저자: JoelGreenblatt · 외국인
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Joel Greenblatt은 자산의 대부분을 Magic Formula 방식과 유사한 분산 포트폴리오로 운용하며, 일부 롱숏·일부 롱온리 전략을 쓴다고 밝힘. 그는 구글·마이크로소프트 같은 우량 기업에도 집중 투자하고 있으며, 이들은 여전히 비싸지 않아 보인다고 평가. 분산 포트폴리오와 집중 포트폴리오 모두 좋은 전략이지만 풀타임 업무라 하나만 선택해 운용 중이라고 설명. Magic Formula(저평가+양질 기업 조합)는 여전히 유효하다고 보며, 단순히 싼 종목만 사는 전략은 더 높은 수익을 내지만 변동성도 크다고 언급. 2010년 이후 운용한 딥밸류 포트폴리오는 S&P500에 거의 근접한 성과를 냈다고 함. 가치 포트폴리오(Value 1000) 데이터 분석상 현재 밸류에이션에서는 향후 2년간 중간 한 자릿수 수익률이 예상되지만, 과거 데이터 기준 가치주 포트폴리오는 향후 2년간 35~40% 수익을 낼 가능성이 있어 유리한 위치라고 전망. 영상 후반부는 자신의 능력 범위 찾기, 기회 포착, 리스크 대비, 단순화의 중요성 등 일반적인 투자 교훈을 다룸.
다듬은 글
Most of my money is invested in diversified portfolios, more similar to the way the Magic Formula works. That’s because that’s a full-time job. We run a big research team, a big tech team, to implement those portfolios. Some of it’s long-short. Some of it’s long only. I also have concentrated positions in some really good businesses that you would know, like Google and Microsoft.
Because some of those top names are businesses like I’ve never seen in my career. Hi, this is Weronika! Today we will study the success of Joel Greenblatt, who is the founder and manager of Gotham Funds, an iconic value investor famous for making a 40% return on average for over 20 years, and the author of investing books including The Little Book that Beats the Market, introducing the magic formula for investing.
In this episode, we are going to break down the top 5 Secrets to Investment Success by Joel Greenblatt. Let’s get started! Find out what you’re good at to make a living off what you enjoy Joel stresses what a meaningful role in life plays awareness and knowing what your circle of competence is, meaning what is it that you’re truly good at.
He points out that the very key to a having a satisfying and happy life on a personal and a professional level, is not being an investor, a salesman, a financial advisor or a manager. What it is, is finding that one thing that makes you stand out, that you enjoy doing and that you can make a living by doing this for the rest of your live.
This way you get to work on whatever it is that you’re passionate about, so you don’t feel you’re actually working. As usual Buffet puts it better than anyone else understand what your circle of competence is. Doesn’t mean you can’t expand that circle of competence, but understand what it is and only play the game that you can play.
So it doesn’t mean don’t keep learning and expanding your circle of competence. It means understand what it is and realize that if you play in that area, you can do very well. Because other people don’t they’re speculating or doing other things where they’re doing things that they’re not an expert at.
Find out whatever it is that you’re good at. And if you have an opportunity to make a living doing, that’s really great. And that’s most of the advice I’ve given my kids. I hadn’t said go be an investor. I said, find out what you’re good at that you enjoy, that you can be successful at. You also have to make a living.
If you find that’s really what your goal is. Find that thing. Take Advantage of an Opportunity Joel Greenblatt brings up the memories of his first full-time job on Wall Street when he was responsible for determining a risk arbitrage which was not an appealing risk-reward business so he decided to pivot.
He explains how it all started when he started to look for opportunities when tracking a specific company situation and business condition, which led him to develop his investing strategy that eventually made him a legendary investor. What is crucial is that when you seek opportunities where no one else does, you have a high chance noticing something that others don’t pay attention to, so they never get to have the same possibilities in the first place.
I started out my first job on wall street, full-time job. Anyone was doing risk arbitrage, that’s merger arbitrage. Basically, when the deal goes through, as I told you before, you make a dollar or two, but if it doesn’t go through you lose 10 or $20. That wasn’t a very appealing risk reward business for me, so I ended looking around the perimeter of the deal, when there were different pieces of paper given out, or there was a company spinoff before the deal could get done, whatever.
Anything that could get me out of risk arbitrage and into something else. Turned out, when companies are going through extraordinary change, there’s a lot of interesting thing that happens. Sometimes they’re complicated, sometimes little things get thrown away, there’s all kinds of different things.
