Choosing individual stocks without any idea of what you're looking for is like running through a dynamite factory with a burning match. You may live, but you're still an idiot.— Joel Greenblatt
The most practical Joel Greenblatt quotes that will activate your desire to change
Here is part of the tradeoff with diversification.
You must be diversified enough to survive bad times or bad luck so that skill and good process can have the chance to pay off over the long term.
The more confidence I have in each one of my stock picks, the fewer companies I need to own in my portfolio to feel comfortable.
If I plug my estimates into the Magic Formula, and it comes out cheap, that's good.
Something out of the ordinary course of business is taking place that creates an investment opportunity. The list of corporate events that can result in big profits for you runs the gamut—spinoffs, mergers, restructurings, rights offerings, bankruptcies, liquidations, asset sales, distributions.
My goal is to buy a company at a low multiple to normal earnings power several years out and that the company earns good returns on capital at that level of normal earnings. A holding period of more than one year also works quite well as the factors are persistent in years 2 and 3.
It just seems logical that sticking to investing in only a small number of companies that you understand well, rather than moving down the list to your thirtieth or fiftieth favorite pick, would create a much greater potential to earn above-average investment returns.
If you spend your energies looking for and analysing situations not closely followed by other informed investors, your chance of finding bargains greatly increases.
I think the exercise of trying to figure out how to simplify concepts has been incredibly helpful to me over the last 13 years of teaching and I hope my students have benefited from it.
The way we make money as a group is that we don't pay a lot for anything, and most of the stocks we buy have low expectations.
I don't know too many people that are good at timing the market relative to macro-economic events.
There's a clarity that comes with great ideas: You can [easily and simply] explain why something's a great business, how and why it's cheap, why it's cheap for temporary reasons and how, on a normal basis, it should be trading at a much higher level. You're never sitting there on the 40th page of your spreadsheet, as Buffett would say, agonizing over whether you should buy or not.
The secret to investing is to figure out the value of something - and then pay a lot less.
Value investing strategies have worked for years and everyone's known about them. They continue to work because it's hard for people to do, for two main reasons. First, the companies that show up on the screens can be scary and not doing so well, so people find them difficult to buy. Second, there can be one-, two- or three-year periods when a strategy like this doesn't work. Most people aren't capable of sticking it out through that.
Remember, it’s the quality of your ideas not the quantity that will result in the big money.
I still believe that for good business analysts a concentrated portfolio is a good strategy combined with a long term horizon. Once again, the secret to success in following the formula strategy is patience, a quality in short supply for both professionals and individual investors alike. I think investors should have a large portion of their assets in equities over time.
We are busy surviving, herding, fixating on what just happened, and being overconfident!
Look down, not up, when making your initial investment decision.
If you don’t lose money, most of the remaining alternatives are good ones.
Value investing doesn't always work. The market doesn't always agree with you. Over time, value is roughly the way the market prices stocks, but over the short term, which sometimes can be as long as two or three years, there are periods when it doesn't work. And that is a very good thing. The fact that our value approach doesn't work over periods of time is precisely the reason why it continues to work over the long term.
I wait until an investment idea is so good, it hits me over the head like an anvil.
Figure out what something is worth and pay a lot less.
So one way to create an attractive risk/reward situation is to limit downside risk severely by investing in situations that have a large margin of safety. The upside, while still difficult to quantify, will usually take care of itself. In other words, look down, not up, when making your initial investment decision. If you don’t lose money, most of the remaining alternatives are good ones.