Introduction

Joel Tillinghast, the renowned mutual fund manager, has had his fair share of winning and losing stocks. With over three decades of experience, he has learned valuable lessons from both. Let’s delve into some of his most notable investments and discover the wisdom he gained along the way.

In early 2001, Tillinghast purchased shares of Ansys when they were trading at less than $3 per share (adjusted for splits). Today, these shares are valued at around $319 each. Ansys, a software company specializing in product design and testing, fulfills Tillinghast’s preference for tech stocks with long-term potential. He considers the company’s ability to expand its business without being overtaken by rival technologies as a key factor for success.

The lesson: When selecting stocks, consider how a company can defend itself against competitors.

In 2001, Tillinghast invested in Monster Beverage (formerly known as Hansen’s Natural) at $4 per share (adjusted for splits). Today, the stock is valued at approximately $57. Tillinghast’s decision was influenced by his admiration for companies that take risks and experiment. Monster Beverage’s innovative approach to product development convinced him of their potential for success.

The lesson: Look for companies that give themselves multiple avenues for growth.

Tillinghast’s experience with HealthSouth, a provider of outpatient surgery and rehab services, serves as a cautionary tale. He held a significant stake in the company but lost almost all of his investment when the stock plummeted by 99%. His regret stemmed from focusing solely on adjusted earnings, disregarding the importance of free cash flow.

The lesson: Avoid getting swayed by charismatic executives and instead focus on a company’s overall fundamentals. Consider a comprehensive range of metrics rather than cherry-picking those that confirm your biases.