Here’s a great recent interview with Joel Greenblatt at CNBC discussing value investing and the one promise that he makes to his new value investing students at Columbia University, saying:
We value businesses like we’re a private equity firm. That’s what stocks are. They’re not pieces of paper that bounce around that you put Sharpe ratios and Sortino’s on, or other fancy ratios. They’re ownership shares of businesses that you value and try to buy at a discount. Whether the market rewards us for our valuations in the short term we ignore because that’s what stocks are.
I actually have taught at Columbia for 23 years and I make a promise to my students first day of class. I promise them if they do good valuation work the market will agree with them. I just never tell them when. Could be a couple of weeks, could be two or three years. But that is the secret. To have a steady disciplined process to value companies and to be confident enough to stick with it when it’s not working in the short term. The market is very emotional in the short term. We try to ignore the noise.
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