Each edition of The Deep Dive unpacks a new idea sourced from our online community of value investors. In this issue, we explore the Greenman Brothers case study from You Can Be a Stock Market Genius.
Joel Greenblatt’s investment in Greenman Brothers was a classic restructuring play, where a promising new business, Noodle Kidoodle educational toy stores, was hidden inside a dull wholesale distribution company. Acting on his wife’s Peter Lynch-style “invest where you shop” insight, Greenblatt bought the stock around $5, well below its $8+ book value, effectively getting the fast-growing retail concept for free.
The catalyst came in May 1995 when management, needing capital to expand Noodle Kidoodle, announced plans to sell the declining distribution unit. The market quickly re-rated the company as a high-growth retailer, sending the stock to $14 within four months. Greenblatt sold around $10 to 11, locking in a gain once the hidden value was recognized.
The case highlights the power of restructurings: limited downside, a strong growth story, a clear catalyst — and the value of paying attention to real-world clues.
