1. How and why did you get started investing? What is your background?
Some of my mentors from my younger life were investors, so I wanted to know more about it. I was attracted to the idea of passive income so I started trying to learn as much about investing as I could. I was using the Dublin City public library a lot, and I set myself the goal of reading every investing book that the library had on the shelves. That was how I discovered ‘The Intelligent Investor’ by Benjamin Graham. It was one of the books that I found while trying to complete this goal.
2. Describe your investing strategy and portfolio organization. Where do you get your investing ideas?
I focus on value for money, getting a decent company at a good price. I tend to go for companies where I already know about their product or service, or where I’d at least be happy to use their product or service myself. I use a screener to help me find new companies that I’m not already familiar with.
I do believe in geographical and industrial diversification. I don’t hold only stocks from a single country or industry, because if that country or industry has severe problems, then my entire portfolio would have severe problems. So I always want to have stocks from a few different countries and industries in my portfolio. But not necessarily countries that are close together, because their economies are often tightly integrated (e.g., Ireland and the U.K.).
Right now I hold American and European stocks, and I’m looking for interesting choices in Asia.
3. What drew you to that specific strategy?
My experience working in different countries and industries. I saw how any country in the world can have problems, and whole industries have their ups and downs. Apart from my native Ireland, I’ve also worked in Japan, Dubai, England and now Germany. I’ve also worked in different sectors during that time so I know that there’s good and bad in any area of the economy that can be invested in.
4. What books or other investors changed the way you think, inspired you or mentored you? What is the most important lesson learned from them? Which investors do you follow today?
Apart from ‘The Intelligent Investor’ by Ben Graham, I also like ‘John Neff on Investing’ and ‘The Dhandho Investor’ by Mohnish Pabrai. I don’t follow any single investor extremely closely, not even Warren Buffett. That’s because I know that they have particular goals and reasons why they make certain moves, which may be very different from my own goals and reasons. I try to learn from the most successful investors, but I don’t try to copy them. The risk with that is that you end up copying their mistakes as well.
5. How long will you hold a stock and why? How long does it take to know if you are right or wrong on a stock?
I don’t have a set time line. I hold it as long as it’s growing. I’ll usually get a feeling shortly after buying a stock whether I’ve done the right or wrong thing. I’m quick to sell if I develop any bad feeling about it, but I’m happy to hold it indefinitely if I keep feeling good about it. Right now I have stocks which I’ve held for several years, and I’m happy to find stocks I can hold that long.
6. How has your investing approach changed over the years?
I started with purely financial information and ratios. I still look closely at those, but now I also try to get a gut feeling for a company. I started out thinking pure rationality was the key, but now I believe that an element of emotional intelligence is also important.
7. Name some of the things that you do or believe that other investors do not.
My focus on international diversification is probably much stronger than many other investors. I’m surprised how many people only invest in their own country. That’s understandable if that person is American or from another major economy. But it makes no sense for someone who’s from a small country. Also I believe that studying languages and cultures (which are intertwined) helps you to understand the world better. Right now, I’m studying German, Spanish, Russian and Japanese. I’m the only investor I know who wants to become a polyglot. There are probably others out there, but I don’t know them.
8. What are some of your favorite companies, brands or even CEOs? What do you think are some of the most well-run companies?
From an investing point of view, I deliberately try to avoid holding any company up as a good example. I know that any company can turn bad if the wrong management is there. The same goes for brands and CEOs. I think as a society we have the tendency to put people and brands up on a pedestal, but that’s unhealthy. We must always retain our skepticism and take a balanced view.
A major factor for me in judging a “well-run company” is how good they are at keeping control of costs. That’s the one thing that all businesses have in common; their costs can spiral out of control if they don’t stay diligent.
9. Do you use any stock screeners? What are some efficient methods to find undervalued businesses apart from screeners?
I’ve just built my own screener as part of the package I’m offering at ivalueinvesting.com. I’m still building out the other areas, but the screener is finished now.
Checking the news every so often can help me to find opportunities. When there is some negative news about a company, and people are talking about “worst-case scenario,” that’s when I know there might be an excellent opportunity for value investors like me.
Also, I subscribe to newsletters from other investors. Some of them are happy to share ideas for free, and I’m happy to hear them. In the future I’ll try to find a good forum for sharing ideas.
10. Name some of the traits that a company must have for you to invest in it, such as dividends. What does a high-quality company look like to you and what does a bad investment look like? Talk about what the ideal company to invest in would look like, even if it does not exist.
Everything is relative to price. Whether the company pays a dividend or not doesn’t affect my decision. I currently hold both dividend-paying and non-dividend-paying companies.
I look for mis-pricing first. Temporary unpopularity is a good sign of opportunity. If a company has a good history but is currently going through a rough period, there’s an opportunity to get in at a lower price and enjoy the returns when the company does better again.
I don’t always look for the same things (apart from an attractive price). I deliberately try to experiment and try different angles. I consider this experimentation part of my investing education.
A bad investment is any company that’s at a historical high. There’s a much greater chance of it going down than up. I don’t really believe in such a thing as an “ideal company” so I can’t comment on that.
11. What kind of checklist do you use when investing? Do you have a specific approach, structure, process that you use?
I’m still working on developing my own checklist. I’ll always try to get a basic understanding of the company first before deciding if it’s worth delving in. If the price is attractive, I’ll take a look at the compound annual growth rate (CAGR) for a few items. If that looks interesting, then I’ll go to the balance sheet, then the income statement, then the cash flow statement.
