- Sep 20, 2022
This is another book by Joel Greenblatt that tries to make investing simple, as if it were written for non-professional investors. Compared with "Secrets of Value Investing", another book written entirely for retail investors, the book is slightly more in-depth, focusing on risk-free or high-risk investment opportunities hidden in corporate spin-offs, takeovers, restructurings, bankruptcies, risk arbitrage, call options, warrants and other events or instruments, combined with cases.
But in fact, these opportunities in investment are unconventional, are the edge of the choice, in fact, is far from non-professional investors should frequently use the method. Even for professional investors, this type of investment opportunity shouldn't make up the majority of a portfolio. The threshold for such investment opportunities is not exactly as low as he says, but very high.
For example, in restructuring or spin-off transactions, in order to make money, it is necessary to have a deeper understanding of the value and valuation of the whole company, otherwise it is difficult to judge the value of the spin-off subsidiaries and the subject matter after restructuring. The same is true for options and warrants, which are highly leveraged and have time limits. In fact, successful investment requires a deep understanding of underlying assets, mature valuation models and even some good luck. Buying bankrupt companies' bonds, protected equity instruments, and so on is a "wealth risk". It is questionable how successful an investment opportunity like this can be when outsiders never know what the internal assets of a company are. Even Greenblatt only gives many examples of his successful investments, but he does not mention any of the failures. It's not really nice.
In fact, there have been such event risk arbitrage opportunities in Hong Kong stocks recently, such as the privatization of Huaneng New Energy (958.HK) and the ongoing arbitrage opportunity of China General Nuclear Power New Energy (1811.HK). In fact, there are many games behind these, and after thinking through some underlying logic, we need to wait patiently and make a comprehensive trading strategy. It's not that easy to make.
Of course, the most important thing we can learn from him is not these methods, but his keen grasp of investment opportunities, his willingness to devote time and energy to reading a lot (not missing a page, not missing a corner), and his attitude to continuously improve his thinking and investing ability. With this attitude and intuition, it's only a matter of time before you become a successful investor. And that is the most important lesson of the book.