Weekly #32: How a BS Detector Can Save Your Portfolio — And Sabotage Your Social Life
We closed May with an 11.1% gain (and are now up 3.4x the S&P 500 since launch). Explore the upside — and social awkwardness — of smelling BS in investing, with lessons from Netflix and OGX.
Hello fellow Sharks,
We closed May with a gain of +11.1% vs. +6.2% for the S&P 500. Since launching this newsletter, the portfolio has returned +9.4% while the S&P 500 has returned just +2.8% in the same period. (If you want to skip straight to the portfolio update, click here.)
This week’s Thought of the Week is about a skill I’ve come to see as both a superpower and a social liability: the ability to detect bullshit (from here on, I’ll refer to all of that simply as BS)
By BS, I don’t just mean outright lies or scams (though those exist too). I’m talking about the fluff, spin, hype, and half-truths that get dressed up to sound impressive, especially in investing. BS is when management paints a rosy picture while ignoring real risks. It’s when media narratives oversimplify complex stories. It’s the overpromises, the blind optimism, and the “trust me, it’ll work” pitches that don’t hold up under scrutiny.
This week’s piece is all about why being able to smell it from a mile away can be one of your most valuable tools as an investor.
Whether it’s understanding what really happened between Netflix and Blockbuster (spoiler: the real story isn’t what you’ve heard), or sidestepping blowups like OGX, my BS detector has alerted me and kept me out of more than a few bubbles.
But it hasn’t always been sunshine and stock gains. That same instinct has made me overly cautious at times... and yeah, maybe a little less fun at dinner parties.
Happy Sunday reading!
~ George
Table of Contents:
In Case You Missed It
This week, I posted a new position and a closing trade:
A Beaten-Down Stock With a Hidden Gem Business and 4x–9x Upside
This week, I added a new position to the portfolio — a misunderstood value play with a hidden gem business buried inside. Despite years of being overlooked, this stock has significant catalysts in motion and could unlock 4x–9x upside through a classic sum-of-the-parts story. Think turnaround potential + niche market leadership = serious rerating opportunity.Why I Just Closed My Third Coast Bancshares Position: Slowing Growth, No Catalyst, Better Opportunities
I closed my position in TCBX. While the business remains strong, recent trends show slowing growth, a lack of near-term catalysts, and stagnating earnings. It’s not about the bank being broken — it’s about redeploying capital into better opportunities (like the one above).
Thought of the Week: How My BS Detector Made Me a Better Investor — and Less Fun at Parties
I'm not sure exactly when it started, but for as long as I can remember, I've had a realistic view of the world. I wouldn't call it pessimistic, because it's not about expecting the worst—it's about seeking the truth behind the shiny stories. One factor that shaped this outlook was my passion for reading. The more you read, the more you discover that the “official” story often misses key details. In business and investing, many popular narratives turn out to be oversimplified or even outright myths once you dig into the facts.
For example, consider the legend of Netflix (NFLX 0.00%↑) vs. Blockbuster. Popular lore credits Netflix’s innovative model for Blockbuster’s downfall, claiming Blockbuster was simply too slow or arrogant to adapt.
But if you read the actual history (not just TikTok summaries), the story gets more nuanced. Netflix’s CEO Reed Hastings, actually offered to sell Netflix to Blockbuster for just $50 million in 2000, but Blockbuster’s leadership turned it down. They thought the dot-com era hype was overblown and that Netflix’s business wasn’t worth it.
Moreover, Blockbuster wasn’t completely blind to change—by 2004, they launched their own online DVD rental service, which amassed over 2 million subscribers by 2006. The fatal issue wasn’t an inability to innovate at all, but internal strife. Carl Icahn (a major Blockbuster shareholder) disagreed with then-CEO John Antioco’s online strategy. This boardroom battle led to Antioco’s ouster in 2007 and a new CEO (James Keyes) who refocused on physical stores, effectively kneecapping Blockbuster’s online efforts.
