Even the Odds: Wise Danger-Taking in Enterprise, Investing, and Life. 2016. Karen Firestone.
Many funding practitioners are already effectively acquainted with Karen Firestone, who labored as a number one analyst and portfolio supervisor at Constancy Investments for greater than 20 years. After leaving Constancy, she cofounded Aureus Asset Administration, shifting her obligations to agency management at an organization offering asset administration for households and people.
What could shock those that know Firestone solely as a consummate funding skilled is that her writing is a complete delight. Her method to danger administration in enterprise, investing, and life, as informed in Even the Odds, is clever, disciplined, and rooted in conscience. Her charming and conversational prose type imprints readers with unforgettable real-life examples of danger taking.
Firestone defines 4 tenets of smart danger taking:
Proper-size your danger.
Proper-time your danger.
Depend on information, ability, and expertise.
Keep a wholesome skepticism.
She delivers memorable tales to underscore every tenet, with some illustrations pertaining to all 4. One, coping with the tech bubble of the late 1990s, will resonate with all readers who lived by means of that debacle and can encourage those that joined the business in the course of the previous 15 years.
Firestone articulately applies her 4 tenets to the errors dedicated in that interval, which she describes in dwelling coloration:
Proper-sizing: The e book particulars the implications for skilled traders who solid apart valuation metrics and chased the tech bubble in 1999 and 2000, believing that inventory costs’ geometric development, with out corresponding development in such basic elements as gross sales and earnings, might proceed.
Proper-timing, counting on expertise and ability, and sustaining a wholesome skepticism: Disregarding widespread sense by investing in firms for which basic worth was 50% or extra under their inventory costs resulted in horrendous funding losses that proved practically not possible to recoup.
Firestone gives examples of traders who caught to those tenets, risking ridicule and underperformance by means of broad divergence from their benchmarks, to vindicate the long-term impact of her really useful method.
The writer tells her story with real humility, despite the fact that she is an funding grasp. She writes of nice funding success that arrived solely after quarter upon quarter of study and statement mixed with smart danger taking.
Firestone additionally recounts some danger evaluation errors, which appear to emerge from incomplete evaluation greater than some other issue. Her experiences with Inexperienced Mountain Espresso Roasters, Kythera Biopharmaceuticals, Allied Irish Banks, and Twitter had me studying and re-reading sections of the e book. She tells readers why she purchased shares (or didn’t), how she decided worth targets, what modified the worth targets, and her precise funding outcomes. Hardly ever does an funding supervisor focus on such issues in depth with anybody apart from her colleagues.
Within the chapter “Masters of the Commerce,” readers will get pleasure from spending time with the all-stars of danger evaluation: Peter Lynch, George Vanderheiden, and Gordon Crawford. For many people in center age, these people have been our funding heroes. Firestone realized effectively from these exemplars of sensible danger evaluation. On this chapter, a phrase related to Lynch — “Nice, nice, nice . . . ” — is talked about in an surprising context.
In “Working,” Firestone relates how a seemingly innocent connection turned out to have a sinister dimension. Her on-target evaluation of the info protected her, each bodily and from a reputational standpoint. This chapter close to the tip of the e book leaves a very lasting impression on the reader.
My sole criticism of Even the Odds is that the print version lacks an index. Though it accommodates detailed notes for every chapter, some help is required to maintain monitor of the massive variety of firms and people referenced in the midst of the narrative. An index would additionally assist readers find the case research for explicit shares far more shortly.
Aspiring and current funding professionals ought to contemplate Even the Odds important studying. Firestone gives considerable real-life funding dilemmas, together with their resolutions for higher or worse, and in doing so additionally produces a compelling memoir. She is a real “grasp of the commerce,” practising and honing her distinctive decision-making and danger evaluation abilities in investing, in main Aureus, and in dwelling. Allow us to hope she writes once more, and shortly! The e book’s writer, Bibliomotion, believes there’s a successful method in distinctive content material, seen authors, group constructing, goodwill, excessive contact (shut collaboration between writer and writer), and enjoyable. Even the Odds fulfills all of those standards.
Extra e book opinions can be found on the CFA Institute web site or within the CFA Institute Monetary Analysts Journal®.
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All posts are the opinion of the writer. As such, they shouldn’t be construed as funding recommendation, nor do the opinions expressed essentially replicate the views of CFA Institute or the writer’s employer.
Janet J. Mangano