How and why did you get started investing? What is your background?
”‹I've always been a big saver, so I would put my money into savings accounts. Then I saw the market gyrating in one day at the same annual rate that I could make in a savings account, which encouraged me to figure out if the gyrations can be figured out!”‹
Describe your investing strategy.
”‹I look for companies with stable long-term earnings that are going through a temporary problem that has caused their price to be undervalued”‹.
What drew you to that specific strategy?
”‹Statistical evidence that low P/E stocks outperform, along with reading the advice of gurus like Ben Graham and Warren Buffett (Trades, Portfolio)”‹.
What books or other investors influenced, inspired or mentored you? What investors do you follow today?
”‹Buffett was the most famous, so he was the first. He introduced me to Graham. I don't really "follow" any investors because I tend to invest in smaller companies, whereas famous investors have so many assets that they practically invest on a different playing field”‹.
How has your investing changed over the years?
”‹I used to be interested in net-nets. But the more I learned about business, the more psychologically difficult it became for me to accept the poor decisions of bad or poorly incentivized managers. ”‹
Name some of the things that you do or believe that other investors do not.
”‹I don't believe interest rates will be forever low, so I wouldn't buy long-term bonds like other investors are doing in droves. I don't believe the Fed's monetary policy is that bad; they have successfully navigated their dual-mandate as far as I can tell. I don't believe you can time the market to figure out when you should get in or out”‹
What are some of your favorite companies? Where do you get your investing ideas from?
”‹I get my ideas from screens or articles. Some of my favorite companies are Google (GOOG, Financial) and Netflix (NFLX, Financial), though I would never own them at these prices”‹.
Do you use any stock screeners?
”‹Yes”‹.
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?
”‹A high ratio of expected cash flow to the company's current worth. Terrific returns on capital over a long period of time, along with the presence of a competitive advantage which suggests these returns are likely to persist.
What kind of checklist do you use when investing?
”‹I have a list to make sure I've remembered to check certain things out to make sure they are okay with me, including insider ownership/compensation, pension obligations, days sales/inventory, options/warrants outstanding, etc.”‹
Before making an investment, what kind of research do you do? Do you talk to management?
”‹I stick mostly to public reports and customer reviews. I generally avoid talking to management unless I have specific questions, as I don't want to be biased towards companies where managers happen to be good salesmen”‹.
What kind of bargains are you finding in this market? Do you have a favorite sector?
”‹There are cheap small-caps, but I'm seeing very little value in large caps (with Apple (AAPL, Financial) being an exception a couple of months ago). I like sectors that are beaten up, including financials (where some believe rates will never rise) and energy (though long-term earnings here are not stable, so I have to have a strong filter)”‹.
How do you feel about the market today? Do you see it as overvalued? What concerns you the most?
”‹Yes. I believe it is overvalued, especially for large-caps, probably because interest rates are so low. It doesn't concern me as it is just part of how financial cycles work.
What are some books that you are reading now?
”‹I'm currently reading "Uncontrolled" by Manzi. I post a lot of reviews of books I have read.”‹
Any advice to a new investor?
”‹Read about everything. Not just markets, but history and about other fields. Seek books, articles, opinions that buck conventional wisdom and read with an open mind.
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