In short, luck and Blockbuster’s board (not management) miscues played a huge role: Blockbuster could have bought Netflix and nearly beaten it online, but wrong calls (and perhaps a bit of arrogance by Blockbuster’s board) sealed its fate.
So you can imagine my frustration when, at a former employer, we hosted Netflix’s CEO for a talk and everyone’s questions were along the lines of “Tell us about Netflix’s amazing innovation and how you defeated Blockbuster!” I was practically squirming in my seat, knowing the untold side of the story. I kept waiting for someone to bring up those caveats—the $50 million offer, Blockbuster’s early online traction—but it never came up.
To me, this was a classic case of my BS detector kicking in: I couldn’t just nod along to the popular narrative without mentioning the inconvenient facts (even if doing so made me that guy in the room).
Another example: OGX, a Brazilian oil producer that many were once hyped about. I detail my OGX story in my book, so I won't rehash every detail here. The short version is that everyone was wildly optimistic about OGX’s prospects, sparked by the charisma of its founder, Eike Batista, but few questioned the numbers closely.
My nose started tingling.
I smelled BS.
So I dug into their figures and found the BS to be true. Sure enough, the company went bankrupt within a year. (For context, OGX was once the hottest stock on Brazil’s exchange, worth $35 billion at its peak, before collapsing to pennies. A lot of believers got burned on that one.)
These experiences reinforced why being a realist and questioning everything served me well, especially in my former life as a junk bond analyst. In that job, we were trained to be skeptical by default: our primary goal was to make sure a company had both the capacity and willingness to pay back its debts when due.
It’s a mindset that forces you to stress-test every rosy projection. I even recall a corporate retreat where one of the partners told the analyst team,
The most important skill for a successful investor isn’t finding the next unicorn — it’s being the goalkeeper, making sure we don’t let too many BS companies slip into the portfolio only to go bankrupt later.
That resonated with me. Defence (avoiding disasters) can be more important than offence in investing.
I carried that mentality for years. Even when I moved on to covering small-cap Latam equities, I had to consciously dial down my doomsday habit of always envisioning worst-case scenarios. It actually took me a while to learn to be a bit more optimistic about company prospects!
Over time, I’ve improved and broadened my approach—now, in addition to deep value plays (like the latest 4x–9x deep dive), I’m willing to invest in GARP (Growth At a Reasonable Price) opportunities as well, such as my positions in CLS and TSM. But make no mistake: that inner skeptic, that BS detector, is still very much alive in me.
After reflecting on this trait, I want to lay out both sides of having a finely tuned BS detector in investing. Why is being able to smell BS from a mile away a great skill for an investor? And what are the drawbacks of viewing the world with such a critical eye? Let’s dive into the cons first (so we can end on a positive note!).
The Downsides of Constant Skepticism
Being relentlessly realistic (or skeptical) isn’t all sunshine. In my experience, this mindset comes with a few notable drawbacks:
Missed Opportunities
As a hardcore realist, I often struggled to invest in small or medium businesses, especially startups or ventures where the appeal is a bold vision rather than current profits. Whenever someone pitched me a “great idea,” my mind homed in on the holes: How will they deal with X risk? Aren’t those revenue projections way too optimistic? I’ve lost count of the times I essentially talked myself out of an investment by pointing out everything that could go wrong.
The result?
Many of those entrepreneurs went on to get funding elsewhere. In most cases, the warnings I raised did come true, and a lot of those ventures failed (or at least struggled before eventually succeeding). The founders who succeeded found ways to overcome the very hurdles I had flagged. This was a humbling lesson. It taught me that sometimes you do need a dose of optimism (or even naiveté) to just jump in and take a chance on a new venture—a skill I still lack (but I am working on it).
