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MiB: Joel Greenblatt on Gotham Relative Value

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MiB: Joel Greenblatt on Gotham Relative Value

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Why have value stocks been underperforming growth stocks for so long?

Joel Greenblatt of Gotham Asset Management LLC explains why the traditional measures of value – Price to Book, Price to Earnings, Debt-to-Equity Ratios, etc. – are all failing to capture good companies with strong future cash flows and good growth prospects. He suggest instead that investors look at “relative value” as way to identify companies that have better prospects than do the traditional value metrics. He has shared this formula in books he has authored, most notably “You Can Be A Stock Market Genius.”

His mutual fund the Gotham Enhanced S&P 500 Index Fund (GSPFX) uses the relative value approach to do just that: It owns all of the components of the S&P 500 index, only over and under weights the components based on Gotham’s relative value ranking. It has a 4-star ranking from Morningstar, and has outperformed 90% of its peers since inception, and is beating its benchmark SPX index.

Greenblatt is an adjunct professor at Columbia Business School, where since 1996, where he teaches classes on value and special situation investing. In the 1980s and 90s, his Gotham Capital hedge fund generated investment returns of 50% per year for a decade. His latest book is “Common Sense: The Investor’s Guide to Equality, Opportunity, and Growth.”

He explains why immigrants — and especially skilled immigrants — are an economic asset of the United States. The nation makes 500,000 to 1 million dollars net for each skilled immigrant we take in. The United States creates 2 jobs for each new immigrant we bring in. Immigrants have founded 51% of start ups (worth over $1billion dollars), and have founded 216 of the Fortune 500 companies. We are second to last in bringing in skilled technical workers; the US H1B visa program is broken.

A list of his favorite books are here; A transcript of our conversation is available here. You can hear our previous conversation in 2018 here.

You can stream and download our full conversation, including the podcast extras on iTunesSpotifyOvercastGoogleBloombergStitcher and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Lisa Cook. She served as a Senior Economist in the Obama Administration’s Council of Economic Advisers, and is currently a Professor of Economics and International Relations at Michigan State University. Her groundbreaking research on patents and economic history has huge implications for the wealth of entire countries.

 

 

 

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