Special situations and structural advantage

One stop on my book tour through public stock investing is Joel Greenblatt's You Can Be a Stock Market Genius. It covers investing in "special situations" like corporate spin-offs, mergers, and turnarounds, where an individual investor can get an edge over institutions. For example: If a large company spins off a division into a separate smaller company, then funds who only invest in large companies are forced to sell the smaller company's stock, creating a potential price arbitrage for individuals to buy up. Or if Company A buys Company B and part of the payment is in bonds, then any stock funds who held Company B stock has to sell the bonds, and... you get the idea.

Beyond the tactics of investing, I enjoyed this read for the meta around winning and strategy. In my experience, most theories of winning don't hold up to close scrutiny. After much theorizing and grandstanding it usually boils down to "I'll be smarter than everyone else" or "we'll innovate harder than everyone else." Which is... fine? But also there are vanishingly few Warren Buffets, or Elon Musks, or Jim Simonses in the world. In stocks I often see the opposite but equally handwavey sentiment: "the banks and the hedge funds have boatloads of money and armies of analysts, so you will always lose, so don't bother trying at all."

In refreshing contrast, this book lays out a clear argument for winning: this is the game that's being played, this is the structure it's being played in, here are the bits that favor the big players, but here are the bits that favor the smaller players, so here's how smaller players can win. Love it!