What makes a GREAT INVESTOR? | Episode 111 Joel Greenblatt
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Position Sizing
Position sizing is crucial in investment strategy. emphasizes that being too timid with good ideas can be a significant mistake. He explains that larger positions should be taken when the downside risk is minimal, not necessarily when the potential upside is enormous 1. This approach allows for asymmetric returns, where the potential loss is limited, but the gains can be substantial 2.
Evaluating Companies
Evaluating management teams is more about their past capital allocation than their interview skills. finds that most CEOs and CFOs are impressive in person, but their track record in capital allocation is a more reliable indicator of future performance 3. He shares a humorous anecdote about hiring his partner, Rob Goldstein, who was a poor interviewee but proved to be a valuable asset 4.
Market Speculation
Market speculation, especially in companies with no earnings, poses significant risks. is not overly concerned about the valuations of tech giants like Amazon and Google, but he warns against speculative investments in companies that are not profitable 5. He points out that many money-losing companies have seen their stock prices soar, which is not a sustainable strategy 6.
Value Investing
Value investing involves buying good companies at reasonable prices. discusses how he and his partner analyzed Moody's, comparing it to Warren Buffett's investment in Coca-Cola, to determine its value 7. He believes in keeping investment strategies simple and continually learning from mistakes to improve over time 8.