1. How and why did you get started investing? What is your background?
As a kid, I liked reading a lot and I used to admire progress and dream about it. I used to read a Greek weekly magazine about the economy. Investing, in a more general context, sounded very interesting to me, as it works like an automation. You plant a tree at present and the tree gives you fruit in the future. You get more than you sacrifice. When I first read about Warren Buffett (Trades, Portfolio) and his approach to stocks, I loved it. I knew that I would do it when I earned my first money as an adult. By investing in stocks, I would lose some money for building a “machine” that provides wealth forever, like the tree I talked about before. I bought my first shares in 2000 when I was 18. My Bachelor of Science degree had nothing to do with economics but my love for investing led me later to do a Master of Science in economic analysis.
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- ATH:MYTIL 15-Year Financial Data
- The intrinsic value of ATH:MYTIL
- Peter Lynch Chart of ATH:MYTIL
2. Describe your investing strategy and portfolio organization. What valuation methods do you use? Where do you get your investing ideas from?
Generally, the whole strategy is based deeply in value investing, totally excluding technical stuff. High diversification and scaling - namely, buying gradually, under requirements, during stock drops and selling gradually during stock appreciation - have helped me to reduce risk and take advantage of market fluctuations without trying to predict them.
Buffet is my archetype for his general philosophy, but my value investing strategy is far from his as it can contain everything from “good” or not so “good” companies, indebted or debt-free, growth or non-growth. Every stock, except those that are going to be bankrupt for sure, has an intrinsic value and can provide you with profit if you buy lower and, of course, if you have assumed things correctly on average. According some characteristics, some undervalued stocks are very aggressive and are suitable for minor participation in the portfolio. Others are safer for larger sums. For many reasons, I avoid having a specific position larger than 10% of the portfolio’s total value. I used to own more than 20 to 30 different stocks. The previous few years, considering that markets are overvalued, I have started opening short positions. I am afraid of the “unlimited loss” and the strange behavior of it, when loss brings more exposure. But I prefer being under these circumstances and having a balanced portfolio of long and short positions, as opposed to just being long.
For me, the basis of valuation is the book value and the annual revenue. Then I add or subtract to that depending on profitability, history, management, growth, prospects, dividends, etc. I get my ideas through stock screeners, value investing sites like GuruFocus, placed price alerts on stocks that I already know and through discussion and exchanging ideas with other value investors, online or offline.
3. What drew you to that specific strategy? If you only had three valuation metrics, what would they be?
Generally, I like reading others, but I like to do it my way. This leads to more failures but lets you deeply understand things and comprehend and better evaluate different strategies. So the answer to your question in two words is my failures.
I would use price-sales to get the discount compared to enterprise’s operation size. Then, price-book to get enterprise size, something very similar to the previous metric but that also, to some extent, encloses the negative impact of liabilites. Finally, forward price-earnings ratio would be the most crucial, as profits give safety, growth and value. Those three valuation metrics give an image of three very important measures: sales, profits and book value compared to the price you pay.
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? What investors do you follow today?
Warren Buffett (Trades, Portfolio) has inspired me very much as an investor and as a person. I learned that I should not feel guilty about wealth. Investing creates and not subtracts value from society. In addition, if you do not use some of that money for personal pleasure, it is like donating to humanity. Taleb also affected me a lot by making me understand that things that I do not know are more important than those I do know. I always read comments of famous value investors but I would not say that I follow somebody specifically.
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 buy “forever,” but I can always sell in months if stocks appreciate or if I conclude that I was wrong, especially when other options are more attractive. On average, I think that I sell after two to three years. Sometimes news and mood can trick you into believing you were wrong. So when I feel I am wrong, I have no constraint to admit it. But I prefer not to make any hasty moves. Of course, I can cancel a plan to buy lower. However, only something groundbreaking can make me sell. So it is difficult to say how quickly I will understand because it depends on the characteristics that made me open a position. Anyway, a bad sign that tells me something is going wrong with my portfolio and my decision is when I see that a large percentage of my portfolio contains positions in loss, stocks that I would not like to buy today.
