A Famed Investor's Small-Cap Picks

Value investor Joel Greenblatt of Gotham Asset Management is well known for his book You Can Be a Stock Market Genius and for his Magic Formula Investing. We have found through our research, analyzing our database of 13F filings, that the most popular small-cap stocks among hedge funds earn an average excess return of 18 percentage points per year.

This makes sense, since small-cap stocks receive less attention from mutual funds and the financial media, and so hedge funds should be more likely to find an undervalued stock if they do research in this valuation range. We believe that one possible application of approach is to see which small-cap stocks investors such as Greenblatt like, and investors can do further research. Here are Greenblatt's five largest positions at the end of December in stocks that have market capitalizations between $1 billion and $4 billion:...461 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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