📖Joel Greenblatt
Value Discipline
Discipline in valuation determines investment success.
Never overpay for a security, no matter how exciting the story. The price you pay determines your return. Discipline in valuation is the foundation of investment success.
🏠 Everyday Analogy
📖 Core Interpretation
In Value Discipline, 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 paid is the most important variable.
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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
Holding Through the Financial Crisis (2008)
An investor following Greenblatt’s Magic Formula held a diversified portfolio as the 2008 crisis caused steep declines across value names.
✨ Outcome：By holding and rebalancing annually instead of selling in panic, the portfolio recovered and outperformed the S&P 500 over the following years.
2
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.
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