Thursday, September 14, 2017

Book Review: Big Money Thinks Small

Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing (Columbia Business School Publishing) by [Tillinghast, Joel]

An interesting read. In terms of concepts and philosophies, the reader will not find anything new that was not encountered before if one has been constantly reading up on the topic of investment.

The author ties together concepts of value investing augmented with experiences and practical applications of financial history and behavioural psychology. The main takeaway for me is his account of the travails of Dendreon and the dangers of investing in a "story." To summarise, Dendreon was a biotech which developed a treatment for cancer. The main bull story for Dendreon was that once FDA approval is obtained, earnings will rocket to the sky. The ending was that Dendreon did actually obtain FDA approval, and its share price went up tenfold, however sales were disappointing and the company eventually declared bankruptcy!

There are several stocks on the ASX in which investors are clearly enamoured with the "story", the most vivid example being Mesoblast.

The author also addressed the issues inherent in indexing, factor investing and macro investing.

The only gripe I have with the book is that it could be better organised. The way it was written looks more like a stream of thought cobbled together hastily without any overarching framework.

A reminder that there is a library of my reading here.

Enjoy and prosper
Yours One-Legged