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  May 2018 Week 2 - Barry Ritholtz Interview with Joel Greenblatt

Barry L. Ritholtz is the co-founder and chief investment officer of Ritholtz Wealth Management LLC. Launched in 2013RWM is a financial planning and asset management firm, with over $605 million in assets under management. The firm offers a variety of services to the investing public, including Financial Planning and Wealth Management, as well as LiftOff — a low cost online investment site.

Source: Ritholtz.com

Barry conducts many interviews with investors for his masters in business podcasts, And one of the interview is with Joel Greenblatt.

Joel ran a fund known as Gotham Capital for 10 consecutive years compounding it at 50% a year.

So what is his secret?

Let's see what can we learn from Barry's interview with Joel.

I will summarize the secret and takeaways from the interview here.

  1. Joel does not believe in efficient market theory - even though they taught it back at Wharton when he was schooling.
  2. He realized that he wants to do stock picking for the rest of his life even before he turned 21 from reading Benjamin Graham's writings.
  3. Value to Joel is to figure out what the business is worth and pay a lot less.
  4. Value and growth are interlinked.
  5. Cash flow is an important part of Joel's valuation. He looks at the current cash flows and projects what they are going to be in future.
  6. Being patient is key.
  7. Stocks to him are ownership of business that he value and try to buy at discount. There is a possibility that the market do not reward his valuations even if he is right. But he will not change his fundamental view of stocks being ownership of shares in businesses.
  8. He got 50% return before fees for 10 years because he did not run a lot of money and his portfolio was concentrated with 6 to 8 ideas being around 80 plus percent of his portfolio.
  9. His study showed that 97 percent of institutional investors with the best 10-year record spent at least three of those 10 years in the bottom half of performance. He said that in order to beat the market, one needs to do something different and that is to have periods of under performing the market.
  10. He looks at relative cheapness which means that he always look at how cheap the business is relative to similar companies, all companies and relative to history.