I’m not into technical analysis, but I will look at a basic price chart for at least a few years to see what the price history is like. I’m looking for a historical low here.
I’ll also do a news search to see what’s going on with that company, and the country and industry that it’s in.
12. Before making an investment, what kind of research do you do and where do you go for the information? Do you talk to management?
I’ve tried out different sources of information, but having my own ideas is what led me to build the tools I’m developing on ivalueinvesting.com. I’ve subscribed to a professional data feed and I’m using that as the basis for the screener and other areas I’m adding. I look at the financials first, then I start to look for qualitative things like talking to people who use their products or services. I’m not a huge believer in talking to management unless they are also owners. I’d rather talk to owners of the stock than the people who are trained to speak publicly in a certain way about the company.
13. How do you go about valuing a stock and how do you decide how you are going to value a specific stock?
Valuation seems more like an art than a science to me. I’ve tested out different valuation methods, but I don’t see that any single method is superior or better than all other methods. In particular, it’s very hard to value banks and other financial services firms.
In the end I usually come back to the price-earnings (P/E) and PEG ratios. Although I’m mostly a value investor, I do look at growth so the PEG ratio is a useful addition there. I guess I’d roughly say I’m about 80% value and 20% growth investor. Valuation only covers the current situation, not the potential growth, so some qualitative information needs to be added to the valuation (at least for me).
14. What kind of bargains are you finding in this market? Do you have any favorite sector or avoid certain areas, and why?
There are always bargains in nearly every market. There’s a certain German bank which is at a historical low at the moment. I’m looking for that point of maximum pessimism before I buy in.
I don’t have a favorite sector, but I avoid the airline industry. I’m also very careful about the automotive sector. I’ve bought stock in a car manufacturer before, but the whole automotive sector is vulnerable to recessions. It’s the opposite of recession-proof, so I’m very careful about investing there.
Discount sellers tend to do well in recessions so I’m happy to invest in these types of companies, if the price is good.
15. How do you feel about the market today? Do you see it as overvalued? What concerns you the most?
I don’t see the market as a whole being overvalued. But there are many overvalued technology companies. My concern would be a future tech bubble. Apart from that, there’s always the risk of contagion if a bank needs to be bailed out. Nobody wants a run on a bank.
16. What are some books that you are reading now? What is the most important lesson learned from your favorite one?
Out of all the books I’ve read put together, the most important lesson is that there isn’t one single “right way” to approach any of this. Each person needs to find their own path in investing, based on their own needs and experiences. Rules, checklists and principles are good, but they have to be your own.
One thing I’ve meant to do for awhile is to create a playlist on YouTube where I review investing books. I’ve done the introduction, but I haven’t recorded the reviews yet, but I’ll try to get those online before the end of the year.
17. Any advice to new value investors? What should they know and what habits should they develop before they start?
Learn as much as possible. Be humble about your level of knowledge (the more you learn, the more you realize how much you don’t know). And be patient. Out of all the attributes, patience is probably one of the most helpful.
18. What are your some of your favorite value investing resources or tools? Are there any investors that you piggyback or coattail?
As far as tools go, well, I want to avoid sounding like I’m marketing myself too much here, but I am building my own tools based on my own ideas. I was originally testing and developing data tools for my own use, but I thought others might be interested in them. That’s why I decided to offer them on my website. They’re not fully available to the public just yet, but people can sign up to be notified when they are.
If people like the tools I built for my own personal investing, great.
I don’t piggyback or coattail other investors, based on what I said earlier about everyone having different goals and needs. Also, because you risk piggybacking their mistakes too. If I follow my own path, I’ll still make mistakes, but at least they’re my own mistakes.
19. Describe some of the biggest mistakes you have made value investing. What are your three worst investments? What did you learn and how do you avoid those mistakes today?
My main mistake was not starting sooner. I wanted to test my judgment before I used real money, so I had a virtual portfolio when I first started. However, when my picks did well, I realized that I’d missed out on the gains. Although there was no real money involved, in my mind I had actually lost money because I’d missed out on the opportunity.
I made one bad judgment investing in an automotive company awhile back. I had a bad gut feeling immediately after I bought the shares, but I let the financial analysis I’d done override that. This was how I learned to always listen to my gut feeling immediately after the purchase. If I’d sold those shares straight away, I’d have been better off. I’d only have paid the commission. I ended up paying the commission to sell later anyway, but after the stock had gone down and I’d lost money on it.
Apart from that, I can’t really name three worst investments, as I’ve generally done OK.
20. How do you manage the mental aspect of investing when it comes to the ups, downs, crashes, corrections and fluctuations?
By not listening to the news or common opinion. If people are freaking out, and the news commentators are trying to create drama, I switch it off. Instead I come back to the financial analysis and remember to be calm and patient. We’re all only human, of course, so it’s easier said than done.
But I find it immensely helpful to get away somewhere, even if it’s just a walk in the woods or a day trip to a new place. Any kind of exercise is wonderful for clearing the mind and getting rid of stress. Recently I’ve also been learning about meditation. I’ve tried it on and off, but I’d like to be more consistent.
21. If you’d like to share, how have the last five to 10 years been for you investingwise?
Good. I’m better off financially for it. I’m happy that I got into stock investing and bought my first shares. It was a big jump from the index trackers and money market funds which I’d used before that, but I’m really happy with my decision.