MiB: Joel Greenblatt on Relative Value
This week, we speak with Joel Greenblatt of Gotham Asset Management LLC. An adjunct professor at Columbia Business School since 1996, he teaches classes on value and special situation investing. When he was running Gotham Capital in the 1980s and 90s, he generated investment returns of 50% a year for a decade. His firm Gotham Asset Management runs a variety of funds that have beaten market indices. He is the author several books on investing, including You Can Be A Stock Market Genius.” His latest book is Common Sense: The Investor’s Guide to Equality, Opportunity, and Growth.
We discuss the challenges of running portfolios intended to outperform the benchmark S&P500. His latest mutual fund, the Gotham Enhanced S&P 500 Index Fund (GSPFX) is the SPX index with Gotham’s relative value weighting for all the holdings in the index. It has a 4 star ranking from Morningstar, and has outperformed 90% of its peers since inception.
Greenblatt explains why traditional measures of value like Price to Book, Price to Earnings, etc. are all failing to capture good companies with strong future cash flows and good growth prospects. He favors measures that look at relative value and other factors beyond P/E.
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 Monday.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Overcast, Google, Bloomberg, Stitcher 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.
Joel Greenblatt’s Authored Books
The Little Book That Still Beats the Market by Joel Greenblatt
Common Sense: The Investor’s Guide to Equality, Opportunity, and Growth by Joel Greenblatt
Joel Greenblatt’s Favorite Books
The Americanization of Benjamin Franklin by Gordon S. Wood
Chasing My Cure: A Doctor’s Race to Turn Hope into Action; A Memoir by David Fajgenbaum