Joel Greenblatt compounded at 49% (!) from 1985 to 2005.
And the best thing, he taught a Columbia Class on how to do it.
Here are 7 Investing Gems from his Columbia Classnotes👇🏼
1. All about Context
Investors all look at the same numbers.
Yet people come to different conclusions about a company’s future success.
The best-performing investors are excellent at putting things into context/perspective.
2. Normalized Earnings
A huge part of getting the right context is normalizing earnings.
Adjust the reported earnings for one-time events that cannot be expected to repeat.
Normalized earnings tell the real story.
3. Simplicity
If you can’t figure out normalized earnings, stay away from that company.
There are thousands of opportunities in the markets.
Keep it simple and safe.
4. Be Sticky
It can take time until the market realizes its mistake.
That time will be hard on your mind.
Be sticky and believe in the work you’ve done.
Having a long-term thesis and an idea of catalysts will make waiting and reassessing easier.
5. Volatility
Volatility is an opportunity for well-informed investors.
If I have an idea of fair value, volatility on the way is an opportunity to maximize profits.
6. Asymmetrical Bets
The basic idea of investing in cheap companies is the asymmetric risk/reward ratio.
You want the downside limited and the upside limited.
It sounds so easy, but so few people do it.
Most people solely focus on the upside.
Downside protection is king.
7. The Most Mis-Priced Market
Small caps are the best friends of individual investors.
Too small for institutions and eventually too small for the best individual investors.
Because they’ll accumulate too much money to keep investing there.
That‘s it for today!
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To learn more about investing follow me @MnkeDaniel.
Cheers!
Ohh, and in case you want to read more in-depth articles on Investing and markets, you should consider following my Substack.
danielmnke.substack.com
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