IC Interviews: Joel Greenblatt

Joel Greenblatt is managing director and co-chief investment officer at Gotham Asset Management, having co-founded Gotham in 1985. His written work includes the famous tome The Little Book That Beats the Market, published in 2005, which set out his ‘magic formula’ for private investors.

In this interview, he speaks to Dan Jones about the relative cheapness of certain US shares, why he is still a fan of big tech, the origins of the magic formula and its usefulness for investors, and the prospects for the UK equity market.

00:00 – Intro
00:58 – Investment philosophy
04:27 – Risk-free rate in 2023
06:00 – Are we in a 'normal' environment?
13:40 – Knowing your 'circle of competence'
17:06 – Value versus growth in the last decade
20:40 – The magic formula
27:03 – Cash flow versus EBIT
32:00 – The UK market
36:23 – Company spin-offs
39:35 – Conglomerates
40:37 – Outro

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32 thoughts on “IC Interviews: Joel Greenblatt

  1. Don’t take me wrong I like Joel, but it appears to me that he likes more to say to people that they have no business investing than actually investing himself (selfconfidence is a good thing but everything can be too much i beleive and many do not need to hear him saying that)

    1. @P Y right but what about peter lynch and all the others that give you a reason to study instead of saying to not even look into it? I think is better to motivate than demotivate people to do as much as they can to learn instead of going for the easy route, if it wasn’t for Peter I would not have beleived I could do it and I’m sure many come from low selfesteem already and need to hear they can do it!
      Ps: yes I have beat the index by far in the last two years.

    2. @PhRiMe reading and listening to every interview and book that I could and felt right, don’t close your mind anything you don’t know is something you want to know not all knowledge is good but all makes you a bit better and knowledge compounds!
      Beleive in yourself for as hard as it can be because you don’t know your limits, start with the amount of money that you can afford to loose (I say it but don’t do it honestly ahah) and grow from there, I’m a very tiny individual investor but make yourself a simile compounding graph with the returns you want to have and you will see how far you can get with even little money, and never forget that to become rich on the long run is totally feasible, not easy but as munger says paraphrased “why should it be?”

  2. This veteran of investing world holds 1200 securities in his portfolio, makes me wonder if he really knows anything about investing. It’s hard to believe he knows what those 1200 companies will earn in future

    1. He says as much, in regards to not knowing which companies will be the winners or not. He openly states that he is aiming for success by average in these bucket portfolios. Can’t argue with his annualized returns though.

    2. LOL yeah the guy who had over 40% CAGR for multiple decades doesnt know anything about investing.

    3. @Dylan Murray That was like ages ago, in the past 7 years his best fund has delivered just 12% CAGR

    4. This is not a serious comment. Joel is a legend. Peter Lynch used to hold over 1k positions at a time…

  3. As usual, I got to watch it a second, third, and many more times to catch everything. It’s been too long since new Joel content!

  4. Why in such a big rush in ending the interview. Joel was just about to expand on your question. If he likes to give you more time, take it gladly.

  5. Joel mentioned he is writing another book… I will be buying on pre-order… looking forward to it

  6. Do The backtest results on magic formula consider taxes or do you have to subtract them from the Return?

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