Joel Greenblatt

Joel Greenblatt carved a unique place in investment history by distilling value-investing principles into a formula anyone can use. For decades he delivered outstanding returns on Wall Street while simultaneously sharing his insights with ordinary investors — an unusual posture in the typically secretive hedge-fund world.

Born in December 1957 in New York, Greenblatt earned his bachelor's degree and MBA at the University of Pennsylvania's Wharton School. Wharton's rigorous quantitative training is widely credited with shaping his conviction that investing should be a 'reproducible process.' In 1985, at 28, he founded Gotham Capital, which reportedly delivered annualized returns of roughly 40% over the next two decades. The performance ranks among the best in hedge-fund history; it was driven largely by special-situation investing in small-cap stocks — spinoffs, restructurings, and liquidations.

Greenblatt's name reached a broader audience with his 2005 book The Little Book That Beats the Market. The 'Magic Formula' he introduced ranks stocks on two metrics: EBIT-based earnings yield (EBIT/enterprise value) and return on invested capital (ROIC). Investors then buy a diversified basket of top-ranked names. The method is strikingly simple. Like Graham's net-net criterion in The Intelligent Investor, Greenblatt's formula represents a modern quantitative screening methodology. Crucially, it has academic backing: backtests against historical U.S. stock data showed significant long-term outperformance.

But Greenblatt's contribution goes beyond formula invention. As an adjunct professor at Columbia Business School — the spiritual home of value investing, where Graham and Buffett's tradition runs deep — he has invested in training the next generation. His earlier book, You Can Be a Stock Market Genius, walks through practical techniques for finding value in spinoffs and restructuring situations and is highly regarded as a practitioner's manual for special-situation investing.

At the root of his philosophy is the Graham-Buffett dictum: buy good businesses at bargain prices. What makes Greenblatt distinctive is his deliberate decision to encode qualitative judgment into a quantitative framework, giving emotion-prone individual investors a structured discipline to follow. He has often noted that 'the biggest enemy of the formula is the investor's own impatience,' warning against the psychological bias that leads people to abandon a working strategy during inevitable stretches of short-term underperformance.

In later years Greenblatt continued managing money as Gotham Asset Management with partner Robert Goldstein, and he took on corporate roles including chairman of Alliant Techsystems and co-founder of the New York Securities Auction Corporation. His integration of academic research, practical investing, and public education embodies a vision of investing as the democratization of knowledge.