Joel Greenblatt and his secrets to running a financial business
Joel Greenblatt is a leading trader and coach. In addition to running his own hedge fund, he writes books and publications on financial topics. His most popular work is The Little Book of the Stock Market Winner, in which Joel reveals his secrets of investing.
Born in New York in 1957, Joel received his bachelor’s degree from the Wharton School of the University of Pennsylvania. The young man was far from the financial world at the time. In 1980, however, he began to get involved in investment activities while studying for a master’s degree in business administration. At the same time, Greenblatt was studying law at Stanford but realised he was more attracted to finance and dropped out after his first year.
The beginning of his financial career
After graduating, Joel began to actively study the specifics of the stock market and gained experience in various firms. Perseverance and good support enabled him to open his own hedge fund, Gotham Capital, with USD 7 million in 1985.
Most of the money came from businessman Michael Milken, who had made his money in the high-yield bond market. The firm grew aggressively. Greenblatt took the most complicated cases under his management and dealt with corporate restructurings. As a result, the hedge fund achieved excellent results:
– from 1985 to 1994, the fund generated approximately 50% of annualised returns after all expenses;
– in 1995, the company returned all of its capital, totalling about USD 500 million, to third-party partners;
– the fund was closed to outside investors from 1995 to 2009.
Gotham’s skilful management and Greenblatt’s professionalism made the fund a success in the US financial market. In 2008, a new company, Gotham Asset Management, was organised with several fund and advisory companies. By the end of 2021, Greenblatt’s business was worth an estimated USD 3.7 billion.
Joel Greenblatt’s strategy
In his book, Greenblatt outlined his own approach to investing, which he called “Magic Value Investing”. The key points of this strategy are:
– buy undervalued stocks of promising companies;
– companies worth more than USD 50 million deserve attention;
– it is better to invest in low-risk assets;
– do not worry about diversification of investments;
– mergers and acquisitions and corporate restructuring can provide good returns.
Joel’s advice is also to act rationally, without regard to emotions. Use numbers and market dynamics to assess the attractiveness of a particular investment. Such a strategy will allow you to evaluate the situation and the risks involved in a dispassionate manner.