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Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing (Columbia Business School Publishing) Hardcover – August 15, 2017
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Tillinghast has built an outstanding investment record over three decades by being smart and disciplined. Now, all of us can benefit from his hard-won wisdom and perceptive insights, which are found on literally every page of this fine book. (Seth A. Klarman, Portfolio Manager and CEO, The Baupost Group, LLC)
For decades I have admired and learned from Joel Tillinghast’s extraordinary investment prowess. Whether you are a professional or an individual investor, you will be a better investor after reading and absorbing the wisdom in this book. (Bill Miller, founder and CIO, Miller Value Partners)
Tillinghast provides a very useful checklist of the required due diligence of investments, the tenets of value investing, the need to more carefully understand the culture and rule of law of foreign countries before investing in them, and how to stay within your circle of competence. (David Kass, University of Maryland)
Written for investors at all levels, this practical, no-nonsense guide . . . empower[s] readers to generate their own informed decisions. (Publishers Weekly)
Tillinghast’s book is a cornucopia of investing wisdom, some acquired as a result of the inevitable mistakes, which he readily shares. (Investing.com)
[This book] is an intelligent guide to stock selection and investment that deserves a place on everyone's bookshelf, whether they work in the City or just want to find some shares to put into their Isa. (MoneyWeek)
Named one of the five best books of 2017 (Money Week)
What could look like anecdotes and unrelated points come together to form a valuable approach to investing...it’s a collection of investment wisdom. I’ll certainly re-read many passages of this book over and over again. Highly recommended for seasoned investors. (Strictly Value)
About the Author
Joel Tillinghast is a Chartered Financial Analyst (CFA) charterholder and thirty-six-year veteran of the investments industry. He has been the manager of the Fidelity® Low-Priced Stock Fund since 1989.
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This is - first and foremost - a book about investing, not a book about how to invest. Maybe you'll appreciate that. But if you are looking for Lynch 3 (after One Up and Beating), other than Lynch's own echo in the introduction you aren't going to find it.
Here's what you do get:
*a rather curious hodgepodge of seemingly random bunch of topics ranging from behavioral finance to anecdotes about company visits to self-congratulatory meanderings about past performance from many years ago. You are already into Chapter 19 before the author even begins to introduce the hint of his investment style but the chapter concludes with a basic 4 bullet checklist which is almost impossible to apply.
*the title is a misnomer. Again and again the author almost unintentionally points out the advantages of 'big money', from his company interviews, international travels, and even his refusal to join a hedge fund because the advantages of Fidelity's analyst staff was too great. The book is filled with comments which might make sense to large hedge and mutual fund complexes or those with extensive industry knowledge but otherwise are not intelligible to anyone else. Consider this passage: "Surveys of oil industry finding costs can tell you about the past but should be combined with a forward-looking view of geological opportunities, the stability of fiscal terms, and a company's technological skills." Good luck with that, especially since the author makes no attempt to explain in layperson's terms many of the things he discusses.
*topics are covered too briefly. As an example, there is a nifty title with much promise - "To Know Thyself, Study Others' Mistakes" but then the author literally fails to discuss any 'others's mistakes'. The book is peppered with these sort of discussions which start out in one direction and end in another, with nothing written comprehensively or completely. What you get is a book that goes on and on without actually being coherent or applicable in a recognizable fashion.
*the examples in the book are almost without exception negative ones. Lynch's introduction pointed to successes in Ross Stores, AutoZone, Monster Beverage, and Ansys both other than 4 paragraphs on Monster the author never goes over these companies in any detail. Instead, he focuses on tales involving GM, Enron, Valeant, and AIG. These anti-examples are fine but become irrelevant after a while because most typical investors won't embrace this level of complexity anyway. Buffett once said that an investment course should be taught using examples that are easy, but this book doesn't take that approach. Lastly, there is never even a mention of Amazon, the most disruptive company of our generation.
In the final analysis, this reminded me of yet another Damodaran book, ironic since the author is a practitioner, not an academic. Maybe you will like it more than me (if you like Damodaran, you will like this book), but clearly given the publisher obviously this was never meant for a popular audience anyway.
I will be doing a second reading and making some good notes that I can rely on when I am analyzing 10-Ks.
Joel makes a great distinction between investing, speculating, and gambling that really resonated with me. I feel you can't really invest in the current market, given elevated valuations due to Central Bank shenanigans.
Joel defines an investment as "the product of thorough research that indicates that capital is broadly secure and an adequate return should be earned". Does this definition match a market that issues 100-year Austrian Bonds at a 2% yield?
The best you can hope for in this market is to speculate successfully, meaning you must use your thorough research to make reasoned guesses about share prices, commodity prices, and crowd psychology. Since nothing is undervalued, there are no Margins of Safety right now.
If you don't do any research, and just invest blindly in this market, you are gambling - and I would suggest, most passive investors are doing just that right now.