Today, I was fortunate to have the chance to talk to Mariusz Skonieczny. He is the founder and president of Classic Value Investors LLC. He is also the author of "Why Are We So Clueless about the Stock Market?" We discuss how his investment style has changed over the years, why he does not use checklists and what his experience teaching ballroom dancing has taught him about investing.
1. How and why did you get started investing? What is your background?
I was always interested in finance and investing. I studied finance in college. However, I was not able to get a job in investing right after graduating, so instead I went into commercial real estate. When the markets were collapsing in 2008/2009, I quit my job and started Classic Value Investors because I saw incredible deals.
2. Describe your investing strategy.
Obviously, I am a value investor but I will look at any anything with value. This includes industries that other value investors would never touch because they are terrible businesses. I don’t care. If I see a lot of value, I will go there.
3. What drew you to that specific strategy?
Value investing is the only thing that makes sense. Everything else is simply nonsense.
4. What books or other investors influenced, inspired or mentored you? What investors do you follow today?
Like many other investors, I was inspired by Warren Buffett (Trades, Portfolio) and other famous value investors. Today, I don’t follow any of them because over the years I learned that the same people that were my idiols are simply fake. What I mean by this is that they have certain personas on TV, but in real life, they are not the kind of people that I would want to associate with. So I appreciate the knowledge that I learned from them, but I cannot stand how fake they are when they have certain agendas.
5. How has your investing changed over the years?
I became more independent. In the past, I wanted to invest in companies that people that I respected were invested in. Today, I do my own thinking and I actually prefer to invest in companies that are so obscure and unknown that barely anybody is interested in them. Then, I get to know these companies better than anybody else, other than insiders.
6. Name some of the things that you do or believe that other investors do not.
It is like anything in life. People simply don’t want to do the work that is required to succeed. For example, I also teach people how to ballroom dance. I have been doing this for almost 20 years. Based on that experience, people want to get good without the work, no matter how many times you tell them that they have to put in the work and practice. The same is in investing. They want great returns but they barely know their companies. Some think that reading an annual report qualifies. Reading an annual report is nothing. Annual report is what the management wants you to read. It is a brochure. In order to truly understand a company, you need to get your hands dirty. You need to talk to customers. Why are they buying? What kind of problems does XYZ product solve for them? You need to talk to competitors. How is XYZ company compared to the subject company? You need to talk to the employees. You think investors do any of that? Of course not.
7. What are some of your favorite companies? Where do you get your investing ideas from?
I don’t want to list any specific names, but I am mostly invested in gold miners right now because everybody else hates them.
8. Do you use any stock screeners?
No because by the time something shows up in stock screeners, I am no longer interested. I want to invest in companies where I can figure out what the income statement will look in five years and then I will sell it to the people that will find it through stock screeners.
9. Name some of the traits that a company must have for you to invest in. What does a high quality company look like to you?
It all depends on value. If the spread between value and price is huge, then I will look at lower quality companies. I prefer low debt. However, if the discount to value is small, then the company will have to be better quality with some kind of moat.
10. What kind of checklist do you use when investing?
I wish life was this easy. People love using formulas. How about using your head? I had a friend who gave a checklist to his daughter in order to find a perfect husband. Are you kidding me? You think checklists will protect you from blowing up. A company with lots of debt might be a great investment during an up cycle, but a terrible one during a down cycle. A company with lots of lawsuits might be a great investment at one time, but a terrible one at another time. I think that the best way to invest is knowing your companies very well. This includes knowing the bad and the good. Then, you make a judgment call. You have to use your brain, not some kind of checklist.
11. Before making an investment, what kind of research do you do? Do you talk to management?
I don’t want to sound promotional, but just read Scuttlebutt Investor and you will know the kind of research that I do. But to be short, I pretty much talk to all the CEOs of the companies that I own. I also follow up with them regularly.
12. What kind of bargains are you finding in this market? Do you have any favorite sector?
At this point, I hate how most of the things are overpriced. I haven’t made a single new trade in three years. The only thing that I hold and still like is mining and oil and gas related.
13. How do you feel about the market today? Do you see it as overvalued? What concerns you the most?
Yes, the market is overvalued. The whole economic recovery is fake. In other words, it is fantasy based on cheap money. What concerns me is how irresponsible the Fed is. This concerns me but at the same time, I am positioned to benefit from Fed’s ignorance.
14. What are some books that you are reading now?
Most of the books that I read these days are books about specific companies or industries. It is not that there is nothing more to learn from reading investing books, but I already read about 300 of them. So now I am putting that knowledge to work by studying a lot of specific companies so that when the market crashes, I will have plenty of candidates to choose from.
15. Any advice to a new value investor?
Know your companies. I really mean know your companies. Then, you will be able to think for yourself. Stop idolizing certain investors. They are nothing special. You can do much better by doing the work yourself.
Disclosure: No position in the stock mentioned.
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