Book Review: The Big Money – Seven Steps to Picking Great Stocks and Finding Financial Security

The Big Money by Frederick R. Kobrick, was also sent to me for review. It was good timing because I was looking for books on stockpicking to expand my reading horizons. One can only read so many books on the wonders of index funds before monotony sets in.

I’d never heard of Kobrick before this book either, but apparently he is a long-time mutual fund manager with accolades such as:

- Manager of the State Street Research Capital Fund, which was ranked as one of the top five mutual funds in the country for the entire 15-year bull market in 1997

- Manager of the The Kobrick Capital Fund, named by USA Today as “All-Star Fund of the Year” – the only manager ever to win this more than once – best of their group of 25 All-Star Funds in 1998 and 1999.

Ok, now that we have established that this guy has made millions of dollars doing what he does and I have not :), let’s get to my own little review of this book: I didn’t like it. Kobrick may be brilliant, but either he consciously decided not to give away any real and useful tips in this book, or his ideas were translated horribly into text. I really tried to keep an open mind for this book, too!

The overall theme of the book is that picking stocks is simple. You should take a holistic view of things and go for the “Big Money” by buying “great” companies that will give you 10-2000 times your original investment. Names like Wal-mart and McDonald’s are given as examples. If you bought these stocks early (and apparently he did) and held on for many years, you’d have done pretty awesome in the markets.

The idea sounds good, but how do you find these “great companies”? He suggests focusing on the four facets of BASM: Business Model, Assumptions, Strategy, and Management, along with what he calls the Seven Steps. The problem is, these are explained so vaguely that even after finishing the book, I really learned hardly anything. Here are some examples:

- He first says that you shouldn’t worry about P/E ratios if the company is truly great. But then later he says that if valuations are too high, that you should sell. He continues to give out other examples of what to look out for, but you should always cut some slack for the “great” ones. How do I tell if a company is “great”?

- From what I read, “Great” means companies with great management and easy-to-explain business model. Gee, thanks! I thought it would be poor management and confusing business models!

- On what to avoid: “My choice would be for investors to avoid all companies that do not explain their earnings and accounting well enough” Okay, what’s “well enough”?

- The book has a lot of examples of great stock picks from the past. But how about now? If it’s so simple, what are some small companies that we should buy now? No help there either.

Now, I actually like the idea of picking a few good stocks and running with them. But really this book could be about 20 pages long. Instead it was almost 300 unorganized and repetitive pages.

Conclusion
For book that touts simplicity, this book was anything but. There is just too much reliance on good personal judgment in this book, which is exactly the thing that the author has, and the vast majority the readers of the book don’t. I would not recommend reading this book, as it would be akin to Mike Tyson throwing a someone into a boxing ring with a pro and saying “Try not to get hit. That’s what I did!”

Overall Rating: 1 Star (ratings explained)

Make your own opinion!
As I got this free from the publisher, a copy of this book will also be given away to a lucky blog reader later this month.

Comments

  1. I read somewhere that great fund managers write books and newsletters when they no longer have the knack for picking good stocks. If they did there is no way they’d be sharing it with you!

  2. Would you mind sharing how you get these books for review? Are they also free book? Thanks

  3. I would recommend “Rule #!” by Phil Town

    Probably the best book on picking and evaluating stocks that I’ve read.

  4. I have read “Rule #1″ and even done some paper trading trying to use the instructions given in it. My results were that after trading in about 4 companies that I picked, that I thought fit the rules, my paper trading was up about $700 in 4 months or so by purchasing and selling 50 shares when the rules said to buy or sell.

    Of course, the past 5 months the stocks never met the “buy” signal again so I haven’t made anymore fake dollars off it. It may have been luck but seeing how I never picked stocks before reading the book I thought the results were quite nice. The only bad thing is picking the right companies is very time consuming due to all the research and number crunching you need to do.

    It really would be nice to see your input on the book. Hopefully you will get a review copy sometime.

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