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Investor Interviews: Invesquotes
After a short summer break, I’m back to posting regular content on here. This week we have lots of content to make up for the recent lack thereof.
Monday - Investor Interview: Invesquotes (free)
Wednesday - Growth portfolio watchlist ideas (paid)
Friday - Crowdstrike Deep-Dive (paid)
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Today I’m starting a new segment of the newsletter called ‘Investor Interviews’ - where I will be speaking with a variety of different investors, all of which offer different opinions on a wide range of subjects. The aim here is to learn from the best.
The first guest is someone who I’ve had the pleasure of interacting with since my very early days on twitter. He is the founder of the twitter handle @invesquotes, one of the two main contributors on the Global Investor Newsletter and a contributing writer at the Potential Multibaggers Service on Seeking Alpha.
His name is Leandro, is 26 years old and in many ways has a very similar investing style to myself.
Thanks for joining me and taking the time to answer my questions on the first ever edition of the guest interview segment.
To start with, could you talk a little bit about your background, how you got into investing, early investing memories, and maybe a bit about what gives you the drive to learn about investing in the markets?
Thanks a lot for having me, Innovestor, you know how much I value all the work you do!
My background is not very tied to investing at all despite what some people might think. I graduated in Economics with a specialization in finance but my interest in investing did not come from my university degree, it came from my will to learn more during my spare time. Although very lightly, I did touch on some investment related topics in some of my lectures which made me want to dig deeper into the world of investing…
I started reading the typical books and articles written by investors such as Warren Buffett and Peter Lynch that every rookie investor reads. I would like to make clear that I still consider myself a rookie. This is basically my background before I started investing.
I actually spent two years or three years reading about investing before investing one single dollar. Perhaps this was motivated by the fact that I did not have much money back then as a student. This, however, was a stupid decision in hindsight because we all know the power of recurrent small amounts (such as 50€/monthly) compounded during long periods.
Another reason why I didn’t start investing immediately was because I thought that I needed to learn all the theory before turning into the practice. This, of course, was another stupid decision because I could’ve learned much faster by putting some money on the line, even if this was a small amount.
My earliest investing memory was talking to a friend to open an account and start dollar cost averaging several index funds. It was obvious that we were not reinventing the wheel but it worked out pretty well if I might say. All of the books I had read about investing pushed me to keep it simple which is why I decided to start passive. I have now changed my strategy towards a more “active” one but I never stopped DCAing index funds.
The thing I like the most about investing is that it requires you to improve daily.
As much as this might seem something vague to say, investing has also helped me improve other areas of my life by drastically improving my organizational skills for example.
I also love the fact that, regardless if you make money or not, you are always learning about new business models and ways of doing business, knowledge which I consider very valuable as I can apply it to my 9-5 for example.
Thanks IQ - I think we both have quite a lot in common here. I especially like your point about always learning when investing. I can’t think of many other activities offering the potential to constantly expand ones knowledge in a wide a variety of industries and professions as investing.
Moving on to the second question - we both started growing on twitter at similar times, so it has been great to watch your success in gaining so many followers, producing such high-quality content on the Global Investor Newsletter and becoming a key contributing writer on the Potential Multibaggers service.
What was the motivation behind pursuing these avenues, and do you have a plan on where you want to be in several years time?
I honestly just started my twitter account because I enjoyed reading about investing and wanted to share some of the quotes I found interesting. It’s actually kind of crazy how much you can learn about investing just reading famous quotes.
After this first period where I basically just used the account to follow much more intelligent people than me and share some quotes, I decided to start sharing my thoughts as this would help me learn faster and…it worked! As soon as I started engaging with other accounts my learning curve became much steeper.
I then started doing some threads which I called “At a glance” so people could get a quick grasp of what a company did and the main financials and then, motivated by Route2FI, I decided to write longer articles and I published a deep dive on Pinterest.
This marked the start of the Global Investor Newsletter which was previously called the Deep Dive Newsletter.
