Investing in retail businesses has a reputation for being risky and volatile, causing many investors to avoid them. After you read these 6 points from Joel Greenblatt, you'll never look at a retail stock the same.

1. Frequent information flow

Retail businesses constantly put out data, often every month or even weekly. All this data gives traders lots of reason for traders to jump in and out of retail stocks. That leads to point #2

2. Volatility is an opportunity

Market overreactions to short-term news can lead to significant price drops. This often creates the chance to buy solid businesses at discounted prices.

3. Markets overreact to misses

The frequent information flow also gives retail companies lots of chances to miss expectations. When they do, the market usually sells them off quickly, even when the underlying business fundamentals remain strong.

4. Take a long view

You don't have to find the next trend in retail. Just find a company with solid fundamentals and a strong management team. These types of businesses survive economic downturns and emerge stronger. Investing in a business like this during a period of market pessimism can turn out very well.

5. Be a contrarian

Buying when others are selling can be really effective in the retail sector. Take advantage of opportunities when they arise, especially when fear and uncertainty dominate the market. Amazon is a great example. It's had several significant drawdowns in its history.

6. Use real-world observations

Greenblatt also points out the advantages of observing retail businesses in person. Noticing how often items are marked down or the length of lines at registers can tell you a lot about consumer behavior and the health of a business.

Retail investing might look risky, but Joel Greenblatt shows it’s filled with opportunities if you look past the short-term volatility.

Focus on the fundamentals, embrace being a contrarian, and buy on short-term bad news. You can find great value in retail businesses that others miss.