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PJ Pahygiannis
PJ Pahygiannis
Articles (149) 

15 Questions With Eric Schleien of Eisco Value Partners

'People have different frameworks for different seeing situations'

September 26, 2016

1. How did you get started investing?

When I was 14 years old I walked into a Barnes & Noble with my mom and decided to be a big boy and not go to the teens section and I went to the business section instead. Found a book called ​"​The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of​." The book had basic financial concepts in it but everything changed for me when I saw a compound interest graph and became obsessed of how to invest. So I started reading about different investors mentioned in the book but the only one that truly made sense to me was Warren Buffett (Trades, Portfolio). Then I started reading books he read when he was younger and down the rabbit hole I went!​

2. Describe your investing strategy

Buy things cheap. Buy great companies at good prices or distressed companies at insanely cheap prices. No leverage. Relatively concentrated portfolio.

3. What drew you to that specific strategy?

Just makes sense. Over long periods of time it works. Doesn't take a rocket scientist to do it. Just what makes sense to me.

4. What books or other investors influenced you?

All the usual names: Seth Klarman (Trades, Portfolio), Mohnish Pabrai (Trades, Portfolio), Charlie Munger (Trades, Portfolio), etc. One of my favorite books is "Tribal Leadership". Its given me an amazing framework to look at culture at organizations. And the research is there showing amazing business results based off certain ways that people organize themselves in relationship to each other in businesses. It's something I've studied quite extensively the last few years.

5. How has your investing changed over the years?

I realized there was no bonus points for complicated investments. I keep it simpler now.

6. Name some of the things that you do that other investors do not

Most of what I do plenty of people in the value investing community do. I guess you could say most people aren't value investors. They either don't get it or don't have the temperament. However 99% of what I do isn't re-inventing the wheel. I'm a shameless cloner. The one thing that is unique to any investor is the "circle of competence". My circle of competence will be different than others, even amongst value investors. But that goes for most of us. People have different frameworks for different seeing situations. So that makes me unique but since everyone has that to some extent it's also pretty normal. The one thing I do bring to the table that is pretty unique is my background in personal development work specifically in organizational culture. Whether that proves to be any kind of competitive advantage or value add still remains to be seen. It won't hurt though.

7. Where do you get your investing ideas from?

Everyday I read the Financial Times, New York Times, Wall Street Journal, and USA Today. On top of that I'm always reading Annual Reports. Other than that just engaging in conversations with others and doing research online. I don't really have a "process". I just read and continue to be curiously engaged and things kind of happen organically.

8. Do you use any stock screeners?

No

9. Name some of the traits that a company must have for you to invest in

For great companies: - easy to understand - competitive advantage/moat - healthy balance sheet - great management - lots of free cash flow - intelligent capital allocation - stage 4 culture

...the simpler the better

For other investments

- assets worth substantially more than the market cap - sometimes there will be some sort of catalyst like an activist or a liquidation - spinoffs or tracking stocks that start getting cheap

10. What kind of checklist do you use when investing?

- trying to come up with terrible scenarios to kill off the investment idea

11. Before making an investment, what kind of research do you do?

- lots of reading. sometimes i will call the company and it's competitors. sometimes i'll talk to management. Lots of people in the value investment community won't speak to management due to CEO's being good at being promotional. I have a pretty intuitive bullshit detector so I have no problem in speaking to management if I have a specific question or attending an annual meeting to see how management is in person and how they engage with other shareholders. There's lots of very subtle things you can pick up intuitively that I'm not sure how to quantify into an equation.

12. What kind of bargains are you finding in this market?

No comment.

13. How do you feel about the market today? Do you see it as overvalued?

It's not screaming cheap. No clue other than that.

14. What are some books that you are reading now?

Currently reading "Never split the difference". Just finished "The Signal and the Noise"

15. Any advice to a new investor?

Start reading about Warren Buffett (Trades, Portfolio). Then start learning about companies you understand. Go to the Berkshire Hathaway Meetings and get connected with the community who is incredibly supportive to new investors.


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