I'm from Italy so the "Borsa Italiana market" was the first one in which I've started to search for investments, the one in which I've built my experience by taking my losses and by identifiyng some common traits of the few winners.
Borsa Italiana is a small and peripheral market that was hit hard by the 2008-2009 crisis and the 2011 Italian sovereign debt crisis, and neither the financial market nor the real economy have never fully recovered.
In my view the Italian market is full of mediocre companies, many of which ultraleverage with poor management, that are simply try to survive, day by day, in an internal market that is in a long and hard recession.
But if you look in the correct spot you can find some really great companies that, when the price is fair, can be a great investment.
Where to look
I search in industries in which the "Italian taste" and "artigianal task" are really crucial as:
- luxury goods
- food and agribusiness
- mechanics and automotive
- tourism and leisure
”‹In any of these sectors, I usually focus my attention on the high end-high quality company .
These are niche sectors that, in my view, are serving the globalization, have benefited and will continue to benefit from the growth of the middle-to-rich classes around the world.
This tipe of company, usually a world-class niche leader in its industry, are real diamonds and in many case meet my investments criteria .
When i find a candidate i run my checklist:
- Company which i know the products with a position of leadership (or niche leadership) in a business that i think i understand.
- High roce and high roe (>20%)
- No debt or little debt
- High and consistent free cash flow generation
- Historical and prospective growth (sales , ebit and EPS)
And if the checklist is OK, I study the story of the company, who are the majority shareholders, the management, I read the annual report and the Investor Presentation to check if:
- the management is honest, competent, effective and is fair to the shareholder
- the company is run conservatively and with a long term horizon.
So, in a spot that I think will benefit more from globalization and world growth of people and wealth, I'm looking for entrepreneur/management extremely focused on company, product and business developement to create medium long-term value.
Entrepreneur who are not tempted by diversification, who keep the general and administrative expenses low and treat minority shareholders fairly.
When I find one of this kind, if the price is fair I swing hard; if it is not, I simply wait patiently for a market downturn to jump in.
