Frederick R. Kobrick's investing book The Big Money is, in simplest terms, a detailed explanation of the stock-picking strategy the author has developed over the course of his career as an investment analyst and as a mutual fund manager. While brand new investors will not find it to be the best starting point in terms of self-education, even just moderately-experienced investors will find the specific framework easy to understand, in addition to being easy to adopt.
That stock-picking framework is actually two-fold. The first theme is a list of minimum criteria any publicly-traded company should meet before an investor takes the plunge. The second and parallel theme is a list of the specific internal issues that all investors will face at some point in their investing careers. Kobrick identifies all of them, and more importantly, identifies how investors should deal with them before they become stumbling blocks.
Identifying Investment-Worthy Companies
The Big Money leaves no doubt as to which four criteria a company should meet before a prospective investors has a proverbial green light. In fact, Kobrick arranges these four ideals into an easy-to-remember acronym – 'BASM' - by the end of the first chapter.
As an example of what the books readers will actually be able to glean, the 'B' in the acronym stands for 'business model'.
While an honest critique of a company's business model may seem like a common sense act most investors should make before committing capital to a stock, too few investors really understand how to assess the quality of a business model - a 'great idea' or a novel technology don't necessarily translate into revenues and profits.
Drawing from his own real-world experiences, Kobrick details some of the specific - and frequently revealing - questions he asked of CEO and a company's management before he would recommend a stock, or buy it for his fund. This 'stand over my shoulder' approach taken by the book lets its readers truly get a feel for what to look for in a business model that will likely lead to a strong-performing stock.
Investor Psychology
While the four criteria (BASM) each company should meet is critical to successful investing, The Big Money further explains which seven mental issues are most likely to misdirect investors to the point where they can hinder that investors bottom like success.
One of those emotional hurdles, for example, is patience.... or perhaps a lack of understanding of the difference between patience, and stubbornness.
Again, drawing on examples from his real-world experience, the author illustrates how a lack of patience can cause an investor to make an exit too soon, or a how too much patience leave an investor holding the proverbial bag. The Big Money then offers - with clarity - the specific reasons investors should continue to hold a stock, or sell it.
About Frederick R. Kobrick's The Big Money
Where most 'how to invest' books would explain the four company criteria or the seven potential pitfalls by devoting one chapter at a time to each focus, Kobrick wastes no time explaining both aspects of investment management – all eleven ideas are laid out right at the book's beginning. The remainder of the book then adds layers of details to all eleven ideas using real case studies.
While that organization may suggest a reader simply read the first chapter of the book and then put it down, the real value of The Big Money may well be the real-world examples. Moreover, the book's structure (and learning the concepts) lends itself to this sequence; most investors will actually want to finish the piece.
About Frederick R. Kobrick
Frederick R. Kobrick has been in the investment industry for over three decades. He was an analyst with Wellington Management Company, and has acted as manager of the State Street's Research Capital Fund and Capital Appreciation Fund, which has been a note-worthy performer within its fund category, including during Kobrick's tenure. He now runs his own hedge fund, Kobrick Capital, teaches part time at Boston University, and serves as an institutional consultant.
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