Well, here's another investing book. So far, I haven't read one lately that I've liked. Think I'll feel any different about The Big Money: Seven Steps to Picking Great Stocks and Finding Financial Security by Frederick Kobrick? Keep reading and you'll find out.
Book Summary
The book is a basic "how to pick great stocks" book. But to give you a bit more information, here's how the publisher summarizes what the book is about:
In his new book, The Big Money: Seven Steps to Picking Great Stocks and Finding Financial Security, Kobrick uses stories that are both educational and entertaining to illuminate his own techniques and secrets for shutting out “information noise” and focusing on the essential elements that indicate whether or not a company is poised to reap big rewards for its shareholders.
Kobrick certainly knows what he's talking about. Here's a brief summary of his credentials:
Kobrick possesses one of the best long-term investment records in the U.S. and a reputation for understanding the differences between ordinary and great companies early on. His Kobrick Capital Fund was named USA Today’s “All-Star Fund of the Year” an unprecedented two years running – best of their group of 25 All-Star Funds in 1998 and 1999. After ten years at State Street, Kobrick was ranked by Investors Business Daily as having the 5th best ten-year record of all diversified stock funds. His funds were included in the November 1996 Money Magazine cover story, “Six Funds of the Decade.” In 1997, the State Street Research Capital Fund, managed by Kobrick, was ranked as one of the top five mutual funds in the U.S., for the entire 15-year bull market.
And as if this weren't enough, he gets some great kudos from stock-picking legend Peter Lynch on the cover of the book:
“I have known Fred Kobrick since our school days and he is one of the best stock pickers I have ever met. This is a refreshing book, a fun read, and with a new approach that removes many complex obstacles for investors. It shows them how to use their own common sense and some simple techniques to identify great stocks early. This book breaks new ground and will help investors improve their skills.”
Basically, the book revolves around two key concepts. The first is summarized in the acronym BASM which stands for Business Model, Assumptions, Strategy, and Management. It's these four critical factors that Kobrick says you can use to identify, analyze and pick great stocks. The second is a set of what Kobrick calls the Seven Steps of Successful Investing, a list of abilities each investor should apply to investing. The seven are:
- Knowledge: An important element in differentiating companies that slip and slide from those that excel; in-depth knowledge of key aspects of a company’s operations leads to genuine confidence.
- Patience: Great companies must be held over an extended period if investors wish to earn the big money. Learn which companies deserve your patience.
- Discipline: In times of crisis, many investors get emotional, abandoning research and knowledge as well as buy and sell disciplines. This can create opportunity for the disciplined investor.
- Emotions: Resist emotion-driven timing when you sense that fear is pulling a market or stock down or that the magnetism of greed is driving it sharply up.
- Time Horizon: Winners can exhibit short-term volatility; take a longer view of a company’s prospects and stay with the winners.
- Market Timing: When markets are becoming overvalued, wait and keep looking; selling out of fear when markets are down, could lead to dumping stocks that can make you wealthy.
- Benchmarks: You need to know what to expect from a company if you are going to be a long-term stockholder. Benchmarks are essential in establishing expectations at the outset.
Finally, I found this sentence interesting in Kobrick's press release:
While Kobrick feels that most people should have the bulk of their retirement money in mutual funds or with financial advisors so that they are not burdened with managing their retirement account, he also believes that everyone can use the methods he has developed to create and manage their own portfolio of a few stocks selected with the objective of becoming truly wealthy.
I agree with that first part. That's why most of my money is in index funds and only a bit is in individual stocks.
What I Liked
The book was an interesting read. It's similar to the Peter Lynch "buy what you know" sort of general stock-picking advice many of us grew up on and loved. Kobrick also has many interesting stories which make the book a fun read.
What I Didn't Like
There wasn't much new news here. To me, it's simply another stock-picking method that may or may not work (it works for him certainly, but can it work for others?). In addition, there's much more emphasis on "gut feel" and less on quantitative analysis then, say, Phil Town offers. Personally, I prefer Phil's approach.
Conclusion and Rating
Overall, this book is "fine" and if you do read it, I'm sure you'll get something from it -- especially if you like to read the "latest and greatest" books on investing. But it just didn't do much for me. Therefore, the Free Money Finance rating for The Big Money: Seven Steps to Picking Great Stocks and Finding Financial Security by Frederick Kobrick (based on my 0 thru 10 rating system) is: 5 Stars.
Comments