Joel Greenblatt

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Joel Greenblatt
Born (1957-12-13) December 13, 1957 (age 66)
Great Neck, New York, U.S.
NationalityAmerican
Education University of Pennsylvania (BS, MBA)
Occupation(s)Managing Principal and Co-Chief Investment Officer of Gotham Asset Management
Former Adjunct Professor at Columbia Business School
Website Gotham Asset Management
Columbia Business School Faculty

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]

Contents

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

Related Research Articles

Finance refers to monetary resources and to the study and discipline of money, currency, assets and liabilities. As a subject of study, it is related to but distinct from economics, which is the study of the production, distribution, and consumption of goods and services. Based on the scope of financial activities in financial systems, the discipline can be divided into personal, corporate, and public finance.

A hedge fund is a pooled investment fund that holds liquid assets and that makes use of complex trading and risk management techniques to improve investment performance and insulate returns from market risk. Among these portfolio techniques are short selling and the use of leverage and derivative instruments. In the United States, financial regulations require that hedge funds be marketed only to institutional investors and high-net-worth individuals.

<span class="mw-page-title-main">Myron Scholes</span> Canadian–American financial economist

Myron Samuel Scholes is a Canadian–American financial economist. Scholes is the Frank E. Buck Professor of Finance, Emeritus, at the Stanford Graduate School of Business, Nobel Laureate in Economic Sciences, and co-originator of the Black–Scholes options pricing model. Scholes is currently the chairman of the Board of Economic Advisers of Stamos Capital Partners. Previously he served as the chairman of Platinum Grove Asset Management and on the Dimensional Fund Advisors board of directors, American Century Mutual Fund board of directors and the Cutwater Advisory Board. He was a principal and limited partner at Long-Term Capital Management (LTCM), a highly leveraged hedge fund that collapsed in 1998, and a managing director at Salomon Brothers. Other positions Scholes held include the Edward Eagle Brown Professor of Finance at the University of Chicago, senior research fellow at the Hoover Institution, director of the Center for Research in Security Prices, and professor of finance at MIT's Sloan School of Management. Scholes earned his PhD at the University of Chicago.

Private equity (PE) is stock in a private company that does not offer stock to the general public. In the field of finance, private equity is offered instead to specialized investment funds and limited partnerships that take an active role in the management and structuring of the companies. In casual usage, "private equity" can refer to these investment firms, rather than the companies in which that they invest.

A mutual fund is an investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe, and the open-ended investment company (OEIC) in the UK.

<span class="mw-page-title-main">Value investing</span> Investment paradigm

Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. Modern value investing derives from the investment philosophy taught by Benjamin Graham and David Dodd at Columbia Business School starting in 1928 and subsequently developed in their 1934 text Security Analysis.

Net asset value (NAV) is the value of an entity's assets minus the value of its liabilities, often in relation to open-end, mutual funds, hedge funds, and venture capital funds. Shares of such funds registered with the U.S. Securities and Exchange Commission are usually bought and redeemed at their net asset value. It is also a key figure with regard to hedge funds and venture capital funds when calculating the value of the underlying investments in these funds by investors. This may also be the same as the book value or the equity value of a business. Net asset value may represent the value of the total equity, or it may be divided by the number of shares outstanding held by investors, thereby representing the net asset value per share.

A stock fund, or equity fund, is a fund that invests in stocks, also called equity securities. Stock funds can be contrasted with bond funds and money funds. Fund assets are typically mainly in stock, with some amount of cash, which is generally quite small, as opposed to bonds, notes, or other securities. This may be a mutual fund or exchange-traded fund. The objective of an equity fund is long-term growth through capital gains, although historically dividends have also been an important source of total return. Specific equity funds may focus on a certain sector of the market or may be geared toward a certain level of risk.

Magic formula investing is an investment technique outlined by Joel Greenblatt that uses the principles of value investing.

<span class="mw-page-title-main">James O'Shaughnessy (investor)</span> American economist

James Patrick O'Shaughnessy is an American investor and venture capitalist, currently serving as the CEO of O'Shaughnessy Ventures. He is the founder of O'Shaughnessy Asset Management, LLC, an asset management firm that Franklin Templeton later acquired.

The following outline is provided as an overview of and topical guide to finance:

<span class="mw-page-title-main">Alternative investment</span> Investments other than stocks, bonds and cash

An alternative investment, also known as an alternative asset or alternative investment fund (AIF), is an investment in any asset class excluding capital stocks, bonds, and cash.

<span class="mw-page-title-main">Seth Klarman</span> American billionaire investor

Seth Andrew Klarman is an American billionaire investor, hedge fund manager, and author. He is a proponent of value investing. He is the chief executive and portfolio manager of the Baupost Group, a Boston-based private investment partnership he founded in 1982.

<span class="mw-page-title-main">Ray Dalio</span> American investor and hedge fund manager (born 1949)

Raymond Thomas Dalio is an American investor and hedge fund manager, who has served as co-chief investment officer of the world's largest hedge fund, Bridgewater Associates, since 1985. He founded Bridgewater in 1975 in New York.

A portfolio manager (PM) is a professional responsible for making investment decisions and carrying out investment activities on behalf of vested individuals or institutions. Clients invest their money into the PM's investment policy for future growth, such as a retirement fund, endowment fund, or education fund. PMs work with a team of analysts and researchers and are responsible for establishing an investment strategy, selecting appropriate investments, and allocating each investment properly towards an investment fund or asset management vehicle.

Jacob Ezra Merkin is an American investor, hedge fund manager and philanthropist. He had been a fund manager and capital raiser until 2008 when one of the funds in Gabriel Capital LP, his $5 billion group of hedge funds became insolvent because a large portion of its assets was invested with the convicted Ponzi scheme operator Bernard Madoff. The fallout from his investment with Madoff has been extensive. He navigated a series of lawsuits without a finding of fraud or knowledge of the scheme, but agreed to repay any fees earned from the investment in Madoff historically. He had to resign a series of positions including his role as non-executive chairman of GMAC.

A quantitative fund is an investment fund that uses quantitative investment management instead of fundamental human analysis.

Michael James Burry is an American investor and hedge fund manager. He founded the hedge fund Scion Capital, which he ran from 2000 until 2008 before closing it to focus on his personal investments. He is best known for being among the first investors to predict and profit from the subprime mortgage crisis that occurred between 2007 and 2010.

Clifford Scott Asness is an American hedge fund manager and the co-founder of AQR Capital Management. As of July 2024, Forbes estimated his net worth at US$2.0 billion.

<span class="mw-page-title-main">Investment fund</span> Way of investing money alongside other investors

An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages include an ability to:

References

  1. 1 2 3 4 5 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. 1 2 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. 1 2 3 4 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. 1 2 3 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.[ dead link ]
  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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