Joel Greenblatt (born December 13, 1957) is an American academic, hedge fund manager, investor, and writer. He is a
value investor
Value or values may refer to:
Ethics and social
* Value (ethics) wherein said concept may be construed as treating actions themselves as abstract objects, associating value to them
** Values (Western philosophy) expands the notion of value beyo ...
, alumnus of the
Wharton School of the University of Pennsylvania
The Wharton School of the University of Pennsylvania ( ; also known as Wharton Business School, the Wharton School, Penn Wharton, and Wharton) is the business school of the University of Pennsylvania, a Private university, private Ivy League rese ...
, and
adjunct professor
An adjunct professor is a type of academic appointment in higher education who does not work at the establishment full-time. The terms of this appointment and
the job security of the tenure vary in different parts of the world, however the genera ...
at the
Columbia University
Columbia University (also known as Columbia, and officially as Columbia University in the City of New York) is a private research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhatt ...
Graduate School of Business. He runs Gotham Funds with his partner, Robert Goldstein. He is the former chairman of the board of
Alliant Techsystems
Alliant Techsystems Inc. (ATK) was an American aerospace, defense, and sporting goods company with its headquarters in Arlington County, Virginia, in the United States. The company operated in 22 states, Puerto Rico, and other countries. ATK's ...
(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
Great Neck is a region on Long Island, New York, that covers a peninsula on the North Shore (Long Island), North Shore and includes nine villages, among them Great Neck (village), New York, Great Neck, Great Neck Estates, New York, Great Neck Es ...
. Greenblatt is a graduate of
The Wharton School
The Wharton School of the University of Pennsylvania ( ; also known as Wharton Business School, the Wharton School, Penn Wharton, and Wharton) is the business school of the University of Pennsylvania, a private Ivy League research university in P ...
at the
University of Pennsylvania
The University of Pennsylvania (also known as Penn or UPenn) is a private research university in Philadelphia. It is the fourth-oldest institution of higher education in the United States and is ranked among the highest-regarded universitie ...
, receiving his B.S. summa cum laude in 1979 and M.B.A. in 1980.
[ADV Part2 Brochure]
PDF
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
''The Journal of Portfolio Management'' (also known as JPM) is a quarterly academic journal for finance and investing, covering topics such as asset allocation, performance measurement, market trends, risk management, and portfolio optimization. ...
. 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
In finance, a high-yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade by credit rating agencies. These bonds have a higher risk of default or other adverse credit events ...
king"
Michael Milken
Michael Robert Milken (born July 4, 1946) is an American financier. He is known for his role in the development of the market for high-yield bonds ("junk bonds"), and his conviction and sentence following a guilty plea on felony charges for vio ...
.
[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
Spin-off may refer to:
*Spin-off (media), a media work derived from an existing work
*Corporate spin-off, a type of corporate action that forms a new company or entity
* Government spin-off, civilian goods which are the result of military or gov ...
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
Michael James Burry (; born June 19, 1971) is an American investor, hedge fund manager, and physician. 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 k ...
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
A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a debt default (by the debtor) or other credit event. That is, the seller of the CDS insures the buyer against som ...
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
Michael Monroe Lewis (born October 15, 1960) Gale Biography In Context. is an American author and financial journalist. He has also been a contributing editor to '' Vanity Fair'' since 2009, writing mostly on business, finance, and economics. H ...
's
book
A book is a medium for recording information in the form of writing or images, typically composed of many pages (made of papyrus, parchment, vellum, or paper) bound together and protected by a cover. The technical term for this physical arr ...
The Big Short
''The Big Short: Inside the Doomsday Machine'' is a nonfiction book by Michael Lewis about the build-up of the United States housing bubble during the 2000s. It was released on March 15, 2010, by W. W. Norton & Company. It spent 28 weeks on '' ...
,
Tracy Letts
Tracy S. Letts (born July 4, 1965) is an American actor, playwright, and screenwriter. He started his career at the Steppenwolf Theatre before making his Broadway debut as a playwright for '' August: Osage County'' (2007), for which he received ...
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
Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. The various forms of value investing derive from the investment philosophy first taught by Benjamin Graham ...
classes for
MBA
A Master of Business Administration (MBA; also Master's in Business Administration) is a postgraduate degree focused on business administration. The core courses in an MBA program cover various areas of business administration such as accounti ...
students at
Columbia University
Columbia University (also known as Columbia, and officially as Columbia University in the City of New York) is a private research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhatt ...
'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
Earning yield is the quotient of earnings per share (E), divided by the share price (P), giving E/P. It is the reciprocal of the P/E ratio.
The earning yield is quoted as a percentage, and therefore allows immediate comparison to prevailing long- ...
and a high
return on invested capital
Return may refer to:
In business, economics, and finance
* Return on investment (ROI), the financial gain after an expense.
* Rate of return, the financial term for the profit or loss derived from an investment
* Tax return, a blank document o ...
. His strategy is featured in ''The Guru Investor'' by
John P. Reese
John P. Reese (born July 1, 1953) is an American author, financial columnist, and money manager. He has written two books about investing, and is a columnist for several international financial publications, including ''Forbes'' magazine and Forbe ...
. 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
Queens is a borough of New York City, coextensive with Queens County, in the U.S. state of New York. Located on Long Island, it is the largest New York City borough by area. It is bordered by the borough of Brooklyn at the western tip of Long ...
, 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
Ozone Park is a neighborhood in the southwestern section of the New York City borough of Queens, New York, United States. It is next to the Aqueduct Racetrack in South Ozone Park, a popular spot for Thoroughbred racing and home to the Resorts Wor ...
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
Success Academy Charter Schools, originally Harlem Success Academy, is a charter school operator in New York City. Eva Moskowitz, a former city council member for the Upper East Side, is its founder and CEO. It has 47 schools in the New York ar ...
, then known as the Harlem Success Academy Charter School, an elementary school in the city's historically
African-American neighborhood
African-American neighborhoods or black neighborhoods are types of ethnic enclaves found in many cities in the United States. Generally, an African American neighborhood is one where the majority of the people who live there are African American. ...
. 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
Alexander Jacob Varshavsky (russian: link=no, Александр Яковлевич Варшавский; born 8 November 1946) is a Russian-American biochemist, noted for his discovery of the N-end rule of ubiquitination. A native of Moscow, he is ...
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
Portfolios with Purpose ("PwP") is a registered 501(c)(3) non-profit organization founded in 2011. It is an annual virtual stock selection competition in which players of novice and professional experience pay a nominal entry-fee to choose a fiv ...
virtual stock trading contest.
Bibliography
*
* Updated 2010 version : ''The Little Book that Still Beats the Market''. .
*
*
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)