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A Review of “The Big Money” by Frederick R. Kobrick
By JLP | May 11, 2006
I recently finished reading Frederick Kobrick’s The Big Money
Frederick R. Kobrick has managed money for more than thirty years. He spent fourteen years as an investment analyst at Wellington Management Company, then joined State Street Research & Management in 1985. He managed the State Street Research Capital Fund, which was one of the five best-performing funds in the country for fifteen years, according to USA Today. Kobrick’s Capital Appreciation Fund was included in Money magazine’s “Six Funds of the Decade” in 1996, and cited in USA Today as among the five best funds for the entire bull market.
Kobrick left State Street in 1997 to start his own firm, managing three public mutual funds as well as Kobrick Capital, a hedge fund for wealthy individuals and institutions. He was cited by The Boston Globe as one of the top three investors of the 1990s. Kobrick Capital was named USA Today’s All-Star Fund of the Year in 1998 and 1999, the only mutual fund ever to win twice.
A frequent guest on financial programs on television, Kobrick currently advises institutions on a pro bono basis and also lectures. He teaches investment management part-time at Boston University, where he has served as a trustee.
This is an author who knows what he’s talking about.
The book opens with the author’s introduction to the four critical factors (BASM) in a business’ success:
Business Model
Assumptions
Strategy
Management
According to the author, in order for investors to properly use BASM, they must follow the Seven Steps:
1. Knowledge - Kobrick believes the more you know the more you make. I don’t know if this is necessarily true, but he does a good job supporting his belief.
2. Patience - This is the key for any successful investment program. Most people fail due to lack of patience.
3. Disciplines - You have to know when to buy and when to sell. This takes discipline.
4. Emotions - Keep those emotions in check!
5. Time Horizon - For what are you investing for? For how long? These questions define your time horizon. In other words, you have no business investing in stocks if you are going to need your money within five years.
6. Market Timing - If you are investing in good, solid companies, you don’t have to worry about market timing.
7. Benchmarks - You need to know how your portfolio is doing compared to similar investments. For instance, you may think you are doing awesome when your portfolio returns 8% per year. However, you may not feel as good when you find out that the S&P 500 returned 12%.
The rest of the book is dedicated to tying everything together.
My favorite chapter in the book was Chapter 7, “Bear Markets, Bubbles, and Market Timing.” This chapter alone is worth the price of the book. I particularly liked his explanation of the difference between bubbles and bear markets:
One of the interesting differences between bubbles and bear markets is that in a bear market, there are plenty of bulls and bears. In a bubble, the few bears are drowned out by the loud and almost universal bullishness. This happened with the Internet, because a mania is normally caused by a belief in something that is supposed to be new and amazing, even though this cannot be proved.
Good stuff!
Overall I thought The Big Money
One a scale of 1 to 10, with 10 being the highest, I would rank this book a 7 or 8.
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Topics: Books |