In fact, research confirms that entrepreneurs as a group are wired to be optimistic, often to an irrational degree. That “irrational optimism” can be a feature, not a bug—it’s what gives them the courage to attempt the impossible. My hyper-skeptical approach meant I avoided most of the failures, yes, but I also missed out on the occasional big success story. In the venture world, being too cautious can mean zero exposure to the few bets that could have paid off 100x.
Social Friction (“Ignorance is Bliss”)
You know that saying, ignorance is bliss? I’ve found a kernel of truth in it. When you make a habit of calling things as they are, it can ruffle feathers. I’ve been at social gatherings where someone confidently repeats a myth or a half-truth that most of the group happily accepts.
In those moments, my instinct is to correct the record: to drop some facts and say, “Well, actually, the truth is XYZ.” Let’s just say this isn’t the greatest way to win popularity points. 😅
People don’t like the feeling of being corrected or having a feel-good story debunked. Over the years, I started noticing my invitations to such gatherings declining. (Coincidence? I think not.)
I eventually learned that, unless it’s truly important, it’s often better for my social life to keep my mouth shut and let others enjoy their narratives. Being the “fact-checker” of your friend group is a lonely job. Nowadays, I try to bite my tongue unless someone directly asks for my take (and trust me, it’s still very hard to resist sometimes!).
Struggling to Stay Positive
Finally, there’s a personal mental cost. To lead a joyful life, a bit of optimism is essential. If you’re constantly seeing the BS in everything, it can be draining. Sometimes, even when I smell BS, I wish I could just go with the flow and enjoy the moment, you know?
For instance, when a colleague was exuberant about a project or when family members are hyped about some multi-level-marketing “opportunity,” they’re happy in that hopeful state. Jumping in with my realist’s nose would just burst their bubble and bring negativity. I’ve learned that not every situation needs my critical analysis. It’s okay to occasionally suspend disbelief and live in the moment.
Excessive skepticism can make it harder to savour the simple joys or to take inspiring leaps of faith. There’s a balance to strike between being grounded and being uplifted. Over the years, I have noticed that positive emotions broaden my ability to think creatively and bounce back from setbacks. I noted that when I lean too far into cynicism, I might obscure options and diminish my own creativity or enthusiasm. In short, being too much of a realist can potentially weigh you down, making it harder to dream big or maintain hope during tough times.
The Upsides of a Sharp BS Detector
Now for the good news: being able to detect BS from a mile away is an incredibly useful skill in investing. In fact, I’d argue it’s one of my superpowers. Here are the biggest advantages of a well-honed BS detector:
Independent Thinking — Avoiding the Herd Mentality
A strong BS radar makes it much easier to resist the siren song of fads, manias, and crowd psychology. When everyone and their grandmother are rushing into the next hot thing—whether it’s tulip bulbs in the 1600s or crypto in the 2020s—a skeptic can step back and ask, “Does this actually make sense? Or is it mostly hype?”
For example, a trendy area in recent years has been ESG investing, which I believe is BS. I won’t delve into why I believe ESG investing is BS, I’ll dedicate a future Weekly to it, but if you can’t wait, check out my favourite professor’s take,
, on ESG investing in this video.The bottom line is that going against the crowd is much easier when you’re armed with knowledge and a skeptical mindset. You won’t be the sucker left holding the bag when the bubble bursts, because you likely never bought into the hype in the first place. In investing, avoiding big mistakes is as important as scoring big wins. By steering clear of popular but flimsy trends, you protect your capital for the opportunities that do pass the smell test.
Stronger Due Diligence – Not Taking Management at Face Value
Perhaps the most important advantage of a BS detector is that you don’t get snowed by corporate spin. Public company CEOs and CFOs are, by nature, salespeople for their stock. They will highlight the positives, put gloss on the negatives, and sometimes outright avoid or obscure the ugly facts. If you take every cheerful earnings press release or bullish conference call at face value, you’re going to get burned.
My approach is to listen to management only after I’ve done my own homework. Read the 10-K and 10-Q filings, scrutinize the footnotes, compare what they’re saying now to what they said six months ago — basically, separate the signal from the noise.
When management makes bold claims, I verify them. If they say, “We’re on track to double sales next year,” I’ll check if their past projections have ever materialized or if this same promise was made before. Years of smelling BS have taught me to spot red flags in these narratives. And trust me, most companies paint an overly optimistic, self-serving picture.
This is even more true in speculative ventures: executives will sing about huge addressable markets, “revolutionary” products, you name it, all to get a higher stock price or cheaper capital.
It’s your job (or mine at Beating The Tide) to look past the pretty painting and see what’s underneath. Skepticism helps you do that. It helps separate fact from opinion. I often cite management commentary in my articles, but that’s only after I’ve vetted it and I’m convinced there’s substance to back it up.
Spotting Red Flags Early – Avoiding Frauds and Failures
A healthy skepticism can save you from disaster. Financial history is littered with implosions that, in hindsight, did show warning signs—if only people had paid attention.
Think of Enron in the early 2000s: a few analysts noticed the fishy accounting and off-balance-sheet entities and sounded alarms, but most investors were mesmerized by the stock’s momentum. Or take Bernie Madoff’s Ponzi scheme: he promised steady ~12% returns year in, year out, which savvy observers noted was “unrealistically positive” and simply too good to be true. A Wall Street analyst named Harry Markopolos smelled that BS early on — he famously said Madoff’s results couldn’t be real and tried (in vain) to warn regulators years before the fraud finally blew up.
In my own circle, I’ve seen plenty of smaller-scale scams and bankruptcies where a little critical thinking could have saved investors a lot of pain. My OGX story above is one instance: by questioning their numbers, I avoided a company that left others holding the bag. As an investor, capital preservation is key. If you lose 50% on a bad investment, you need a 100% gain on another just to break even. So, avoiding a blow-up is as valuable as finding a winner.
Having a BS detector is like having an early-warning radar for trouble. You’re more likely to notice when a company’s cash flows don’t support its earnings claims, or when a “hot” stock’s valuation defies gravity without justification. By catching those red flags before others do, you can step away (or even profit by shorting, if that’s your style) before the house of cards collapses. It’s no coincidence that many great investors emphasize “never lose money” as Rule #1. Being skeptical is how you follow that rule.
Staying Grounded in Reality – Long-Term Success
In the short run, markets can behave like a voting machine (popular stocks win, story-driven stocks soar), but in the long run, they act like a weighing machine, measuring real value.
Being a realist means you focus on the weighing machine factors: earnings, cash flows, assets, and honest management. While the exuberant optimists chase shiny objects, a BS-sensitive investor sticks to companies with solid fundamentals (or deeply misunderstood ones with value).
This can lead to periods of underperformance when bubbles are inflating—admittedly, sitting out crazes can make you look “wrong” for a while. But when the tide goes out, as Buffett says, you see who was swimming naked. The skeptic who stays disciplined often comes out ahead, or at least survives to play the next round.
I’ve personally found that my skepticism kept me solvent and calm during market storms while others were panicking. It’s a lot easier to sleep at night when your portfolio isn’t built on castles in the air. Over an investing lifetime, avoiding catastrophic losses and steadily compounding wins (even if they’re not flashy “10x in a year” wins) is a formula for success. And that’s exactly what a BS detector helps you do. It enforces a sort of reality-check discipline in your strategy, which is invaluable when so much in finance is built on hope, hype, and extrapolation.
How to Spot BS: Tools and Tactics
Spotting BS isn't always easy—but thankfully, it's a skill that you can sharpen over time. While I can't guarantee these tips will turn you into a human lie detector overnight (perhaps some of us are just born with better BS radars), I can share what has genuinely helped me develop my own.
First and foremost: Read widely. It sounds simple, yet it's surprisingly powerful. Don't just read materials that confirm your existing views; actively seek out the opposite perspective. For instance, if you're bullish on a stock, intentionally find bearish articles or analysts who doubt the company's story. This helps you see the full picture, not just the side you want to believe. Remember, reality isn't one-dimensional—it's nuanced. Reading diverse sources has repeatedly prevented me from falling victim to seductive but ultimately false narratives.
Second: Don't rush your thinking. In a world of instant reactions, taking a step back to genuinely ask yourself, "Does this make sense?" can be revolutionary. Our minds crave quick conclusions, but snap judgments often overlook critical details. Deliberate thought—pausing to truly question assumptions—helps you separate substance from spin.
Third (and yes, this might sound a bit out there, but bear with me): Meditate. Meditation has been invaluable for quieting the noise in my head. It teaches you to observe situations clearly, exactly as they are, rather than how they're painted or sold to you. By cultivating a habit of mindful observation, you'll find yourself becoming naturally more skeptical of surface-level claims.
Additionally, consider these practical tools:
Check past predictions: Has this source been consistently accurate or consistently wrong?
Look for incentives: What's the agenda here? Is the person selling you something?
Corroborate facts: Can the claims made be independently verified from reliable sources?
Beware of overconfidence: Certainty is attractive but often misleading. Humility and nuance usually indicate more genuine insight.
Keep in mind: everyone's internal map of the world is a bit different. Your BS detector might not work exactly like mine. And that's okay. Maybe you're naturally more trusting or skeptical—your internal wiring might not change dramatically, no matter how much you practice. But I firmly believe anyone can get better at smelling BS. It's just a matter of staying curious, reading broadly, and cultivating a mindset that questions, rather than blindly accepts, what you're told.
Conclusion: Don’t Forget to Smell the Flowers
Like many things in life, the ability to smell BS is a double-edged sword. On one side, it has made me a better investor — one who’s avoided many pitfalls by questioning the conventional story.
On the other side, it’s something I’ve had to temper, so that I don’t become too cautious or cynical for my own good. I’m still learning to balance realism with optimism: to keep my BS detector on, but adjust the sensitivity depending on the context.
In investing, I’ll probably always lean towards skepticism (that’s my job, after all!). But in other parts of life, I remind myself to occasionally take off the skeptic hat and just enjoy the ride.
At the end of the day, I believe having a BS detector is hugely beneficial, especially in markets swarming with overhyped stories, as long as you remember to not let it close your mind completely.
Question everything, but don’t become an insufferable know-it-all.
Smell the BS, but also remember to smell the roses once in a while.
After all, the goal isn’t just to make great investments, but to lead a life that’s both informed and fulfilling.
And that’s no BS!
Portfolio Update
We closed May with a gain of 11.1%, almost twice S&P 500’s 6.2% gain in the month.
The portfolio’s performance slightly lagged the S&P 500’s performace, narrowing the performance gap from 193 bps to 114 bps.
Since launching the newsletter, the portfolio has delivered 3.4x the return of the S&P 500.
Consumer cyclicals was the main contributor to the portfolio performance, slightly offset by healthcare.
Contribution by Sector
Some contributors to the portfolio:
+12 bps AGX 0.00%↑
+8 bps MFC 0.00%↑ (TSX: MFC)
+5 bps IAG 0.00%↑ (TSX: IMG)
+4 bps TSM 0.00%↑
+2 bps TCBX 0.00%↑
-3 bps DXPE 0.00%↑
-5 bps KINS 0.00%↑
-6 bps POWL 0.00%↑
-25 bps CLS 0.00%↑ (TSX: CSL)
For the full breakdown, here’s the weekly stock performance for each portfolio: Weekly Stock Performance Tracker
That’s it for this week.
Stay calm. Stay focused. And remember to stay sharp, fellow Sharks!
Further Sunday reading to help your investment process:
Hey! I saw your post pop up on my homepage and wanted to show some support. If you get a chance, I’d really appreciate a little love on my latest newsletter too always happy to boost each other!