Joel Greenblatt’s Gotham Asset Management’s Return, AUM, and Holdings

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A famous value investor who mainly  focuses on special situations, the author of The Little Book that Beats the Market, Joel Greenblatt founded his own hedge fund called Gotham Capital, back in 1985 in New York City. Today, he is the co-chief investment officer and the managing principal of its successor, called Gotham Asset Management, which he runs with his partner Robert Goldstein. An already mentioned book, The Little Book that Beats the Market, describes a special quantitative investment strategy called “Magic Formula Investing”, which is a method for choosing the right stocks to invest in, based on value investment principles. Joel Greenblatt is also an adjunct professor at the Columbia University Graduate School of Business, where he teaches “Value and Special Situation Investing”, and serves on the board of directors of Pzena Investment Management. He graduated from the Wharton School of the University of Pennsylvania, with a BS summa cum laude in 1979 and with an MBA in 1980.

From 1985 until 1994, Gotham Capital had a fascinating track record – reporting a net return of 34% for this period. The fund provides to its investors a variety of diversified long/short hedge funds, all of which apply the same investment strategy. The essence of the Gotham Assets Management’s investment philosophy lies in the professional valuation of companies. “Our process is to analyze financial statements from approximately the 3000 largest U.S. companies based on our assessment of value. We then buy the companies we believe are the cheapest and short the ones we believe are the most expensive.”

Gotham Asset Management’s Return, AUM, and Holdings

When you listen to Joel Greenblatt, the world of investing sounds so easy. In a short video published in June 2018 on CNBC, he shared his simple advice on investing – “If you can’t figure out the value of a company, you have no business investing in it”.

Investor Joel Greenblatt breaks down the key to valuing a business from CNBC.

According to Joel Greenblatt, Gotham Asset Management’s secret of success lies in the fact that they are “sticking to their guns”. Why would the fund change its investment strategy that apparently works in a long run? Even when returns don’t match its expectations, it continues to follow the only investment strategy Joel Greenblatt thinks is worth following – and that’s value investing. Gotham Asset Mangement’s team analyses each company separately, in that manner conducting very detailed research. After the fund has invested in a company, it waits patiently for a year or two, to get rewarded for its smart valuation. Throughout the years the company grew bigger, managing around $5.3 billion in assets under management (data from June 2018). Let’s take a look at some of its return figures throughout the years.

For example, it’s Gotham Neutral Fund brought back 5.77% for the last four months in 2013, and 6.83% annualized in 2014. It’s flagship Gotham Absolute Return Fund brought back an impressive 29.82% back in 2013, followed by a good 9.31% gain in 2014. Then, 2015 turned out to be quite challenging for this fund, as it had lost 10.25%. In spite of the loss in 2015, Gotham Absolute Return Fund came out positive the next year, delivering a strong return of 7.97%. In 2017, it had an even higher gain of 10.03%, and last year through October it delivered 1.65%. Since its inception in August 2012 through 2018, Gotham Absolute Return fund delivered a return of 58.6%.

The insider Monkey’s flagship strategy identifies the best performing 100 hedge funds at the end of each quarter and invests in their consensus stock picks. This way it is always invested in the best ideas of the best performing hedge funds and is able to generate much higher returns than the market. Since its inception in May 2014, our flagship strategy generated a cumulative return of 89%, beating the S&P 500 ETF (SPY) by 29 percentage points (see the details here).  

At the end of the fourth quarter of 2018, Gotham Asset Management’s equity portfolio was valued $6.44 billion. As very diversified it counted more than 900 long positions. Among the top three most valuable positions the fund held, was a position in Apple Inc. (NASDAQ:AAPL), which is one of the 30 Most Popular Stocks Among Hedge Funds. The fund reported $65.43 million worth a stake in the company, on the account of 414,819 shares outstanding.

On the next page, you can read more about the most important positions and the changes the fund has made to its equity portfolio during Q4 2018.

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