Big Money Thinks Small Quotes

“The degree of one’s emotion varies inversely with one’s knowledge of the facts—the less you know, the hotter you get. —BERTRAND RUSSELL”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Statisticians say that stocks with healthy dividends slightly outperform the market averages, especially on a risk-adjusted basis. On average, high-yielding stocks have lower price/earnings ratios and skew toward relatively stable industries. Stripping out these factors, generous dividends alone don’t seem to help performance. So, if you need or like income, I’d say go for it. Invest in a company that pays high dividends. Just be sure that you are favoring stocks with low P/Es in stable industries. For good measure, look for earnings in excess of dividends, ample free cash flow, and stable proportions of debt and equity. Also look for companies in which the number of shares outstanding isn’t rising rapidly. To put a finer point on income stocks to skip, reverse those criteria. I wouldn’t buy a stock for its dividend if the payout wasn’t well covered by earnings and free cash flow. Real estate investment trusts, master limited partnerships, and royalty trusts often trade on their yield rather than their asset value. In some of those cases, analysts disagree about the economic meaning of depreciation and depletion—in particular, whether those items are akin to earnings or not. Without looking at the specific situation, I couldn’t judge whether the per share asset base was shrinking over time or whether generally accepted accounting principles accounting was too conservative. If I see a high-yielder with swiftly rising share counts and debt levels, I assume the worst.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Technology is an extension of human behavior,”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“A successful investor is one who holds on for the long term and continues to monitor the fundamental story, and if it remains in place you stay, and if not you move on.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“treacherous”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Xerox had an attractive financial model focused on leasing and servicing machines and selling toner, rather than big-ticket equipment sales. For Xerox and its salespeople, this meant steadier, more recurring income. With a large baseline of recurring revenues, budgets were more likely to be met, which allowed management to give accurate guidance to stock analysts. For customers, the cost of leasing a copier is accounted for as an operating expense, which doesn’t usually entail upper management approval as a capital purchase might. As a near-monopoly manufacturer of copiers, Xerox could reduce costs by building more of a few standard models. As owner of a fleet of potentially obsolete leased equipment, Xerox might prefer not to improve models too quickly. As Steve Jobs saw it, product people were driven out of Xerox, along with any sense of craftsmanship. Nonetheless, in 1969, Xerox launched one of the most remarkable research efforts ever, the Palo Alto Research Center (PARC), without which Apple, the PC, and the Internet would not exist. The modern PC was invented at PARC, as was Ethernet networking, the graphical user interface and the mouse to control it, email, user-friendly word processing, desktop publishing, video conferencing, and much more. The invention that most clearly fit into Xerox’s vision of the “office of the future” was the laser printer, which Hewlett-Packard exploited more successfully than Xerox. (I’m watching to see how the modern parallel, Alphabet’s moonshot ventures, works out.) Xerox notoriously failed to turn these world-changing inventions into market dominance, or any market share at all—allowing Apple, Microsoft, Hewlett-Packard, and others to build behemoth enterprises around them. At a meeting where Steve Jobs accused Bill Gates of ripping off Apple’s ideas, Gates replied, “Well Steve, I think there’s more than one way of looking at it. I think it’s like we both had this rich neighbor named Xerox and I broke in to steal his TV set and found out that you had already stolen it.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Assume the following scenario: there are one hundred firms in an industry with equal investments in each of them (table 15.2). Over a decade or two, one becomes the clear leader, and its stock multiplies a hundredfold. There’s also a strong contender that advances fiftyfold. Fifty stocks stagnate but maintain their value. Forty-eight go bust. Your overall basket doubles in value. A double that happens in a year is fantastic, but over ten or twenty years, it’s mediocre.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“In commerce, being superb and easy to use matters much more than being first.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Industries dragged down by both substitution and competition were terrible investments between 1900 and 2016.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Investors have fared best in industries that cater to daily needs where customers can’t or won’t switch.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“The four elements of value are (1) profitability or income, (2) life span, (3) growth, and (4) certainty.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Life’s too short to wallow in the weeds! There are thousands of stocks to choose from. Some investors do build a career around digging into the minutiae in the footnotes. For banking and insurance analysts, it’s mandatory. But as a portfolio manager who didn’t own Enron stock, I didn’t need it. Disclosure is a wonderful thing, but I’ve never had good luck with complex corporate structures that require massive information statements. Not infrequently, companies with complex corporate structures or opaque disclosures are trying to hide something.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“if there are too many pages of footnotes, and I don’t already own a stock, I conclude that the company must be trying to hide something, and I move on.