“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.” ShouldIdeasReasonLevelsHigherNormalPagesSittingBasesClarityTemporaryTradingGreat IdeaHigher LevelGreat BusinessAgonizingBuffett Author:Joel Greenblatt
“The big picture is: the main thing you should be concerned about in the future are incremental returns on capital going forward. As it turns out, past history of a good return on capital is a good proxy for this but obviously not foolproof. I think this is an area where thoughtful analysis can add value to any simple ranking/screening strategy such as the magic formula. When doing in depth analysis of companies, I care very much about long term earnings power, not necessarily so much about the volatility of that earnings power but about my certainty of "normal" earnings power over time.” ThinkingShouldLongBigsCarePastValuesTurnsTermSimpleCompanyMagicReturnNormalAreasConcernedStrategyAddDepthCertaintyAnalysisLong TermThoughtfulFormulasI CareEarningBig PictureScreeningRankingProxyVolatilityFoolproof Author:Joel Greenblatt
“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.” YearsWellsGoalLevelsCompanyReturnPeriodsNormalLowsFactorsMultipleEarningPersistent Author:Joel Greenblatt
