Joel Greenblatt
WATCHGotham Capital / Gotham Asset Management
Legendary early track record (40% for 20 years) with a concentrated special situations approach, but current systematic Magic Formula strategy with 500+ positions is irrelevant to our concentrated philosophy.
Classic Value Investors
Score Breakdown
Investment Philosophy & Portfolio Style
Philosophy
Greenblatt's philosophy has two distinct phases. (1) Early career (Gotham Capital, 1985-2005): Deep value special situations investing — spinoffs, mergers, restructurings, recapitalizations, rights offerings, and other corporate events that create mispriced securities. Extremely concentrated portfolio (5-8 positions), high conviction, long holding periods. This approach generated the legendary 40% returns. (2) Later career (Gotham Asset Management, 2009-present): Systematic 'Magic Formula' investing — a quantitative screen that ranks stocks by earnings yield (EBIT/EV) and return on capital (EBIT/tangible capital employed). This identifies 'good companies at cheap prices.' The systematic approach is diversified (hundreds of positions) and designed to be scalable. Core underlying principle in both phases: buy above-average businesses at below-average prices. Greenblatt emphasizes that value investing works over 3-5+ year periods but requires patience through inevitable periods of underperformance.
Portfolio Style
Two very different styles across career phases. Early Gotham Capital: extremely concentrated (5-8 positions), special situations, high conviction, contrarian. Current Gotham Asset Management: highly diversified systematic approach with hundreds of long and short positions based on Magic Formula rankings. The 13F for Gotham Asset Management shows 500+ positions, many small, reflecting the systematic quantitative approach rather than high-conviction stock picking. Turnover in the systematic strategy is higher (annual rebalancing). The early concentrated approach is far more relevant to our philosophy, but Greenblatt no longer invests that way at scale. His personal investments may still be concentrated, but this is not visible.
Background
Joel Greenblatt (b. 1957) is the founder of Gotham Capital, a private investment partnership he started in 1985, and later Gotham Asset Management. He holds a B.S. and MBA from Wharton. At Gotham Capital (1985-2005), he compounded at approximately 40% annualized over 20 years, one of the best long-term track records ever recorded. He is a professor at Columbia Business School where he teaches value investing. He is the author of several influential books: 'You Can Be a Stock Market Genius' (1997, on special situations), 'The Little Book That Beats the Market' (2005, introducing the 'Magic Formula'), and 'The Big Secret for the Small Investor' (2011). He co-founded Value Investors Club, an online community of elite value investors. In 2009, he launched Gotham Asset Management, which runs long/short systematic value strategies using the Magic Formula framework.
Track Record
Gotham Capital (1985-2005): approximately 40% annualized gross returns over 20 years, one of the best track records in investing history. This was achieved with a concentrated special situations approach. Gotham Asset Management (2009-present): performance has been more mixed. The Magic Formula systematic approach has underperformed the S&P 500 in several recent years, particularly during growth-dominated markets (2015-2021). The long/short structure creates additional headwinds in persistent bull markets. Academic backtests of the Magic Formula show strong historical returns, but live implementation has been challenging. Greenblatt has been transparent about this, noting that the approach requires patience and that most investors abandon it during periods of underperformance, which is exactly when it becomes most effective.
Notable Holdings
Early Gotham Capital era: famous positions in spinoffs and special situations (specific holdings from this era are less well-documented in public records). Value Investors Club ideas often reflect his analytical approach. Current Gotham Asset Management 13F: hundreds of positions across the market, reflecting the systematic Magic Formula approach — not meaningful for individual stock idea generation. Notable past investments include positions in various spinoffs, restructurings, and corporate events that created mispricings. His books describe specific historical investments in detail (e.g., Host Marriott spinoff, Charter Medical, Wells Fargo).
Transparency & Integrity
Transparency(Score: 9/10)
Very high transparency. Greenblatt has written three books that clearly explain his approach in accessible language. He teaches at Columbia Business School and has given numerous interviews and lectures. The Magic Formula is fully disclosed — anyone can replicate it. He founded Value Investors Club, which promotes transparent idea-sharing among investors. His 13F filings are available but less useful due to the systematic/diversified nature of Gotham Asset Management. His early special situations approach is very well-documented in 'You Can Be a Stock Market Genius.'
Integrity(Score: 9/10)
High integrity. Greenblatt invests his own capital alongside his investors. He returned outside capital at Gotham Capital when AUM grew too large for the concentrated special situations approach (similar to Klarman). He has been honest about the challenges of implementing the Magic Formula in live markets. He founded Value Investors Club as a genuine educational community. No scandals or regulatory issues. He has acknowledged that the systematic approach underperforms in certain market regimes and has not oversold it. His transition from concentrated special situations to systematic investing was driven by scalability considerations, not a change in underlying philosophy.
Relevance to Us
Mixed relevance. Greenblatt's early concentrated special situations approach (1985-2005) is highly relevant to our philosophy — deep value, concentrated, contrarian, patient. His current systematic approach at Gotham Asset Management is NOT relevant — it's the opposite of our concentrated, few-positions philosophy. His 13F is essentially useless for idea generation due to hundreds of small positions. His books and teaching are extremely valuable for developing analytical frameworks, particularly around special situations and corporate events. The Magic Formula framework (cheap + good quality) aligns with our philosophy conceptually, but the implementation is too diversified. His thinking is relevant; his current portfolio is not.