📖Joel Greenblatt
Long-Term Horizon
The formula needs 3-5 years to prove itself.
The magic formula doesnt work every year. You need a 3-5 year horizon for it to work.
🏠 Everyday Analogy
📖 Core Interpretation
Joel Greenblatt frames investing as a compounding game. Time amplifies quality and discipline, while unnecessary activity often destroys long-horizon returns.
💎 Key Insight：Any strategy, including the magic formula, can underperform for 1-2 years. Short-term results are dominated by noise and luck. Only over 3-5+ years do the underlying fundamentals drive returns. Most investors abandon strategies after a bad year, ensuring they never capture the long-term gains. Patience and persistence are prerequisites for systematic investing.
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❓ Why It Matters
Short-term noise often forces investors out before value is realized. Long-term discipline increases the odds that fundamentals, not emotions, drive outcomes.
🎯 How to Practice
Extend research and review horizon, reduce unnecessary turnover, and adjust only when intrinsic value, risk, or opportunity cost materially changes.
🎙️ Master's Voice
Value investing works. The question is whether you have the stomach for it.
Greenblatt knows value investing requires patience through periods of underperformance. Most lack the stomach.
⚔️ Practical Guide
✅ Decision Checklist
- Do I have the stomach?
- Can I endure underperformance?
- Am I committed to value?
📋 Action Steps
- Test your stomach
- Prepare for tough periods
- Stay committed
🚨 Warning Signs
- Weak stomach
- Abandoning in tough times
- No commitment
⚠️ Common Pitfalls
Calling it long term while never reviewing thesis
Overtrading and damaging compounding
Ignoring opportunity cost and alternatives
📚 Case Studies
1
Spin-off: Liberty Media from AT&T (2000)
AT&T spun off Liberty Media, which appeared complex and overlooked. Greenblatt analyzed underlying assets and saw a large discount to intrinsic value.
✨ Outcome：Held through volatility; as the market recognized underlying media asset value, returns were multiples of initial investment over several years.
2
American Express Post-Asia/Russian Crises (2001)
American Express traded at depressed multiples after emerging market and Russian crises hurt travel and card volumes.
✨ Outcome：Greenblatt’s long-term view on brand strength and card economics led to holding; as conditions normalized, valuation rerated and produced strong multi-year gains.
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