It just seems logical that sticking to investing in only a small number of companies that you understand well, rather than moving down the list to your thirtieth or fiftieth favorite pick, would create a much greater potential to earn above-average investment returns.
Joel GreenblattValue investing doesn't always work. The market doesn't always agree with you. Over time, value is roughly the way the market prices stocks, but over the short term, which sometimes can be as long as two or three years, there are periods when it doesn't work. And that is a very good thing. The fact that our value approach doesn't work over periods of time is precisely the reason why it continues to work over the long term.
Joel GreenblattI think the exercise of trying to figure out how to simplify concepts has been incredibly helpful to me over the last 13 years of teaching and I hope my students have benefited from it.
Joel GreenblattSo one way to create an attractive risk/reward situation is to limit downside risk severely by investing in situations that have a large margin of safety. The upside, while still difficult to quantify, will usually take care of itself. In other words, look down, not up, when making your initial investment decision. If you donโt lose money, most of the remaining alternatives are good ones.
Joel Greenblatt