During his recent interview with the Investors’ Chronicle, Joel Greenblatt explained why there’s a big dichotomy in the opportunity set right now. Here’s an excerpt from the interview:
Greenblatt: I will tell you a story. I started Gotham in 1985. My partner Rob Goldstein joined me in 1989. We returned our outside capital the end of ’94 but continued to run our portfolios.
And in 1998 was our first year we lost money. We were down 5% but the market was up, S&P was up 28% that year. So not a good year to lose 5%.
The next year ’99 market was up another 21%, we were down 5% again. Second year we lost money since 1985. In 2000 the market was finally down a little bit I think 9 or 10 percent, we’re up 115%.
We didn’t do anything different during those three years. The market finally recognized the work that we had done in ’98 and ’99, finally got paid in 2000. I don’t think idiots in ’98 and ’99, all of a sudden geniuses in 2000.
It was just the market decided, that dichotomy was historic in what people favored at that particular time and what people didn’t like.
And what I was suggesting at the top of the show was not that this is anything like the internet bubble but that the opportunity set, there’s a big dichotomy in the opportunity set out there.
I think between individual opportunities in cheaper businesses and how much they’re out of favor relative to popular businesses. So there is a dichotomy right now. I don’t think it’s anywhere near what it was in ’98/’99 to 2000, but I think it rhymes and I think there’s some nice opportunities out there so we’re pretty excited about what we do anyway.
You can listen to the entire discussion here:
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