Joel Greenblatt’s Return, Portfolio and Magic Formula

Published July 11, 2023 at 5:33 pm EDT Updated September 7, 2026 at 11:59 am EDT

In this article, we will discuss value investor Joel Greenblatt’s portfolio, hedge fund returns, and his Magic Formula.

Joel Greenblatt, renowned for his expertise in value investing, holds a prominent position among Wall Street’s notable investors. In 1985, he established Gotham Capital, a venture that yielded an impressive annualized return of 50% from 1985 to 1994. Recognizing the need for progression, Greenblatt founded Gotham Asset Management in 2008 as a successor to his previous fund. Presently, he assumes the role of Managing Principle and Co-Chief Investment Officer.

Greenblatt is most famous for creating the “Magic Formula,” a systematic methodology that can be used to find and identify value stocks with growth potential. The Magic Formula, as explained by Joel Greenblatt in his book The Little Book that Beats the Market, involves ranking stocks based on two metrics: earnings yield (EBIT/enterprise value) and return on capital (EBIT/invested capital). Greenblatt’s approach to investing can be called a combination of value investing and quality investing. It’s all about buying a high-quality company at an attractive price. Or, viewed from a different angle, buying a cheap company that isn’t a waste. As Greenblatt stated in a 2006 interview with Barron’s, the Magic Formula is designed to help investors with “buying good companies, on average, at cheap prices, on average.”

However, investors should take note that the Magic Formula is not the Holy Grail of investing. It does not guarantee success, and as with any other strategy, it does involve some level of risk. The strategy relies on historical data and may not perform as well in the future, especially if market conditions were to change. During a backtest conducted to analyze market performance from 2003 to 2015, it was discovered that the Magic Formula strategy yielded annualized returns of 11.4%. In comparison, the S&P 500 achieved returns of 8.7%. The author of the backtest observed that while the magic formula strategy did outperform the benchmark, it fell short of the exaggerated claims made in the Little Book.

Incidentally, Joel Greenblatt’s investment technique seems to have caused his hedge fund to lag behind the broader market. Over the past 5 years, Gotham Large Value Fund (GVALX) has gained only 9.15%, compared with a 12.31% return of the S&P 500.

At the close of Q1 2023, Gotham Asset Management’s portfolio value surpassed $4.125 billion, marking an increase from the previous quarter’s $3.5 billion. The fund maintains a diverse investment strategy, with technology, services, healthcare, and finance sectors occupying significant positions within the portfolio. Noteworthy holdings of Greenblatt in Q1 include Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL). This article will further delve into Joel Greenblatt’s top 10 stock holdings, highlighting his preferred selections.

Joel Greenblatt's Return, Portfolio and Magic Formula

Joel Greenblatt of Gotham Asset Management

Our Methodology

To make our list of the top stock picks of Joel Greenblatt’s Gotham Asset Management for the first quarter of 2023, we took a look at its latest filings with the SEC and picked the 10 investments that the investment fund held the highest stakes in.

10. Merck & Co., Inc. (NYSE:MRK)

Gotham Asset Management Q1 2023 Stake: $18.23 million

Merck & Co., Inc. is an American multinational pharmaceutical company headquartered in Rahway, New Jersey, and is named for Merck Group, founded in Germany in 1668, of whom it was once the American arm. The company does business as Merck Sharp & Dohme or MSD outside the United States and Canada. A leading pharmaceutical firm, Merck is known for developing medicines, vaccines, biologic therapies, and animal health products. The company’s operations are managed on a products basis that includes two operating segments: the pharmaceutical and animal health segments. On May 23, Merck & Co., Inc. declared a $0.73 per share quarterly dividend, in line with previous. The dividend was payable on July 10, to shareholders of record on June 15.

Gotham Asset Management initiated its position in Merck & Co., Inc. more than a decade ago during the first quarter of 2011, at an average quarterly share price $31.90. Currently, the company represents 0.44% of Joel Greenblatt’s portfolio.