Then, on the collaboration with Kris (@FromValue) in Potential Multibaggers, it was like a dream come true to be honest. I had already been in contact with Kris very early since opening the twitter account and I admired what he had built with Potential Multibaggers. I was a subscriber so ending up being a contributor was out of this world!
I have no specific plan of where I want to be in several years but I do know that I will keep investing and sharing my research regardless of market conditions.
Where will I end up? Only time will tell!
Thanks - so a quick follow-up - Seeing as your twitter account was originally focused on investing quotes, I’m hoping you might have some insight into this…
What is your favourite investing quote, and why?
“In the business world, the rearview mirror is always clearer than the windshield” - Warren Buffett
I like the way it illustrates hindsight bias, as I see that hindsight bias is one of the worst poisons for new investors.
And to newer investors it occurs constantly - “Why did I sell this? Look how it has run up.” - It hurts, but when you made the decision you acted on the info available to you.
Agreed. Even outside of investing, hindsight bias is something we come across all the time. Really useful to check yourself every now and then.
Moving onto question 3, lets get into your investing style.
Like me, you seem to have a focus on higher growth companies - is there any rationale behind this?
Then, regarding your portfolio in general, do you have a process for generating new ideas along with a strategy for position sizing and things like ‘timing the market’?
Well, I look for high growth because I think that investing is all about the future and looking for these types of companies will increase my chances of obtaining higher returns.
Another very different thing is what everyone considers as high growth. I always take into account “growth compounding” because lower growth rates compounded over longer periods are much better than higher unsustainable growth rates. This is exactly why investors look for moats.
To generate new ideas I tend to listen to people that are much more knowledgeable than me and from there I try to research these suggestions in depth because I can’t borrow their conviction.
I think that I have quite a different approach when it comes to position sizing because I monitor my portfolio on a cost basis rather than on a “current value” basis. My rationale is that I can control how much initial capital I pour into each position but I can’t control how much these positions run up or down over the short term.
About timing the market, I think it can’t be done with enough accuracy to be worthwhile and I suck at it so I just DCA without taking macro much into account.
Macro is a highly complex endeavor.
Digging slightly deeper - when analysing the fundamentals of growth companies, are you looking for anything in particular over-and-above promising financials and strong key metrics?
For example, do you rate management and culture as important factors to consider?
Actually, it’s funny that you touched on this topic in particular because management quality and culture is what I think is most important when analyzing growth companies.
During their early stages, companies rely strongly on decisions made by management so great management can make a company thrive by making the right calls and bad management can ruin great companies. The clear example is Cloudflare vs Fastly.
As companies grow, management is still important but less crucial because it takes more bad decisions to screw things up.
Funnily enough, I weigh management so much that when doing the Farfetch deep dive that we released recently I just wanted to invest because I thought that management was exceptional. At the end I did not start a position and I hope that I don’t regret not investing in such great management.
As a follow-up, you mention the importance of management and culture when looking into companies. Do you have any common indicators of good management/culture (e.g. glassdoor scores etc.)?
In other words how do we, as investors, distinguish between good and bad management/culture without the luxury of being a 'fly on the wall'?
That’s a great question and I think that many investors have different ways of assessing management because no two humans are alike. What I might like to see on a CEO might differ greatly from what another investor is looking for. This is something natural.
I try to look mainly for trust and vision. Without the former I know that the latter is of little use.
To assess trust I go to earnings calls that go a couple of quarters back and see what management was promising. Once I know what they had promised I turn to recent earnings to see if they were able to deliver. Great management will promise x and deliver x+y, I always look for this.
Another important thing I like to look out for is how the vision has evolved from start to finish. If the founders are still executing on a vision they had 10 years ago and it’s working, that’s a great sign of visionary management.
It’s also important to see if management is coherent. Is management’s compensation aligned with long term objectives? If the answer is no, you better run. I don’t care if insiders sell stock, I care if they reduce their stake significantly.
