In 1985, Greenblatt started a hedge fund, Gotham Capital, with $7 million, most of which was provided by "junk-bond king" Michael Milken.[5] Robert Goldstein joined Gotham Capital in 1989.[1] At Gotham Capital between 1985 and 1994, Greenblatt presided over an annualized return of 50% "after all expenses" but "before general partner's incentive allocation" fees; or 30%, net of all fees.[6]) Gotham specialized in "special situations" like spinoffs and other corporate restructurings".[7][8] In January 1995 Gotham returned all capital of outside partners (approximately $500 million).[8]
From 1995 to 2009, Gotham Capital was closed to outside investors.[8]
In 2000, Gotham Capital helped Michael Burry create his hedge fund Scion Capital by buying 25% of its capital for one million dollars after taxes.[9] In October 2006, Gotham's investment in the funds managed by Scion amounted to $100 million.[9] Gotham exited its investments both in the managed funds by Scion Capital and as a shareholder.[9]
In 2008, Gotham Asset Management, LLC was created as "the successor to the investment advisory business of Gotham Capital".[1] In 2010, Gotham started four conventional mutual funds raising $360 million.[8] As of December 2021, Gotham Asset Management, LLC managed $3.74 billion.[10][11][12][13]
Greenblatt co-founded a website with John Petry called the Value Investors Club,[14] where investors approved through an application process exchange value and special situation investment ideas. Membership is capped at 250 members and is considered highly prestigious.[15] A 2012 academic study showed that the recommendations of the members of the club do in fact appear to generate significant abnormal profits.[16] The club awards $5000 bimonthly to members who provide the best advice.[17]
Greenblatt's book The Little Book That Beats the Market (Wiley, 2005 & 2010) introduced the investment strategy of "magic formula investing", a method for determining which stocks to buy: "cheap and good companies" with a high earnings yield and a high return on invested capital. His strategy is featured in The Guru InvestorbyJohn P. Reese. Several studies from around the world have found Greenblat's formula tends to result in long-term outperformance relative to market averages, but is also associated with significantly higher short-term volatility and sharper drawdowns due to his concentrated approach of 20–30 stocks.[18][19][20][21]
In October 2009, Greenblatt launched a website for Formula Investing, providing an online tool that follows the investment strategy described in his book.[22][23]
Greenblatt’s first book, You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits, was released in 1997. Greenblatt published his second book, The Little Book That Beats the Market in 2005, a New York Times Best-Seller that sold over 300,000 copies. After the 2007–2008 financial crisis, The Little Book was updated and re-released in 2010 as The Little Book that Still Beats the Market.[24]
Greenblatt’s book, The Big Secret for the Small Investor: A New Route to Long-Term Investment Success, was released in 2011.[25]
In 2020, Greenblatt shared an investor’s perspective on building an economy that works for all in his book Common Sense: The Investor’s Guide to Equality, Opportunity, and Growth.[26]
In 2002, Greenblatt donated $2.5 million to P.S. 65Q, a public elementary school in the borough of Queens, whose students come largely from the neighborhood's South American and South Asian immigrant communities. This investment was equal to about $1,000 per student per year over five years.[27]
He has also served on the boards of the Institute for Student Achievement and the Davidson School of the Jewish Theological Seminary.[29]
During 2007 and 2008, Joel Greenblatt, Robert Goldstein and Gary Curhan created a website, inspired by the Value Investors Club, to spur idea sharing in order to advance cancer research.[30][31] The $1 million Gotham Prize for Cancer Research was awarded in 2008 to Alexander Varshavsky for trying to find a potentially vulnerable feature of cancer cells that won't change during tumor progression.[32]
Greenblatt, Joel (2011). Le petit livre qui bat le marché [The Little Book That Beats the Market] (in French). Translated by Monet, Roland. Hendaye, France: Valor Editions. ISBN978-2-36117-001-1.
^Newberg, Bruce L.; Pzena, Richard; Greenblatt, Joel M. (1981-07-31). "How the small investor can beat the market". The Journal of Portfolio Management. 7 (4): 48–52. doi:10.3905/jpm.1981.408811. ISSN0095-4918. S2CID153544502.
^Davyclov, D., Tikkanen, J. & Äijö, J., 2016. Magic Formula vs. Traditional Value Investment Strategies in the Finnish Stock Market. Nordic Journal of Business, 65(3–4), pp. 38–54.