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“When a manager has a criminal record or a history of cheating investors or even just feels above the law, I stop right there. Crooks don’t suddenly sprout a sense of fiduciary duty. When a piece of evidence might or might not tag a bad guy, I use it only if it hints at other investment defects. Glamorous hype stocks are more likely to be scams, but I avoid them because they are usually overpriced and prone to raising capital constantly. Intricate corporate structures make analysis difficult, even if nothing bad is going on. To spot bad guys, look for the fraud triangle: pressure, opportunity, and rationalization. Philosopher Hannah Arendt had it right that “most evil is done by people who never make up their minds to be good or evil.” Watch for when massive option grants or hefty fees compel people to try too hard. Pride can be a dominant motive when an audience believes in someone’s magical powers. Charismatic promoters often suppress the boards of directors, auditors, and other naysayers that might prevent them from doing what they want. They cluster in industries and geographies where capital is abundantly available with little scrutiny or accountability. Lax accounting standards are also a draw. Don’t buy anything someone is pushing hard. By avoiding the bad-guy stocks—and it’s a short list—I slash the possibility of a disastrous outcome but scarcely reduce my opportunity set.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“As a value investor, what really scares me away is that if investors believe the hype, a stock will be overpriced. Nearly all of the companies on lists of major accounting debacles had stocks trading at demanding multiples”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Price discounting suggests that either prices are too high or product features don’t matter much.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“In all businesses, profits and losses today stem from a collage of decisions, big and trivial, made in the sometimes distant past, often by people who are no longer around. Dumb luck can be as influential as good judgment”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“According to strategy guru Michael Porter of the Harvard Business School, successful business strategies are at the opposite poles of each of two choices: (1) aim to dominate the entire industry or, alternately, target only the few segments in which it can excel; (2) choose between winning by marketing superior products or, alternately, by offering bargain prices. Companies run into trouble when they are not clear about whether they are serving the whole market or just focusing on specific niches. Also, quality products and low prices can’t be equally important objectives, or a company will be stuck in the middle.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“A smaller mistake is generally easier to repair. Thinking small not only reduces the severity and frequency of errors, but it also puts you in a better frame of mind to expect them and fix them.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Investors aim for the rationality of natural scientists, but can never achieve it because businesses and economies are structures of human beings. As issues in economics become vast and multifaceted, they tend to shade into political and philosophical beliefs.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Successful people simplify their lives by focusing on the facts and actions that matter most. If you don’t, you will find yourself either on a hamster wheel or bogged down in trivia. The trickiest part is staying open to new and contradictory information that affects your goals, while cutting out the clutter.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“news is available 24/7, and history takes digging.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“If shares are partial interests in enterprises, not just numbers on a screen, the certainty we seek must emanate from the business itself. Training our minds on businesses rather than stock prices moves us in the right direction. We’re not equally equipped to analyze every security or industry, but if we focus on spots where we are conversant, we’ll be more certain that we’ve put together the evidence properly. By entrusting our capital only to honest and capable executives, we reduce the risk of malfeasance. Some industries are brutally competitive and change relentlessly, and some companies depend on the kindness of bankers. Go elsewhere, where there’s more safety.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“People avoid reason until they have tried everything else.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“If markets are efficient, past price movements should tell you nothing about the future path of prices. If true—and it is true enough—this means that research into historical price changes won’t be rewarded.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“on market prices or crowd psychology. The spectrum splits along two dimensions. First, event or holistic? Are you looking for an identifiable trigger or catalyst to produce a winning trade, or rather for a holistic (comprehensive, long-term) sense that capital and income are secure? Second, is this well-researched or not? Have you done thorough research, sloppy research, or none at all?”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Invest where you have an edge through superior information. Consider the popular interpretation, but also variant perspectives. Estimate the value of stocks; don’t trade for other reasons. Try to look out as far into the future as possible. Be (calculatingly) bold. Minimize taxes, fees, and transaction costs; this is done most easily by trading infrequently. Above all, don’t underestimate your rivals. If you are average, don’t count on superior results.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Of all the motivations of those who make millions they don’t need, social acceptance, popularity, and respect are surely near the top.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“Be wary of topics at the edge of your expertise”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing

“For stocks that have rallied sharply from an absurdly undervalued price, Fidelity fund manager Peter Lynch advised “mental whiteout” of the gains you have missed, in order to focus on today’s opportunity for further gains.”
― Joel Tillinghast, Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing