📖Joel Greenblatt
Focus on Intrinsic Value
Compare price to intrinsic value, not to past prices.
Always estimate the intrinsic value of a business before investing. Compare price to value, not price to past price. The gap between price and value is where profits are made.
🏠 Everyday Analogy
📖 Core Interpretation
In Focus on Intrinsic Value, Joel Greenblatt focuses on the gap between price and value. Returns come from paying less than what a business is worth, not from guessing short-term market moves.
💎 Key Insight：The price-value gap is the source of returns.
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❓ Why It Matters
Ignoring valuation turns even good companies into poor investments. Overpaying compresses future returns and leaves little margin when assumptions are wrong.
🎯 How to Practice
Estimate intrinsic value with conservative assumptions, set clear buy ranges, and act only when price offers a meaningful discount with acceptable downside.
⚠️ Common Pitfalls
Confusing a low price with true cheapness
Using one metric without business context
Overly optimistic assumptions that erase margin of safety
📚 Case Studies
1
Magic Formula Small-Cap Portfolio (2012)
An investor built a 20–30 stock portfolio of high-ROC, cheap small caps per Greenblatt’s method, then suffered early underperformance and volatility.
✨ Outcome：Maintaining the rules-based portfolio for several years led to strong excess returns versus the market, illustrating the payoff of disciplined holding and rebalancing.
2
Dot-Com Bubble Peak (2000)
Portfolio heavily tilted to soaring tech stocks after big gains in 1999.
✨ Outcome：Annual rebalance trimmed tech, added undervalued cyclicals; reduced subsequent crash losses and improved 5-year risk-adjusted returns.
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