I started looking at all these different areas, because the risk rewards were so much better. One of the things… They happen a lot, but there’s not hundreds of things you can invest in all at once. If you examine a situation, a special situation, that something extraordinary is happening in a business and it’s complicated, or it’s obscure, or not everyone’s looking at it for whatever reasons, because the regular analyst who follows that business doesn’t really care about this little piece or whatever it might be, you actually can almost not invest or even gamble.
It’s kind of like cheating, where you know what something’s worth, no one else is looking at it, and if you can buy it for a lot cheaper, it doesn’t feel that risky to you. It’s like, “Okay, I think it’s worth 10 bucks and I can pay five, so if I’m wrong and it’s only worth seven, that spend grams margin of safety.
I can buy a lot of that.” I think we talked about, years ago, basically, I didn’t size my positions based on how much money I could make. I took bigger positions, you’re able to take bigger positions in things you can’t lose much money in. Understand that bad things can happen and prepare for that Joel Greenblatt mentions breaking points that took place in his life, proving that one of the major lessons he would like to pass on to his own children is that regardless of what you do and how much you make, unexpected and bad things happen.
And sometimes they are things and events you have never experienced in your lifetime. As an example, he brings up COVID which proves that any prosperous business can unexpectedly be locked down for months due to unpredictable circumstances that no one, including the smartest and most legendary investors, can’t predict.
He shares a personal reflection on how he tried teaching his own children about how important it is to differentiate your investment portfolio and build your financial safety, so you don’t end up investing your money in a one-stock portfolio and end up losing it all. I have five kids, a couple of which I’ve taught investing or tried to teach investing too.
I was trying to teach investing early 2020, when COVID appeared. I tried to explain, “I’ve been doing this a long time. I’ve never seen this, never anticipated anything like this. I’ve never seen where they just closed down the world.” Besides the terrible human cost, I’d never seen anything like this.
I just tried to explain to them that, “I’m not going to be much help here. I’ve never seen this before, but it is a good lesson to learn that you have to be at least diversified enough, and aware enough, that really bad things can happen. You have to live to play another day. What’s probably the best lesson to learn, you can’t put all your eggs in one basket, and you can come back from big mistakes as well.
I’ve made big mistakes with big positions as well, and then bad things just happen. Part of what I always thought you get paid for in this business, it’s kind of your stomach. What I enjoyed about getting into the business was, if you think well, and if you try to figure things out, it’s not really count how many hours you showed up thinking about it, it’s the quality of your thought?
In this case, it doesn’t matter how well you’ve thought, other things still can happen. Understanding that, understanding that bad things can happen and preparing to survive to play another day is important. I think that was one of the best lessons. Of course, the market came back fairly quickly, so it wasn’t as painful as it could have been, but we didn’t know that at the time.
I remember watching Warren buffet at his annual meeting, in the thick of things, maybe at the end of March, 2020. I think it was maybe April one or I don’t remember, not far after COVID started. He didn’t look like this was nothing, and it was a little frightening to see, because it was really staring at the unknown.
If you’re looking at the unknown, one of the benefits of working for a long time in this business is, a lot of it is gaining experience, seeing a lot of things, contextualizing things, comparing things to what’s happened in the past and what might happen, and this was fairly unique. Why keeping things simple is the essence of human interaction Joel Greenblatt talks about why one of the principles of life should be to keep the seemingly complicated things simple.
He believes that many people get to overanalyze, overthink or doubt the data they track or the people they look up to and take advice from, because very often the message they get becomes blurred, distorted, and too complicated to understand so they second-guess it. This is why his goal is to simplify every piece of information he passes on so the listener gets to the essence of it, gets to understand it, and as a result, truly learns whatever information Joel tries to pass on.
It’s been interesting, the process of trying to simplify, what was I thinking when I wrote you can be a stock market genius about my years at Gotham and special situation investing? It was actually pretty easy to write because early on I decided, “Well, I’m not going to do a lot of research on this thing.
I just want to write down what was I thinking actually at that time? And why did I do that? Because if I didn’t do the research before the book, well, why am I sharing something that I’m doing after I made the investment and so boiling it down? What was I thinking at that time, explaining it in the simplest form started me out there?” I also, after I wrote You Can Be a Stock Market Genius and realized it was really written at an MBA level.
I realized that when I started teaching MBAs and realized that boy, “If you didn’t have this background, you weren’t really going to understand what I said in that book.” And so started me on simplifying things even more because that wasn’t the goal of writing a book to help a lot of future hedge fund managers.