Insider Monkey dug through 943 hedge funds for their first quarter of 2023 investments to discover that 75 had invested in Merck & Co., Inc.. Ken Fisher’s Fisher Asset Management is the biggest shareholder, owning a $1.3 billion stake.

Here’s what Aristotle Capital Management, LLC said about Merck & Co., Inc. in its Q4 2022 investor letter:

“Founded in 1891 and headquartered in New Jersey, Merck & Co., Inc. (NYSE:MRK) is one the world’s largest pharmaceutical firms. The company’s drugs are used to treat conditions in a variety of areas, including oncology (~38% of revenue), vaccines (~19%), diabetes (~11%), animal health (~11%) and other (~21%). Merck produced over $48 billion in sales in 2021, just under half of which were generated in the United States. Within oncology, the firm’s immuno-oncology platform is becoming a major contributor to overall sales, driven by the blockbuster1 drug Keytruda. The company’s vaccine business is also significant and includes Gardasil for the prevention of HPV (the disease that can lead to cervical cancer in women), as well as vaccines for hepatitis B, pediatric diseases and shingles. In recent years, Merck has been shifting its focus toward unmet medical needs in specialty-care areas. As part of this shift in focus, in June 2021, Merck received $9 billion from the spinoff of its women’s health, established brands, and biosimilars businesses into the now independent, publicly traded company Organon…” (Click here to read the full text)

Similar to Alphabet Inc., Microsoft Corporation, and Apple Inc., Gotham Asset Management holds considerable confidence in Merck & Co., Inc..

9. Pfizer Inc. (NYSE:PFE)

Gotham Asset Management Q1 2023 Stake: $18.49 million

Pfizer Inc. (NYSE:PFE) is an American multinational pharmaceutical and biotechnology corporation headquartered at The Spiral in Manhattan, New York City. Established in 1849 by two German entrepreneurs, Charles Pfizer and Charles F. Erhart, it is renowned for developing and producing medicines and vaccines for immunology, oncology, cardiology, endocrinology, and neurology. In 2022, Pfizer Inc.’s top product was COVID-19 vaccine Comirnaty, generating 37.8 billion U.S. dollars in alliance revenues and direct sales. The biotech company has been raising its dividends consistently for the past 13 years. It currently pays a quarterly dividend of $0.41 per share and has a dividend yield of 4.60%, as of July 11.

Pfizer Inc. was Joel Greenblatt’s largest biotech position given Gotham Asset Management’s stake value of over $18.49 million at the end of March 2023.

At the end of March 2023, 73 hedge funds tracked by Insider Monkey owned stakes in Pfizer Inc., worth collectively roughly $2.2 billion. Of these, Cliff Asness’ AQR Capital Management is the largest shareholder, with total stakes worth approximately $380.28 million.

8. Exxon Mobil Corporation (NYSE:XOM)

Gotham Asset Management Q1 2023 Stake: $19.91 million

The largest direct descendant of John D. Rockefeller’s Standard Oil, Exxon Mobil Corporation has undergone a remarkable transformation over the past 140 years. What began as a localized distributor of kerosene in the United States has grown into a global powerhouse, ranking among the largest publicly traded companies in the petroleum and petrochemical industries. Exxon Mobil Corporation has gained about 29% over the past five years and the company has upped its dividends for 39 straight years. Currently, the oil and gas corporation pays a quarterly dividend amount of $0.91 with a yield rate of 3.48%.

Gotham Asset Management raised its position in Exxon Mobil Corporation by 30% to end the first quarter of 2023 with a stake of over $19.91 million in the petrochemical giant.

73 of the 943 hedge funds part of Insider Monkey’s database had bought the firm’s shares as of Q1 2023. Exxon Mobil Corporation’s biggest investor in our database is Rajiv Jain’s GQG Partners with an investment of $2.1 billion.

