It all started when Greenblatt stumbled upon an article in Forbes magazine delineating Benjamin Graham's stock-picking formula when he was studying to become a lawyer.
He continued: "From there I just started reading everything that Ben Graham wrote and eventually got to Buffett." Greenblatt's strategy is simple in theory, but without the right emotional or valuation skillset , difficult in practice. It revolves around figuring outleaving a wide margin of safety"You're buying a house. They're asking $1,000,000 for it. Your job needs to be to figure out whether that's a good deal. One thing you might think to yourself is 'if I rented out that house — net of my expenses — how much would I be earning every year?'" he said.
Juxtaposing the business under consideration to comparable businesses, different businesses, and the overall market gives Greenblatt a better sense of whether or not its stock is — you guessed it — a good value.
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