📖Joel Greenblatt
Know Your Limits
Stay within your circle of competence.
The most successful investors stay within their circle of competence. Know what you understand well and resist the temptation to venture outside it.
🏠 Everyday Analogy
📖 Core Interpretation
Joel Greenblatt advocates a repeatable process: define criteria, execute consistently, and review decisions against evidence. Process quality drives outcome consistency.
💎 Key Insight：Self-awareness about knowledge limits prevents costly mistakes.
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❓ Why It Matters
Without process, there is no reliable feedback loop. Structured execution and review improve decision quality over time.
🎯 How to Practice
Run a decision loop of research, thesis, execution, and post-mortem; document assumptions and update playbooks with evidence, not hindsight bias.
⚠️ Common Pitfalls
Having opinions without execution criteria
Reviewing outcomes but not decisions
Abandoning rules during volatility spikes
📚 Case Studies
1
Dr Pepper/Seven Up from Cadbury Schweppes (2002)
Cadbury Schweppes separated its U.S. beverages unit, leaving a more focused confectionery business and an underappreciated beverages spinoff with solid brands and cash flow.
✨ Outcome：Both parent and spinoff rerated upward over time as investors recognized better economics and clearer business focus.
2
American Express Recovery (2002)
Magic Formula ranked American Express highly after the tech bust when it was out of favor and trading at a low earnings yield.
✨ Outcome：Within several years, the stock delivered strong double‑digit annual returns as credit trends improved and valuation normalized.
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