7. Meta Platforms, Inc. (NASDAQ:META)

Gotham Asset Management Q1 2023 Stake: $25.64 million

Meta Platforms, Inc. (NASDAQ:META) stands as a thriving social media corporation, boasting an impressive user base of 3 billion monthly active users. Through its adept utilization of user data and analytics, the company has achieved remarkable success in delivering personalized experiences and driving profitability through targeted advertising. In the year 2022, Meta Platforms, Inc. recorded a staggering revenue of $116 billion, accompanied by a net income of $23.2 billion. On July 5, Meta platforms, Inc. officially launched Threads, its text-based rival to Elon Musk’s Twitter. Despite a delayed EU launch, the app had racked up more than 30 million sign-ups within about 18 hours of its launch.

Meta Platforms, Inc. is among the top 10 biggest positions for Joel Greenblatt’s 13F equity portfolio at the end of Q1 2023 given his hedge fund’s stake of over $25.64 million in the social media giant.

According to Insider Monkey’s first quarter database, 220 hedge funds were long Meta Platforms, Inc., compared to 194 funds in the prior quarter. Billionaire Philippe Laffont’s Coatue Management is one of the largest stakeholders of the company, with a position worth $1.70 billion.

Harding Loevner Global Equity Strategy made the following comment about Meta Platforms, Inc. in its Q1 2023 investor letter:

“The losses from SVB and First Republic were significantly mitigated, though not fully offset, by a rebound in shares of growth companies, which contributed to outperformance among our Communication Services and IT holdings. Our biggest relative contributor was Meta Platforms, Inc. (NASDAQ:META), the parent of Facebook, which pledged to boost efficiency through layoffs and a hiring freeze.”

6. Berkshire Hathaway Inc. (NYSE:BRK-A)

Gotham Asset Management Q1 2023 Stake: $27.48 million

Berkshire Hathaway Inc. (NYSE:BRK-A) is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States. Its main business and source of capital is insurance, from which it invests the float in a broad portfolio of subsidiaries, equity positions and other securities. Led by the iconic Warren Buffett, the firm has strategically built a diversified investment portfolio encompassing various industries including consumer discretionary, consumer electronics, banking, finance, and energy. Joel Greenblatt’s reduced its shares in Berkshire Hathaway Inc. by 11% in Q1 to end March with a position worth almost $27.48 million.

As of the first quarter of 2023, 108 of the 943 hedge funds surveyed by Insider Monkey had invested in the investor of investors. Berkshire Hathaway Inc.’s largest hedge fund shareholder proved to be the Bill & Melinda Gates Foundation Trust, which held $6.08 billion worth of shares.

Berkshire Hathaway Inc. ranks among the likes of Alphabet Inc., Microsoft Corporation, and Apple Inc. as a top stock in Joel Greenblatt’s portfolio.

5. Amazon.com, Inc. (NASDAQ:AMZN)

Gotham Asset Management Q1 2023 Stake: $29.85 million

Amazon.com, Inc. (NASDAQ:AMZN) is a retail and tech company that sells consumer products and subscriptions online and in physical stores globally. One of the Big 5 tech giants, Amazon.com, Inc. made a significant announcement on June 22, revealing its plan to invest $100 million in the AWS Generative AI Innovation Center. This initiative aims to empower users by providing them with resources and assistance to develop and utilize generative artificial intelligence solutions within their respective businesses. Gotham Asset Management reportedly holds 289,049 AMZN shares worth approximately $29.85 million as of the first quarter of 2023.

On April 27, Amazon.com, Inc. reported a Q1 GAAP EPS of $0.31 and revenue of $127.4 billion, exceeding Wall Street estimates by $0.11 and $2.85 billion, respectively.

Insider Monkey’s first quarter of 2023 survey covering 943 hedge funds revealed that 243 had invested in the firm. Amazon.com, Inc.’s biggest investor in our database is Ken Fisher’s Fisher Asset Management since it owns 41 million shares that are worth $4.2 billion.

