (PDF). Financial Times.
  16. "Do Fund Managers Identify and Share Profitable Ideas?". Social Science Research Network. SSRN 1499341.
  17. http://www.bidnessetc.com/hedge-fund/JOEL-GREENBLATT/ Archived 2016-07-14 at the Wayback Machine Value Investors Club
  18. Persson, V. & Selander, N., 2009. Back testing “The Magic Formula” in the Nordic region. Stockholm: Stockholm School of Economics.
  19. Davyclov, D., Tikkanen, J. & Äijö, J., 2016. Magic Formula vs. Traditional Value Investment Strategies in the Finnish Stock Market. Nordic Journal of Business, 65(3–4), pp. 38–54.
  20. Oscar Gustavsson and Oskar Strömberg. Magic Formula Investing and The Swedish Stock Market: Can the Magic Formula beat the market? Bachelor’s thesis, Fall Semester 2017, Lund University
  21. Luo, Min (2019). "Case Study of Magic Formula Based on Value Investment in Chinese A-shares Market". Advances in Computational Science and Computing. Advances in Intelligent Systems and Computing. Vol. 877. pp. 177–194. doi:10.1007/978-3-030-02116-0_22. ISBN 978-3-030-02115-3. S2CID 158778392.
  22. Joel Greenblatt's Forgotten Original Magic Formula NASDAQ.
  23. Finding Magic in the Market Barron's.
  24. 10 books to read before you start trading Capital.com.
  25. Individuals Can Beat The Market With Big Secrets And Magic Formulas Forbes.
  26. Value investor Joel Greenblatt defends 'big tech' stock prices and tackles major societal issues in a new interview. Here are the 11 best quotes. Business Insider.
  27. How Is a Hedge Fund Like a School?, New York Magazine February 10, 2006.
  28. How Is a Hedge Fund Like a School? Archived 2006-03-26 at the Wayback Machine, Feb. 20, 2006.
  29. Bill Ackman, David Einhorn And Seth Klarman Listen To Your Billion Dollar Idea Jewish Business News.
  30. Neill, Ushma S. (2007-08-01). "The Gotham Prize: a beacon for cancer researchers". Journal of Clinical Investigation. 117 (8): 2016. doi:10.1172/JCI33097. ISSN 0021-9738. PMC 1934580. PMID 17671633.
  31. "Sharing ideas to advance cancer research". MarketWatch. Retrieved 2020-01-18.
  32. "DNA idea wins $1m US cancer prize". DAWN.COM. 2008-04-01. Retrieved 2020-01-18.
  33. Ziegler, Maseena (1 December 2012). "When Quitting Is Not An Option - How You Can Find Purpose And Fulfillment Through Your Career". Forbes. Retrieved 27 December 2012.
  34. "Value Weighted Index – A New Approach to Long-Term Investing". valueweightedindex.com. Retrieved 2020-08-25.
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