In this interview with the RWH Podcast, Joel Greenblatt explains why he runs concentrated and diversified portfolios. Here’s an excerpt from the interview:
Greenblatt: Most of my money is invested in diversified portfolios, more similar to the way the Magic Formula works. That’s because that’s a full-time job. We run a big research team, a big tech team, to implement those portfolios.
Some of it’s long-short. Some of it’s long only. I also have concentrated positions in some really good businesses that you would know, like Google and Microsoft. Because some of those top names are businesses like I’ve never seen in my career, that still do not look fully priced to me.
That are just buy them and hold them Warren Buffet type choices in my mind. Really my full-time job is running these diversified portfolios. It’s not because I think it’s a better strategy. I like them both. I think they’re both full-time jobs and I can only choose one. I did one for 30 years. I’m doing something else that’s fun for me.
I like them both for different reasons. One’s far less volatile. One still gets very nice risk-adjusted returns. The concentrated portfolios in cheap, good businesses also works incredibly well.
You can watch the entire discussion here:
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