Alphyn Capital Management made the following comment about Amazon.com, Inc. in its second quarter 2023 investor letter:

“In my 2002 Q4 letter, I outlined quantitative reasoning for why I believe the company’s financials mask its true earnings power. More qualitatively, Amazon.com, Inc. continues to make strategic strides that enhance its appeal as an investment. Firstly, Amazon’s willingness to streamline costs and shutter underperforming initiatives demonstrates prudent financial management. The company’s overhaul of its fulfillment network, transitioning from a national to a regional model, will improve efficiency and delivery speed, resulting in lower costs and increased customer satisfaction, both critical drivers of revenue growth. Second, Amazon’s unparalleled scale, leading e-commerce platform position, and technology investments attract advertisers eager to engage with its vast customer base and provide consumers with highly targeted ads. This strategy has propelled Amazon’s advertising business to surpass broader market trends. Finally, Amazon remains a long-term growth entity. With retail, 80% of shopping is still offline, and Amazon has been steadily expanding its business sales (currently at $35 billion) and international presence. With AWS, despite near-term conservative enterprise spending, 90% of global IT spending remains on-premise. With other bets, Amazon has ambitious forays into diverse sectors such as grocery, healthcare, and satellite internet connectivity.”

4. Alphabet Inc. (NASDAQ:GOOG)

Gotham Asset Management Q1 2023 Stake: $41.94 million

Alphabet Inc. reigns as a prominent technology giant among the Big 5. At the core of its operations lies Google, a search engine that handles billions of queries every single day. The firm also encompasses an array of video streaming and productivity platforms, including Youtube. Additionally, the company engages in the sale of electronic devices such as smartphones, ultra-thin notebooks, and speakers. Joel Greenblatt initiated a position in the tech giant back in Q2 2016, at an average quarterly share price of $36.70. Currently, his hedge fund holds a stake worth $41.84 million in the company.

On April 25, Alphabet Inc. reported a Q1 GAAP EPS of $1.17 and a revenue of $69.79 billion, outperforming market estimates by $0.10 and $950 million, respectively

After digging through 943 hedge funds for their first quarter of 2023 shareholdings, Insider Monkey found out that 155 had bought Alphabet Inc.’s shares. Out of these, the firm’s largest investor is Ken Fisher’s Fisher Asset Management with a $4.3 billion stake.

3. Apple Inc. (NASDAQ:AAPL)

Gotham Asset Management Q1 2023 Stake: $50.47 million

The largest company in the world by market capitalization, Apple Inc. is a major tech firm that is branching out in several domains, including the metaverse and AI. With a revenue of $365.82 billion and a net income of $99.8 billion in 2022, Apple Inc. experienced exceptional financial success. Notably, the iPhone played a significant role in driving this achievement, contributing to over half of the company’s revenue. In 2022, iPhone sales reached an impressive 225.30 million units, further solidifying its position as a cornerstone of the company’s revenue stream. Joel Greenblatt’s Gotham Asset Management cut its position in Apple Inc. by 15% to end the quarter with a stake worth around $50.47 million.

Apple Inc. announced its financial results for FQ2 on May 4, surpassing expectations on Wall Street with a GAAP EPS of $1.52 and revenue of $94.84 billion, exceeding estimates by $0.09 and $2 billion, respectively.

Apple Inc. was in 131 hedge fund portfolios at the end of Q1 2023, as per Insider Monkey’s database. These stakes are collectively worth over $165.2 billion. Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q1.

