Joel Greenblatt: How To Compare Apples And Oranges With Potential Investments

Johnny HopkinsJoel GreenblattLeave a Comment

During his recent interview with the Investors’ Chronicle, Joel Greenblatt discussed how to compare apples and oranges with potential investments. Here’s an excerpt from the interview:

Greenblatt: If you’re going to buy a stock, the first hurdle you want to pass is: over time, are you going to beat the risk-free rate of 6 per cent?

That’s obviously a lot higher than the risk-free rate’s been for a long time, and as you suggest that’s one way to put in a margin of safety.

That doesn’t mean a company has to have a 6 per cent earnings yield right now. If you think it’s growing, a 6 per cent earnings yield would be really good, so that’s a little over 16 times earnings.

But even something that’s earning 4 per cent – if you think earnings are going to double in the next couple of years, then you’ll be over that 6 per cent rate we’re looking at.

So it’s a good way to look at the world of investing, how to compare apples and oranges: what do I pay, what’s my yield.

You can read the entire interview here:

Joel Greenblatt Interview – Investor’s Chronicle

For all the latest news and podcasts, join our free newsletter here.

FREE Stock Screener

Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple:


Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.