Greenblatt Explains his “Magic”

Hedge fund guru and author Joel Greenblatt talks about the concepts behind and implementation of his “magic formula” investing strategy in Forbes’ latest “Intelligent Investing” interview. Greenblatt also discusses the importance of keeping emotions at bay and embracing long-term thinking for investors. And he talks about the areas of the market that have been popping up on his magic formula screen lately.

Greenblatt: Know Your Risk Tolerance

In his latest column on his Magic Formula Investing web site, Joel Greenblatt says it’s critical for investors to know what level of short-term losses they’ll be able to take before they start investing — lest they be scared out of the market at just the wrong time. “An investment strategy where 100% of your assets are invested in the stock market (even with no leverage/margin account, etc) can result in a drop of 40%… Read More

“High-Quality” Picks from the Gurus

In the past two days, two of the most successful gurus I follow — GMO’s Jeremy Grantham and Gotham Capital’s Joel Greenblatt — have said that they are seeing a lot of value in “high-quality” stocks, as opposed to the junk-type stocks that have led the recent market surge. In his third-quarter letter, Grantham says that U.S. “quality stocks (high, stable return and low debt)”, are now trading at “genuine outlier levels” compared to the… Read More

Greenblatt: High-Quality Appears to Offer Most Value

Hedge fund guru Joel Greenblatt says that he thinks the best values in the stock market are probably now in the “high-quality” area, as opposed to the junk stocks that have led the recent rally. And, he says he’s not too concerned with potential inflation — or deflation, for that matter. Greenblatt, who uses a purely quantitative formula to pick stocks, tells Yahoo! TechTicker that he doesn’t like to predict where the broader market will… Read More

Greenblatt Says It’s All about Discipline

Often times, investors get the idea that beating the market requires complicated strategies, whether in the form of complex mathematical formulas or highly technical timing mechanisms. Others assume that an investor needs to have some sort of specialized, inside knowledge or God-given natural ability to produce strong returns over the long run. In 2005, however, Joel Greenblatt showed the investment world that all of those assumptions are wrong. In his Little Book that Beats the… Read More

Greenblatt on Markets, Magic Formula & More

In a wide-ranging interview, author and hedge fund guru Joel Greenblatt has responded to a myriad of reader questions on GuruFocus.com, offering his thoughts on portfolio strategy, macroeconomic analysis, and whether the potential popularity of his new website, FormulaTrading.com, will impact the success of his “Magic Formula”. Greenblatt’s formula, detailed in his Little Book that Beats the Market, includes only two variables: return on capital and earnings yield. Despite its simplicity, it has a lengthy… Read More

Portfolio Size: How Big Is Big Enough?

How many stocks should you own? Rob Wherry of SmartMoney.com takes an interesting look at that question today on The Wall Street Journal’s web site. Wherry examines “focused funds” (those that own fewer than 50 stocks), narrowing the list down to 18 that meet performance, fee, sales load, and manager experience requirements. Among the funds with the best five-year track records: CGM Focus (3.9% average annual return) and Forester Value (3.5% annual return), run by… Read More

There’s Magic in Greenblatt’s “Magic Formula”

I’ve added a new investment model to my arsenal. It’s based on the “Magic Formula” strategy that Joel Greenblatt outlined in The Little Book that Beats The Market. Some of what you’ll find below is a recap of a post I did last week, but in this post I’ve also included the ten stocks that are currently in my Greenblatt-based portfolio. The beauty, and attractiveness, of Greenblatt’s “Magic Formula” lays in its perceived simplicity. The… Read More

What Does It Mean to be a Value Investor?

In a piece written for Forbes.com’s “Gurus’ Guide to 2009“, John Heins and Whitney Tilson do a great job in examining just what makes an investor a value investor. While value investors come in all shapes and sizes — large-cap, small-cap, activist, non-activist, U.S.-focused, foreign-focused — Heins and Tilson list 12 similarities they share. A sampling: They focus on intrinsic company value and buy only when there is a substantial margin of safety, rather than… Read More