Profile: Joel Tillinghast '83
Tillinghast '83: Decade's best stock picker
two decades, Kellogg MBA Joel Tillinghast's intensive
research and value perspective have enabled him to outperform
investment gurus like Warren Buffett while positively
crushing the S&P 500. A dollar entrusted to Tillinghast's
Low-Priced Stock Fund in December 1989, when he launched the
portfolio at Fidelity Investments, grew to nearly $16 by December
2006. That's about $4 more than Buffett's financial wizardry
produced over the same time and $12 more than the S&P
advice for would-be market mavens? Understand a business before
studying its numbers, since doing so helps determine why a
company should be profitable and can "separate luck and temporary
success from lasting success factors." Tillinghast '83 recommends
digging deep for research in addition to reading the annual
report before meeting top management.
management directly address tough issues or identify growth
opportunities? If they're not forthcoming in the report, that
may be how they present themselves [in person]," he says.
Too many photos of the management team could indicate executives
who are "egomaniacs." Conversely, no real indication of leadership
could mean the firm is "a faceless company," which presents
its own set of problems.
with management before making an investment is critical, says
the Kellogg graduate, who began his finance career in 1980
as an equity analyst with Value Line Investment Survey before
going to Drexel Burnham Lambert from 1982 to 1986 when he
disciple of Peter Lynch, legendary former manager of Fidelity's
Magellan Fund, Tillinghast prefers a low-turnover approach
to his portfolio, which is composed almost entirely of stocks
priced at $35 or under. This strategy requires him to select
investments carefully and be prepared to hold them for years.
would lose my mind if I had to move investments as frequently
as some people do," says Tillinghast. "I tend to ease in and
the investment research company, has called Tillinghast "a
diligent, bottom-up stock picker [who] pays little attention
to market indices or macroeconomic trends," but who nevertheless
knows how to find undervalued equities that often can increase
earnings even during inclement economic weather. Such qualities
earned the Kellogg alumnus MarketWatch's "Stockpicker of the
Decade" honor in 2007.
the insights Tillinghast shared with Kellogg students during
a February visit were:
nonfinancial publications, plant and store visits and compulsive
curiosity bring insights you don't get from a CFO;
to trends not yet reflected in analytical models;
on companies that have very high returns on equity for decades;
for barriers to entry that keep returns high;
out information that is not obvious or already priced into
and soft-spoken, Tillinghast grows animated when the topic
of questionable accounting practices or inadequate banking
transparency arise. "I'm not a fan of present-value accounting,
taking a gain on a security that you've not yet sold and converted
to cash," he says.
major recalls some memorable Kellogg experiences: marketing
classes with Professor Philip
Kotler; an investment banking class taught by Professor
John Roberson; a course on business and its environment with
Professor Lawrence Lavengood.
ties together a lot of business aspects," says Tillinghast.
"You shouldn't just do finance, though that's obviously helpful."
Finance Professor Robert
Korajczyk calls Tillinghast's track record "amazing."
is very Kellogg-like," says Korajczyk, "in the sense that
he believes good portfolio managers need to understand the
whole business and competitive environment of the firm —
strategy, marketing, managerial culture, in addition to being
able to dissect the financial statements."