It was really to teach investing. And so when I had the opportunity at Columbia to teach, every time I thought of a new lesson to teach or used an example or whatever, I tried to simplify it so that I could explain it better. And so just the practice of writing and teaching really helped me simplify, simplify, simplify to really get to the essence of what was I really saying.
The Magic Formula - does it still work for Joel Greenblatt? Joel sheds more light on what he personally does with his own money, and what kind of strategies of investments he prefers these days. Most of my money is invested in diversified portfolios, more similar to the way the Magic Formula works. That’s because that’s a full-time job.
We run a big research team, a big tech team, to implement those portfolios. Some of it’s long-short. Some of it’s long only. I also have concentrated positions in some really good businesses that you would know, like Google and Microsoft. Because some of those top names are businesses like I’ve never seen in my career, that still do not look fully priced to me.
That are just buy them and hold them Warren Buffet type choices in my mind. Really my full-time job is running these diversified portfolios. It’s not because I think it’s a better strategy. I like them both. I think they’re both full-time jobs and I can only choose one. I did one for 30 years. I’m doing something else that’s fun for me.
I like them both for different reasons. One’s far less volatile. One still gets very nice risk-adjusted returns. The concentrated portfolios in cheap, good businesses also works incredibly well. He also recollects The Little Book that Beats the Market, providing his thoughts about the ingenious Magic Formula and whether he believes it still works.
The fun of The Little Book was that I did not spin the computer thousands of times and say, these two items cheap and good, that worked the best. I didn’t do that. I said, “Let me think of a crude metric for cheap. Let me think of a crude metric for good. Split them, put together a portfolio and see what happens.” That was the very first test we ran.
It worked well. I wrote a book about it. It wasn’t meant to say, I spun the computer thousands of times and I came up with this and this was the best one. I said, “This makes sense.” Then we did one test, which I think is pretty valid and it worked incredibly well and in order. So I agree with the work that cheap also works very, very well.
It happens to be more volatile, so it depends how you measure returns or risk. I don’t measure risk by volatility either. It also turns out that if you’re buying big cash flow generating businesses, usually they’re getting good returns on capital. But if you open a store and earn 30% returns on tangible capital, that’s pretty good.
Not many places in this world you can take money and get 30% return. So maybe you should open another store. Of course, if you can open a store and earn 60% on capital, that sounds better. But the real question is, can I open a thousand of those stores that earn 30%? And only three or four stores that earn 60%, before that return comes down, then, which is the better long term investment?
It has to be good enough return on tangible capital. So when you’re writing a book and telling people, “Just buy a handful of companies. You want to make sure they’re cheap and good, not like you’re buying thousands of companies and this 200 will do better than this 200 or whatever. You’re not buying 200 companies.” So I wanted to make sure people were safe and cheap and good.
So I still think it’s very valid. I won’t argue with any of the data other than to say that, if you just buy cheap, it does do better, but it’s also more volatile. I run portfolios both ways and they’re both good. What I will say is, that we’ve run a portfolio since 2010, I believe, that’s just strictly buying cheap.
Well, it’s actually cheap and good. It has an element of return on tangible capital, it’s not 50/50 and that’s done incredibly well. Almost as good as the S&P 500, which is incredible. But it’s a deep value portfolio, which has crushed any value portfolio during that time. We also have a lot of data on, I call it the Value 1000.
We also have a lot data of just ordering… It’s about 600 or 700 stock portfolio. That’s weighted towards cheapness chosen from the 1000 largest. But I have a lot of data over history on this portfolio. What it would show you is, the way it’s priced today, the way we look at the S&P and where it’s valuation is, it looks like it’s going to have single digit returns over the next two years.
Doesn’t mean that’ll happen. It doesn’t mean that’s adjusted for interest rates. Maybe it’ll do better, because interest rates are lower than historically. But if you look back and use the data for the last 30 years, apples to apples, it says mid-single digit returns over the next two years. Whereas that value portfolio using the same analysis says, I think it’s going to earn 35% to 40% over the next couple of years, based on past history.
So positioned very, very well to do well in the future. I looks to me like it’ll easily catch up to the S&P and maybe exceed it. So that’ll be good. This is it for today! Thank you for watching! I hope you learned something new today thanks to Joel Greenblatt’s fascinating insights! If you enjoyed this video, don’t forget to like and subscribe to our channel and of course don't forget to watch other videos that we made for you. ”.
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