Here’s what Fred Alger Management said about Apple Inc. in its Q1 2023 investor letter:

“Apple Inc. (NASDAQ:AAPL) is a leading technology provider in telecommunications, computing, and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives particularly tight engagement with consumers and enterprises, which is fostering the growing purchase of high margin services like music, apps, and Apple Pay. While iPhone sales were down year-over-year (YoY). services revenues grew 7% YoY which was slightly above analyst estimates. Company earnings were also better-than-anticipated due to lower input costs, such as memory chips and cost control initiatives. Aside from production disruptions, negative sentiment had also weighed on shares as investors questioned how an economic slowdown would affect consumer demand for Apple products in 2023. However, management projected an acceleration in earnings for the fiscal first quarter, where they noted that iPhone and services growth should remain strong, along with encouraging impacts around product mix, lower input costs, and continued cost controls.”

2. Microsoft Corporation (NASDAQ:MSFT)

Gotham Asset Management Q1 2023 Stake: $55.32 million

Boasting a massive user base surpassing 1 billion, Microsoft Corporation achieved remarkable financial success in 2022, with a revenue of $198.27 billion and a net income of $72.73 billion. With a market capitalization exceeding $2.56 trillion, the company unmistakably showcases its considerable value. As a prominent market leader in the technology industry, Microsoft Corporation ongoing triumph can be attributed to its unwavering commitment to innovation, effective marketing strategies, and a devoted customer base. Gotham Asset Management reported holding $55.32 million worth of stakes in the tech giant, making up 1.34% of his hedge fund portfolio.

At the end of Q1 2023, 289 hedge funds in Insider Monkey’s database owned stakes in Microsoft Corporation, worth collectively nearly $58 billion.

Ariel Investments mentioned Microsoft Corporation in its first-quarter 2023 investor letter:

“Enterprise software provider, Microsoft Corporation (NASDAQ:MSFT) also traded higher in the period alongside the investor enthusiasm for Artificial Intelligence. Microsoft is well positioned as this new technology advances given its large investment in Open AI, the parent company of ChatGPT. Looking ahead, we continue to like Microsoft’s solid fundamentals, competitive positioning and long-term business outlook. We anchor on the company driving value creation by capitalizing on a broad and deep set of opportunities, most notably within Azure, its hybrid cloud infrastructure. The platform continues to demonstrate share gains and strong multi-year purchase intent as enterprises transition to cloud based platforms. At current trading levels, we believe Microsoft’s risk/reward is skewed to the upside.”

1. Snowflake Inc. (NYSE:SNOW)

Gotham Asset Management Q1 2023 Stake: $60.32 million

Snowflake Inc. (NYSE:SNOW) is a cloud computing–based data cloud company based in Bozeman, Montana. It was founded in July 2012 and was publicly launched in October 2014 after two years in stealth mode. The firm offers a cloud-based data storage and analytics service, generally termed “data-as-a-service”. Snowflake Inc. is Gotham Asset Management’s largest tech position, and consequently, its largest stock holding with a stake worth approximately $60.32 million

On June 30, Keith Weiss at Morgan Stanley reiterated an Overweight rating on Snowflake Inc. shares while also maintaining a $215 price target on the stock.

As of Q1 2023, 63 of the 943 hedge funds surveyed by Insider Monkey had bought Snowflake Inc.’s shares. Brad Gerstner’s Altimeter Capital Management is the firm’s largest shareholder with an investment of $2.3 billion.

In its first-quarter 2023 investor letter, The Ithaka Group said the following about Snowflake Inc.:

“Snowflake Inc. (NYSE:SNOW) is a dominant player in the Data Warehousing market, offering customers the ability to break down data silos and derive value from rapidly growing data sets through Snowflake’s analytical database product, the Data Cloud. The company’s base business is benefitting from a number of secular tailwinds, the three most prevalent being: 1) data-driven decision making, 2) cloud adoption, and 3) the exponential growth of corporate data. The company’s visionary management team, headed by industry veteran Frank Slootman, plans to capture its fair share of this growth through: 1) executing on its land and expand model, 2) acquiring new customers, 3) growing internationally, and 4) expanding its nascent partner network. The stock’s negative contribution in the quarter was due to the timing of Ithaka’s purchase (mid-February) and its small portfolio weighting (100bps).”