6. How has your investing approach changed over the years?
When I started, I was based in simple and quantitative metrics like price-earnings or price-to-book value. Through the years, I have tried to see the whole picture using a lot of instinct, through multi-year experiences and investing examples, for what a fair value could be and metrics just as a tool. The challenge here is to not let your instincts be severely affected by emotion. Then I avoid having an opinion on everything. I can more easily say “I do not know." In addition, when I make assumptions and projections, I can be more absolute on certain things and less certain for others. I may “play” in either certain or uncertain conditions. In any case, risk / reward must be very high. This is the condition and whenever it is low, I prefer to abstain. My first few years, I owned about 10 different stocks. After that, I thought that it would be better if I chose the very few best (3 to 4). Unfortunately, that brought some difficulties in efficiently managing my portfolio. Today, as I said before, I own more than 20 to 30.
7. Name some of the things that you do or believe that other investors do not.
In contrast with other value investors, I think that I am not afraid to do transactions more frequently if they are value based. I will repeat. These are not trades based in fundamentals, they are transactions based on the deep value investing philoshophy. When a stock gets cheaper for no reason, you should own more. If it is closer to fair value, you should own less. I use scaling, which most do not use, and I have a highly diversified portfolio.
8. What are some of your favorite companies, brands or even CEOs? What do you think are some of the most well-run companies? How do you judge the quality of the management?
Most of my experience has came from the Greek stock market. I like Titan, FF Group and Mytilineos (ATH:MYTIL) from the Greek market. Just to name one American, I am impressed by First Solar (NASDAQ:FSLR). Just to clarify, good companies are not always good stocks if they are expensive. For me, the style of announcements shows a lot. If I feel that a company is treating investors like fools, for me it is a no. Consistency, sincerity and setting long-term goals are the key to quality management. I trust them more when they speak unpleasant words.
9. Do you use any stock screeners? What are some efficient methods to find undervalued businesses apart from screeners?
Yes, I use many stock screeners and try with many different criteria. I do not think that just metrics will tell me what is cheap, but they are nice for narrowing to some potentially interesting stocks. Apart from screeners, industries under tough conditions that are cyclically depressed have given me a lot of nice value investing ideas, not easily catched by metrics like price-earnings.
10. Name some of the traits that a company must have for you to invest in, 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.
As I explained before, I am not stuck on a specific type of value investment. Whatever stock can be a good option at the appropriate price, unless it goes for bankruptcy. Generally, I like companies and conditions where I believe my understanding is comparatively better. Generally, I would say that the ideal company to invest in would be the one with a price much lower than intrinsic value.
11. What kind of checklist or homework do you utilize when investing? Do you have a specific approach, structure, process that you use? Or do you have any hard cut rules?
I always search for undervalued stocks and, as my approach is not very quantitative, I do not use a specific process. Yes. I read a lot for the company and if I like it as an investment, I open a moderate position at first. What I do is to keep notes for the strategy I follow, like what I am planning to do if the market crashes or gets to a bubble. I used to have a wishlist and I have a lot of stock alerts.
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 read the annual reports and the news of the company for the last few years. Then I talk to other value investors about their opinion and watch for any potential serious comments at forums or articles or analysis for the company. Sometimes, I will make a phone call to investor relations, but that rarely leads to management contact. I choose not to look at market capitalization before I end my initial research to avoid market price having an impact on my opinion. Then I investigate and dig deeper if it is under x threshold.
13. How do you go about valuing a stock and how do you decide how you are going to value a specific stock? When is cheap not cheap?
Many do DCFs attempting to be as accurate as they can. However, the real problem is how the assumptions are going to work and not the accuracy of the method. For example, if you tell me how many cars Tesla is going to produce in 10 years or what is going to be Facebook’s revenue, I do not need any DCF model to tell you if the stock is a buy or not. So the cheap versus not cheap thing is how you see the evolvement of a situation, then very simple metrics like forward P/E or forward dividend yield can be a good base for valuing.
14. What kind of bargains are you finding in this market? Do you have any favorite sector or avoid certain areas, and why?
I think companies that are not growing a lot are overwhelmingly punished by the market now. You can seek value there. Furthermore, I believe in small-sized extrovert Greek companies. They are cheap and are growing and have prospects despite a bad domestic situation in the Greek economy. They are cheap as they lie under the radars of foreign investors and because Greek investors are few and afraid due to the crisis and the 1999 bubble crash trauma. For most Greeks, the stock market is just a casino.
