Joel Greenblatt former Managing Partner and Co-Chief Investment Officer at Gotham Asset Management ($5.2 billion hedge fund) spoke on Thursday at the Reuters Global Investment 2018 Outlook Summit.
Greenblatt, said the “Standard & Poor’s 500 has appeared cheaper only 16 percent of the time over the last 27 years”.
“Standard & Poor’s 500 has appeared cheaper only 16 percent of the time over the last 27 years”
Joel Greenblatt’s fund returned 18 percent, outperforming 98 percent of its “long-short” peers.
He said that could herald annual 3 to 5 percent gains over the next few years, with negative returns possible from the Russell 2000 index of smaller stocks, because it has been cheaper only 4 percent of the time.
“The only thing that could hurt us going forward is if the market continues up 15 to 20 percent a year for the next three to four years,” he said.
“That’s unreasonable to think, given current valuations. I think there will be normal to subnormal returns”, he added
“The only thing that could hurt us going forward is if the market continues up 15 to 20 percent a year for the next three to four years”
The apple of Joel Greenblatt’s eye
Businesses that do not need much capital to grow, as well as businesses that can earn money efficiently and can reinvest it at high rates of return.
For example, BNSF railway unit of Berkshire Hathaway Inc, iPhone maker, Apple Inc.
“Companies that are gushing cash, with high returns on capital, with nice niches and trading at low multiples to cash flow, if I buy a bucket of those, I‘m going to do very well” – Joel Greenblatt