Special Situation Investing

Monday, November 13, 2006

Joel Greenblatt's Stock Picks

For those of you new to special situation investing Joel Greenblatt wrote the special situation bible. If you ever get a chance, I highly recommend "You can be a stock market genius" by My. Greenblatt. It has an amazingly bad title but is an absolute gem. In spite of the title, this is not some cheesy, you can make a million dollars with only $1 down and zero-effort book. It is actually quite detailed and clearly points out that this type of investing takes A LOT of work. Slackers will not be rewarded. Joel covers a number of special situation topics in the book: spinoffs, bankruptcies, tracking stocks, etc. and provides a number of detailed case studies for each.

Well anyways, if you have any respect or interest in what Joel Greenblatt is doing, there is an article on some of his recent stock picks here. The article is quite short and doesn't provide any insight into why he might have chosen the stocks, so that is up to us. Of the stocks on his list, I have been watching Claire's & Autozone for awhile but just never pulled the trigger. Anyways, here are his picks:

Autozone (AZO) - Huge turnaround was perfomed on it by Ed Lampert, the guy who is making Sears owners rich. My big problem with this one is that he may have over-emphasized cost-cutting to the point where the store's reputation is starting to suffer. Also, you have already seen substantial appreciation here.

Aeropostale (ARO) - I don't know anything about this one.

Claire's (CLE) - Good turnaround candidate. The stock sells for around 16x trailing earnings and is still growing. Maybe I'll write an article on it 1 of these days.


  • All these stocks are retailers, run in a shareholder friendly way. Because they have 'proven' business models, one can assume about the same rates of return on invested capital, as long as there is room for expansion without cannibalization,

    Success in investing,
    Hendrik Oude Nijhuis

    By Anonymous Hendrik Oude Nijhuis, at 11:57 AM  

  • Some very interesting stock recommendations.


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