GREENBLATT: STRATEGY CHANGE

November 14, 2014

It isn’t often that a very successful hedge fund manager with a winning strategy closes up shop, but that is exactly what this week’s Great Investor guest did in 1995. It’s equally unusual to get back in the business more than a decade later with a dramatically altered strategy. Joel Greenblatt of the Gotham Funds will explain his big change in portfolio strategy, from a very concentrated approach to broad diversification.

WEALTHTRACK Episode #1121; Originally Broadcast on November 14, 2014

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Joel Greenblatt

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JOEL GREENBLATT

Co-Manager, 
Gotham Funds

Consuelo MackIt isn’t often that a very successful hedge fund manager with a winning strategy closes up shop, but that is exactly what this week’s Great Investor guest did in 1995. It’s equally unusual to get back in the business more than a decade later, and with a dramatically altered strategy. Joel Greenblatt of the Gotham Funds will explain his big change in portfolio strategy, from a very concentrated approach to a broadly  diversified one. There are some lessons for all of us.   Greenblatt is the Managing Principal and Co-Chief Investment Officer of Gotham Asset Management, a firm he founded in 2009 with longtime business partner and investor Robert Goldstein.    He co-manages the Gotham Funds, four long/short funds that go long hundreds of stocks – buying them, believing they will appreciate in price and shorting hundreds of others – selling them short, betting they will decline.   The largest fund, Gotham Absolute Return was recently given coverage by Morningstar, debuting with a Bronze Analyst Rating, Morningstar’s third highest ranking.   The predecessor firm to Gotham Asset Management was Gotham Capital, a  long/short hedge fund firm he started with Goldstein in 1985. However it had a heavily concentrated portfolio with as few as 6-8 holdings.   In 1995 the two of them decided to close the fund to outside investors and give clients their money back, even after delivering 34% annualized returns since inception. Why did they do that? We will find out.   In the intervening years Greenblatt started teaching a “Value and Special Situation Investing” course at Columbia Business School and helped start the Success Academy Charter Schools, which now operates over 30 schools primarily in New York City’s poorer neighborhoods.   Greenblatt has also written several books – “You Can be a Stock Market Genius”, “The Little Book that Beats the Market”, “The Little Book that Still Beats the Market”, and “The Big Secret for the Small Investor”.     In a wide ranging discussion I ask Greenblatt to distill a lifetime of successful value investing for us, and reveal the “big secret.”    In our EXTRA feature with him we will talk about his commitment to the Success Academy, which he helped found and another organization he started, the Value Investors Club. How do you gain admission to this select group, limited to only 250 members? He will tell us.     Have a great weekend and make the week ahead a profitable and a productive one.   Best regards,   Consuelo Mathews Asia

READ JOEL GREENBLATT’S THE LITTLE BOOK THAT STILL BEATS THE MARKET

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VALUABLE BREAK

In 1995, after ten years of running the extremely concentrated hedge fund, Gotham Capital, Great Investor Joel Greenblatt and his co-manager decided to give the money back to outside investors and take it private. In addition to continuing to run the fund, what else did Greenblatt do with his time? As it turns out, plenty!


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