Full Reading List

In April, 2014, I decided to start emailing my friends book recommendations every month. After two years, hundreds of books, and seven thousand new readers, I’ve finally pulled the full list together. This is the full archive of everything I’ve ever recommended. This list is meant to foster a community of book lovers. Share it!…

The Market’s Buyback Yield Is Not A Timing Tool

Almost nothing written about investing is actionable. It’s why I’ve read less and less on investing and tried to instead do more and more work myself—to reach my own conclusions, conclusions which can be applied over long investing horizons. The action most appropriate is almost always: do nothing. One thing that is written about a lot…

Two Star Managers and the Wheel of Fortune

Here is an idea that is doomed to fail: a podcast or interview series with 2-star fund managers. We hear about strategies, portfolio managers, and asset classes after the fact—when they’ve delivered performance numbers that make our mouths water. We cannot blame the financial complex for focusing on strongest returns: it leads to more interesting…

Shrinkage vs. Growth

The most interesting story in the history of capital allocation was the rapid growth and then steady shrinking of Teledyne, a conglomerate formed by Henry Singleton in 1960. Teledyne spent the 60’s growing through acquisitions—130 companies in total, bought for twelve times earnings or less—funded in large part by the issuance of new shares of…

Alpha or Assets

More and more investors are buying “factor” based strategies which invest using measures like valuation and low volatility, but the most popular strategies are applying factors in the wrong way. Strategies should be built for alpha, not scale—but the asset management industry has gone in the opposite direction. Most factor-based strategies—commonly called Smart Beta—have hundreds…

The More Unique Your Portfolio, The Greater Its Potential

If there is a lot of overlap between your portfolio and the market, there is only so much alpha you can earn. This is obvious. Still, when you visualize this potential it sends a powerful message. Active share—the preferred measure of how different a portfolio is from its benchmark—is not a predictor of future performance, but…

When Measures Become Targets: How Index Investing Changes Indexes

in·dex noun : an indicator, sign, or measure of something. In Vietnam, under French colonial rule, there was a rat problem. To solve the rat infestation, the French offered a bounty on rats, which could be collected by delivering a rat’s tail as proof of murder. Many bounties were paid out, but the rat problem…

Will You Be a Gambler or the House In the Stock Market?

Blackjack odds are as good as you’ll get at most casinos. In most cases, the casino has just a 1% edge versus the gambler. So in a given night, you can go on a great run and win a lot of money playing blackjack. But of course if you played every day, all day, your…

Stocks That Triple In One Year

There have been 1,700 individual U.S. stocks (with starting market caps of at least $200MM, inflation adjusted) which have tripled in a 12-month period since 1962. Many of these individual stocks tripled in more than one 12-month period, so we have 7,500 or so separate observations of a stock tripling in a 12-month period. Tripling your money quickly…

The Few Rule the Many — Power Laws in Market Returns (2015 Case Study)

As index investing has grown in popularity, investors focus more and more on the market’s overall return and less on the return of its component parts (individual stocks). But underneath the hood of each market index we find many inequalities. The top 20% of stocks represent 85% of the overall market’s size in 2015. Similarly,…