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 Funds with his partner, Robert Goldstein. He is the former chairman of the board of Alliant Techsystems (1994–1995) and founder of the New York Securities Auction Corporation. He is also a director at Pzena Investment Management, a firm specializing in value investing and asset management for high-net worth clients.

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.ADV Part2 Brochure
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source: https://www.adviserinfo.sec.gov/Firm/149335 At Wharton, his paper "How the small investor can beat the market" was published in The Journal of Portfolio Management. Greenblatt spent one year studying law at Stanford Law School in California before dropping out to pursue a career in finance.

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.Gannon, Geoff.
Value Investing Encyclopedia: Joel Greenblatt
. December 28, 2005. Robert Goldstein joined Gotham Capital in 1989. 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.) Gotham specialized in "special situations" like spinoffs and other corporate restructurings". In January 1995 Gotham returned all capital of outside partners (approximately $500 million).

From 1995 to 2009 Gotham Capital was closed to outside investors.

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. This was the first time Greenblatt partnered with an outside investor. In October 2006, Gotham's investment in the funds managed by Scion amounted to $100 million. Based on disagreements about Burry's strategy of betting against the US housing market, Gotham Capital and other investors eventually wanted their money back. However, Burry used a provision in his prospectus to "side pocket" (block withdrawals) between 50 and 55 percent of Greenblatt's investment, an amount corresponding to his credit default swap short-bet which was then losing money. Gotham Capital threatened to sue Burry because it was "wildly unconventional to side-pocket an investment for which there was obviously a market". On August 31, 2007, Burry lifted the side pocket and began to sell his credit default swaps, which were now a profitable bet in the housing market crisis. Gotham exited its investments both in the managed funds by Scion Capital and as a shareholder. In the 2015 film adaptation of Michael Lewis's book The Big Short, Tracy Letts appears as "Lawrence Fields", a fictionalized composite of Greenblatt and others who'd invested with Burry.

In 2008 Gotham Asset Management, LLC was created as "the successor to the investment advisory business of Gotham Capital". In 2010, Gotham started four conventional mutual funds raising $360 million. In January 2014, the mutual funds managed $1 billion. Due to new-money inflows this suddenly increased to $4.8 billion in October 2014 and briefly culminated to $13.1 billion in March 2015. As of November 2019 Gotham Asset Management, LLC manages $5.6 billion.

Value Investing Professor

In 1996, Greenblatt began teaching value investing classes for MBA students at Columbia University's Graduate School of Business.

Value Investors Club

Greenblatt co-founded a website with John Petry called the Value Investors Club, 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. A 2012 academic study showed that the recommendations of the members of the club do in fact appear to generate significant abnormal profits. The club awards $5000 bimonthly to members who provide the best advice.

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.

In October 2009 he launched Formula Investing, an online money management firm that follows the investment strategy described in his New York Times bestselling book ''The Little Book That Beats the Market''. Formula Investing was a money management firm that uses a proprietary stock-screening system and a disciplined approach to manage portfolios of value stocks. The firm offered its services to individual investors and institutions and to registered investment advisors, who could use Formula Investing as a sub-advisor. Formula Investing used a system that determines portfolio selections based on a combination of their relative cheapness and quality, as measured by earnings yield and return on capital. Formula Investing was promoted as managing money in a disciplined manner that removes factors, like excess emotion and future projections, that often lead to bad investment results. In February 2014, Formula Investing's operations were merged into Gotham Asset Management, the advisor to the Formula Investing Mutual Funds.

Philanthropy

Greenblatt is also famous for his contributions to education in New York City. In 2002, he 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, equal to about $1,000 per student per year over five years, helped P.S. 65Q to go from a struggling school to an urban success story almost overnight. He continues to aid the school in Ozone Park currently as they have continued to rise. Recently the school and principal Rafael Morales received a progress report score of A, scoring 98 out of a possible 100 points.

In 2006, Greenblatt also helped start 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. He is also a board member of the Institute for Student Achievement, a national leader in developing new small high schools and transforming large comprehensive public high schools into small learning communities.

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. The, finally, unique $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.

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

Bibliography

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* Updated 2010 version : ''The Little Book that Still Beats the Market''. .
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References

External links

Magic Formula Investing WebsiteMagic Formula stock picks scored in real timeGotham Asset Management Current InvestmentsGotham FundsGotham Asset Management

{{DEFAULTSORT:Greenblatt, Joel
1957 births
Living people
American chief executives of financial services companies
American finance and investment writers
American financiers
American hedge fund managers
American investors
American money managers
Philanthropists from New York (state)
American stock traders
Businesspeople from New York (state)
Columbia University faculty
Drexel Burnham Lambert
People from Great Neck, New York
Wharton School of the University of Pennsylvania alumni
Writers from New York (state)