[The Weekend Bulletin] #188: What Drives Share Prices?, Where Do Good Ideas Come From?, Good and Silly Questions, ...
... Joel Tillinghast, A Simple Strategy for Smarter Reading, and more.
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Investing Wisdom
The author of this article ruminates on the reasons behind the movement in share prices in the short run. He attributes the sharp share price movements to a change in market structure, among other things. However, he then argues that despite these factors, the longer term share price movements are still dictated by fundamentals. He backs this claim with data, quoting examples that would surprise most of us.
Idea generation in the investment business is complex and diverse, with managers employing different strategies like quantitative screens, niche expertise, or open exploration to identify opportunities. While each approach demands distinct frameworks, there is one underlying principle that works across all frameworks. This articleexplains.
Legendary investor Joel Tillinghast lays down some of his investing principles in this interview. He shares his views on valuations, growth, quality, and durability. He also shares his approach to risk management, talking about three different types of risks and how he overcomes them.
Mental Models & Behavioral Biases
Questions serve as a very important tool in the process of doing research. However, the right tool wielded by inexperienced or careless hands can lead to inefficiency, errors, and even harm. Understanding the proper use and limitations of tools is essential in any endeavor. This article explains the proper use and limitations of questions in research.
Personal Development
This article presents a simple strategy for smarter reading. The author defines the problem of learning something new from books as an inability to differentiate a well-researched opinion from a quirky theory. He then explains a simple solution that he has come up with so as to avoid reading a multitude of books to learn a single subject. Quite simple yet effective.
Blast From The Past
Revisiting articles from a past issue for the benefits of refreshing memory and spaced repetition, as well as for a fresh perspective. Below are articles from 111:
Warren Buffett rates pricing power as the single most important indicator of a business's strength. But what exactly is pricing power? Raising prices to pass on inflationary pressures is definitely not pricing power, claims this article, and then goes on to explain the kind of pricing power that investors should look for.
Here is another investor letter. This one, from Broyhill Asset Management, while discussing the current market outlook provides some interesting perspectives on the historical relation between starting valuations and prospective returns. The letter also provides a checklist observed by Goldman Sachs that characterizes an investment bubble (should be put up on your desk).
…is every stock now—maybe the market itself—more like an untethered balloon? When you stick a pin in a balloon, it doesn’t plummet toward the ground. It fires off at odd angles, sometimes shooting up to extreme heights, spinning and spiraling and seesawing—until it eventually runs out of air. Then it might drift back to the ground; or it might defy ration and reason, get caught in a stiff breeze—and rise up, and up, forever.
One of my professors used to assert that 'you've understood a concept well only if you can express it as an equation'. This article, breaking down decision making in to its key components, will tell you why he was right. This is one of the best articles on decision making that I have read so far.
Quotable Quotes
“Rule your mind or it will rule you."
“There's a tremendous amount of craftsmanship in between a great idea and a great product.”
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That's it for this weekend folks.
Have a wonderful week ahead!!
- Tejas Gutka
[Mar 03, 2024]