What I avoid? Biotechnology and other tech companies, especially the smallest, because it is difficult to predict what is going on.
15. How do you feel about the market today? Do you see it as overvalued? What concerns you the most?
Very few slow-growth companies are fair valued, but most of the market is overvalued in my view. What concerns me is that a lot of years have passed without a major correction in the markets and the economy and that some stocks, like Tesla, are traded with very high valuation multiples. You will find very few no debt companies below a 10x P/E.
16. What are some books that you are reading now? What is the most important lesson learned from your favorite one?
I have read some investing books and I have loved it whenever I did. Unfortunately, absence of time makes me read a lot of fragmented information through articles than from books right now. I admit that I should take time and read a book again. But lately, I am affected a little bit by Evan Bleker and some analysis that I do for The Broken Leg. With a lot of surprises, I have seen that methods based on many enhanced quantitative metrics and criteria, based on Graham, create a safety net and those companies are good investments. I would buy most of them, even by researching them with my nonquantitative strategy.
17. Any advice to a new value investor? What should they know and what habits should they develop before they start?
The first thing I would say to any investor, not just to a value investor, is that the biggest threat to you is yourself. I would tell him to diversify a lot and not to be afraid to admit his errors. If he is going to be a value investor, I would say never to forget what value investing is because most people are initially interested in it but get carried away. Market conditions erode their principles and they end up with very bad investing results.
18. What are your some of your favorite value investing resources or tools? Are there any investors that you piggyback or coattail?
Of course, I check with a lot of interest GuruFocus, Net Net Hunter and The Broken Leg of Evan Bleker, SeekingAlpha and FT.com. Through my blog and my participating in SED (Greek Investor’s Association), I have met very many Greek investors. Unfortunately, Greek investors are mainly using trading and do not trust to buy and hold. They rarely care about fundamentals. However, there are about five people that I know, talking by phone or going for a coffee, that are true value investors. Not famous, but efficient!
19. Describe some of the biggest mistakes you have made value investing. What are your three worst investments that burned you? What did you learn and how do you avoid those mistakes today?
I did not diversify at some point. I was buying lower without checking if conditions had gotten worse and I was searching for the cheapest in numbers without getting quality data. ALTE, Empedos and Betanet were a disaster for me. The first two, construction companies, destroyed my portfolio at the beginning. You know, I made the three above errors together. I did not diversify. I was attracted by low valuation metrics without realizing the trap and I was buying lower and lower, not wanting to accept my mistake. The crazy thing is that I started with a diversified portfolio but suddenly lost my patience, sold the other positions and bet “all in” at those construction firms.
20. How do you manage the mental aspect of investing when it comes to the ups, downs, crashes, corrections and fluctuations?
I try not to let my feelings be affected. I do not bother with trends but look at valuation. If a stock or the market goes down and I see a good valuation, I get in. But I always know that it can go lower. I do not try to guess. I just do scaling. Scaling and high diversification makes me sleep peacefully. If the market goes against my position, I still can earn more by increasing the position at a better valuation. If it goes positively towards my position, I can take some profits near fair value. The same logic works in ups, downs and crashes. Finally, if I feel fear or greed, I have told to myself, “You won’t do anything, no moves!.” A crazy thought or move can burn all your hard work and discipline.
21. How does one avoid blowups in value investing?
Everyone has built a strategy, so I would not like to repeat my rules. But I would recommend never to violate your strategy.Then, if you believe in value investing, do not make rules that are against basic principles of value investing. Mainly, do not forget that you are buying enterprises.
22. If you are willing to share, what companies do you currently own and why? How have the last five to ten years been for you investing wise compared to the indexes?
I own some undervalued middle and small Greek companies. Then I like some cheap U.S. stocks like automobiles or GameStop (NYSE:GME). I think they are already pressed, so in case of a crash they will have less downside. Generally, I think the markets are expensive right now, so when I buy, I do it knowing that there is a long-short strategy behind it.
Graham would buy dozens of small Greek companies like I do right now!
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