Joel Greenblatt: I’m Excited About The Value ‘Opportunity Set’ Going Forward

In his latest value investing masterclass with Rich Pzena, Gotham’s Joel Greenblatt provided some statistics on why he’s excited about value as an ‘opportunity set’ going forward. Here’s an excerpt from the masterclass:

Greenblatt: I can add a little color with some numbers to tell you what the froth is in the non-value space. We did some research. So there were 359 companies that lost money in 2019, so that’s pre-covid, that now have market caps over a billion dollars.

So in other words, if you just bought every single company with a market cap over a billion dollars, 359 of them that lost money in 2019. In 2020 the median return was 65 percent. The average return was 120 percent. So that was your single best investment strategy for 2020. Just buy everything that loses money, which generally I’ve found, and we have a lot of statistics to show that’s the world’s worst investment strategy! But that was the best last year.

Another stat that makes me very hopeful, and it’s cold and calculating. We usually can construct a value portfolio in our Gotham Large Value Fund that has a 50 to 60 percent cash flow premium to the S&P. Today we’re off the charts!

We can create the same portfolio, following the same guidelines, with a 95 percent cash flow premium to the S&P, and if you look at the chart it just like blips up. So I’m excited I guess is what I would say about the opportunity set.

You can watch the entire masterclass here: