Philosophy

Over a dozen years ago I resolved to build the best fund I could. -- Tom Stanley
Tom Stanley

The Resolute Way: Tom Stanley’s Investment Philosophy

I have no claim that what has worked for me in the past will continue to work in the future, but I would like to share with you two dozen principles I have learned over 39 years that helped me become a better investor.

  1. Be a Long Term Investor
    Too much emphasis is placed on short-term momentum, not long-term value. A long-term track record of outperformance is hard to achieve, but that’s what we strive to accomplish.
  2. Have a Flexible Investment Style
    As any investment style becomes too popular, it becomes less effective.
  3. Actively Look for Ideas
    I find my best ideas; they don’t find me.
  4. Buy Only The Best Ideas
    Good ideas are hard to find, hence I prefer to buy only my best ideas.
  5. Filter out the Noise
    In an era of information overload, one of the greatest challenges is to use only what is relevant.
  6. Don’t Rely on a Single Perspective
    In an era of fake news and fake statistics, try to have the broadest range of information sources.
  7. Be Skeptical
    Are you dealing with an agent or a principal? Know the incentive system you are dealing with and check facts directly with evidence-based observations.
  8. Free Markets — An Outdated Concept from the Twentieth Century
    Spend time understanding the motives and means of the players.
  9. Think Like a Fiduciary and Deal with Others Who Do
    Customers should NOT be treated as counterparties to be exploited.
  10. Corporate Governance Is Key
    Too many boards focus on how they can enrich themselves rather than their shareholders.
  11. “Skin In The Game”
    I prefer boards and management to have their incentives aligned with shareholders. Likewise, my only stock market investment is the Resolute Performance Fund.
  12. A Good Card Player Does Not Show His Hand
    Confidentiality is essential for successful small cap investing.
  13. Be Thrifty
    Moderate costs facilitate moderate fees. Moderate fees facilitate performance.
  14. Being Small is an Advantage
    It is easier to outperform being small.
  15. Know Your Limits
    It is just as important for me to know what I don’t know as it is to know what I know.
  16. Stay Humble
    Stay humble or the market will make you humble.
  17. Honesty
    Above all be honest with oneself.
  18. Apply Spiritual Principles
    An important measure of one’s success is how much one benefits one’s fellow man.
  19. Too Much Emphasis is Placed on Precision
    Simplicity is a virtue. I don’t need exact numbers or complex models to make decisions.
  20. You Don’t Have to Succeed by being Original
    You succeed by being right.
  21. Outperform by Being Different
    To have a chance of outperforming the indices, invest differently than the indices.
  22. Be a Contrarian
    Too many investors prefer to fail conventionally than succeed unconventionally.
  23. Look at Track Records
    It is astonishing how many well-spoken, politically savvy advisors and academics there are, who have no successful track record of investing themselves.
  24. Critical Thinking Skills Are Paramount
    High levels of formal education with passive rote learning has little to do with the critical thinking skills needed to be a successful investor. Check your ego at the door, do your homework, consider all possibilities, and make rational decisions based on facts.