Who is Joel Greenblatt?
Hedge fund legend, Columbia professor, and the investor who proved that a simple formula can beat Wall Street.
Joel Greenblatt (born December 13, 1957) is one of the most successful American value investors, hedge fund managers, and financial authors of recent decades. He is known worldwide as the creator of the Magic Formula, a quantitative investment strategy designed to beat the stock market. In addition to his role as an investor, he served as an adjunct professor at Columbia Business School for over 20 years and has authored numerous best-selling books on investing.
Key milestones
Born in Great Neck, New York
B.S. Wharton School, summa cum laude
M.B.A. Wharton School
Founded Gotham Capital with $7M
50% annualised return over 10 years (before fees)
Published "You Can Be a Stock Market Genius"
Published "The Little Book That Beats the Market"
Co-founded Success Academy Charter Schools
Launched Gotham Asset Management
Early Life and Education
Greenblatt was born in Great Neck, New York. His talent for numbers and finance became apparent early on. He attended the prestigious Wharton School of the University of Pennsylvania, where he earned his B.S., summa cum laude, in 1979, and completed his M.B.A. a year later in 1980.
During his time at Wharton, he co-authored a groundbreaking academic paper with Rich Pzena and Bruce Newberg titled "How the small investor can beat the market". This early work showcased his ambition to make complex financial markets accessible to everyday people. Although he spent a year studying law at Stanford Law School after Wharton, he eventually dropped out to pursue his true passion: a career in finance.
The Founding and Incredible Success of Gotham Capital
In 1985, Greenblatt founded the hedge fund Gotham Capital. He started with $7 million in initial capital, the vast majority of which was provided by Michael Milken. What happened over the next decade turned Greenblatt into a Wall Street legend.
Between 1985 and 1994, Gotham Capital achieved an astonishing annualised return of 50% before general partner's incentive allocation fees (over 30% net of all fees). His secret: specialising in corporate spinoffs, restructurings, and bankruptcies where stocks were often mispriced by the broader market.
In 1995, Greenblatt did something unusual: he returned all outside capital (approximately $500 million) to his investors. Between 1995 and 2009, Gotham Capital was closed to outside investors and only managed its own partners' money. In 2008, he launched Gotham Asset Management as the successor, which eventually grew to manage billions of dollars.
Fun Fact: Greenblatt was one of the early backers of Michael Burry (famous from the movie The Big Short). In 2000, Gotham Capital bought 25% of Burry's hedge fund, Scion Capital, for $1 million to help him get off the ground.
The Creator of the Magic Formula
While Greenblatt was already a star in the financial world, he became famous to the general public with "The Little Book That Beats the Market" (2005). In this book, which sold over 300,000 copies, he revealed the Magic Formula.
The philosophy is based on a simplified form of value investing where you look for:
Good Companies
Measured by a high Return on Invested Capital — the business efficiently converts money into profits.
Cheap Prices
Measured by a high Earnings Yield — you get a lot of earnings for the price you pay.
Multiple global academic studies have since shown that this concentrated strategy of holding 20 to 30 stocks historically tends to outperform market averages, although it is associated with periods of high volatility and sharp drawdowns.
Author and Academic Work
Greenblatt doesn't believe in keeping his knowledge a secret for Wall Street insiders. For over 20 years he taught at Columbia Business School, and co-founded the Value Investors Club — an exclusive online community of 250 professional investors exchanging high-quality investment ideas.
You Can Be a Stock Market Genius
1997Focuses on the "special situations" — spinoffs, restructurings and bankruptcies — that made Greenblatt rich in his early career at Gotham Capital.
The Little Book That Beats the Market
2005Introduced the Magic Formula to the general public. A New York Times bestseller with over 300,000 copies in print. Updated editions released in 2010 and 2023.
The Big Secret for the Small Investor
2011Explains why most actively managed funds underperform and how individual investors can use index-like approaches combined with value principles.
Common Sense
2020An investor's guide to equality, opportunity, and growth — exploring how sound investment principles intersect with social impact.
Philanthropy and Social Impact
Beyond accumulating wealth, Greenblatt dedicates significant time and money to charity and educational reform:
Success Academy: In 2006, he co-founded the Success Academy Charter Schools (originally Harlem Success Academy), providing high-quality elementary education in historically underserved neighborhoods in New York City.
Direct Donations: In 2002, he donated $2.5 million to P.S. 65Q, a public elementary school in Queens with many children from immigrant families.
Cancer Research: Inspired by his Value Investors Club, Greenblatt helped set up a platform to share ideas to advance cancer research. This led to the $1 million Gotham Prize for Cancer Research, awarded in 2008.
Conclusion
Joel Greenblatt is not just an investor with a lucky streak. He is a deep analytical thinker who proved that with intense research (special situations) it is possible to achieve unprecedented returns, but also that applying strict, mechanical rules — the Magic Formula — can give the average retail investor a massive edge over Wall Street.
The Little Book That Still Beats the Market
In 2005, Joel Greenblatt published a book that is considered one of the classics of finance literature. A New York Times bestseller with over 300,000 copies in print, the book explains how investors can systematically apply a formula that seeks out good businesses when they are available at bargain prices.
“One of the best, clearest guides to value investing out there.”
“Simply Perfect. One of the most important investment books of the last 50 years.”
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