Maurece Schiller on the Safety of Special Situations

Tom Jacobs shared two short excerpts from Maurece Schiller’s Investor’s Guide to Special Situations in the Stock Market (1966) and provided his thoughts on those passages:

SAFETY: The basic prerequisite for “real” special situations is ready availability of hard facts and sound premises. This is often in contrast to some so-called special situations having, in the main, nothing more than a typical business venture offering hope and expectation. Special situation investors want to know where the “real” is and where fancy takes over. A prime benefit of this approach is greater safety and peace of mind, particularly during turbulent market days. In many types of special situations, too, the investment follows a predictable course of work-out within a specified period, regardless of the course of the market as a whole.

This is the crux of special situations. Schiller believes you take substantial risk out of investing by focusing on specific corporate actions that didn’t depend on operations. He also captured the usual “take a flyer on the stock market” attitude and wanted to the opposite.

And later, not to put too fine a point on it:

Outstanding features inherent in special situations are:

  1. Corporate action is a reality.
  2. A calculable capital gain potential is present.
  3. All information regarding this situation is available.
  4. Capital gain is not dependent upon the trend of the securities market as a whole.
  5. There is a time limit to the corporate action.
  6. Dividends and interests play a minor role.
  7. A semiautomatic “out” is usually inherent.
  8. Minimal risk is a common characteristic.

Do you get the idea he was risk averse? No one had written this. And all his five books apply these principles across a broad range of special situations.

Be sure to visit the Kickstarter campaign for The Complete Works of Maurece Schiller soon. The campaign ends May 29, 2016.

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