Friday, June 21, 2024
InvestingStock Market

The Definition of Value Investing by Joel Greenblatt

In this feature, legendary investor Joel Greenblatt offers an interesting take on the definition of Value Investing. Joel is known for the creation of the Magic Formula and wrote ‘The Little Book That Beats the Market’.

Joel met with Howard Marks at Wharton School and provided the following fascinating insight into value investing.

You can see more on the Magic Formula in another of our blog posts, ‘Beating The Market With The Magic Formula Investing Strategy’.

Here’s the transcript of the above video:

“My definition of value investing is figure out what it’s worth pay a lot less. It has nothing to do with low price book or low price sales and so that’s how a lot of people like Russell or Morning Star would classify value investors and so they probably wouldn’t classify me as a value investor or a growth investor. They kind of don’t know what to do with us and you know as Buffett has said you know growth in value or are tied at the hip I mean a part of what makes value is by investing in a business that can grow over time so they’re they’re not two different ways as they’re classified by let’s say Morningstar Russell. Maybe there’s much lower growth in value and much higher growth in growth and they they make it that way, but I’m looking for good businesses that are cheap.

You know Ben Graham said figure out what it’s worth pay a lot less leave a large margin of safety. Between those two things Warren Buffett his best student made one little twist that made him one of the richest people in the world Buffett simply said if I can buy a good business cheap even better. Part of good is a business that it can grow over time and so I slowly gravitated not fast enough you know certainly in my first decade of investing gravitated more towards theway that Warren Buffett invest he’s looking for good and cheap businesses and growth this is part of sometimes.”

Source: Wharton School Youtube

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