Last but not least, I try to watch as many interviews as I can. It’s crucial (and I know it’s going to sound dumb) to watch these interviews to get a grasp of how confident management are on what they are executing on, as well as to analyse how much they trust themselves. Some managers have given me great first impressions participating in interviews, and for me this is a great sign.
Assessing culture is a bit more complicated, especially for younger companies. I use glassdoor reviews as preliminary indicator and then I try to dig deeper into the issues I find. For example, when doing Farfetch, I could clearly see in the reviews that culture and work environment were great but salaries were not that great so I looked more into it using additional sources.
What I want to make clear is that trust is something personal and no two investors will end up trusting the same people. Give your money to people who you trust and you’ll do fine!
Cheers for the detailed answer.
Moving on, one commonly held opinion here on twitter is the idea that we buy a stock with the intention to 'never sell'. Does this hold true for you? What is your general philosophy on this?
I would agree with that if I could add “as long as the thesis remains intact” to it.
I consider myself a buy and hold investor but I don’t fall in love with the companies I own. If the thesis remains intact then I don’t care what the stock does, I will not sell. If, on the other hand, the thesis changes, I won't hesitate to sell, regardless of the stock price.
Next, what is your opinion on valuation when looking at companies? As a growth investor myself, many of the companies we follow tend to have 'historically' expensive valuations.
What factors do you look for in these 'expensive' stocks?
I do take into account valuation but I don’t get overly concerned with it.
When I think about valuation I automatically think more about the downside rather than the upside. If you are on to the next big company, a high multiple should not scare you because winners tend to grow quickly into their valuations and continue growing after that. However, if you pick an expensive stock and it doesn’t play out, your downside is much higher because expensive stocks are priced to “perfection” as some might say.
I would never look at valuation in isolation, there are many more important things to look at before looking at valuation, mainly because without context, valuation makes absolutely no sense, it’s just a number.
Last question on the topic of growth investing - will you always be primarily a growth investor? Or do you think this will change to more passive methods as you age/evolve?
This is a great question! I think my strategy will not change because, besides having alpha as an objective, I enjoy researching companies so I don’t see why I would change to a strategy that I don’t enjoy as much.
Having said this, only time will tell!
Opinions on various topics
For the last section, lets focus on other areas.
Looking at how technology has changed over the past several years, what (if any), emerging trends or technology developments do you think investors should be looking out for?
An example for me is immersive technology (heavily biased) along with the shift to remote work/freelance. Both, in my opinion, are huge opportunities for growth in the future.
I completely agree with your choices and I would like to add data.
I think that tech and digital connections inevitably bring increased amounts of data and many companies don’t have the infrastructure to make sense of this data, especially legacy companies. This is why I like Palantir, it’s really sticky and has a head start with Foundry.
I also think that adtech will continue to thrive, especially those companies that are able to deliver richer quality ads in the most demanded formats. Right now, video is driving engagement but maybe in the future these companies will need to adapt their ad formats to something immersive such as AR/VR and that might be a huge opportunity for those companies that manage to do the transition.
A topic which tends to split old-school and new-school investors is Crypto & Blockchain.
For me, as someone who considers themselves to be somewhere between the two, I'm curious to learn more about crypto and Blockchain along with the technologies it could enable - such as the metaverse.
Do you have an opinion on the topic? And do you think it's an area/opportunity growth investors should at least consider?
I actually don’t know enough about crypto to have a well informed opinion.
This said, I think that in the future crypto tech will be really important but maybe the only currencies that will thrive will be those backed by the government. Who knows.
Are there any investors you look up to? If so, why?
On the “goat side” I would say that I enjoy reading things written by Peter Lynch, Warren Buffett and Phil Fisher. I also enjoy Stanley Druckenmiller and have been reading pieces written by him lately. I admire these investors because they managed to turn a highly complex endeavor such as investing into something that seems fairly simple and this is one of the most difficult things you can achieve.
On the retail side, I look up to investors such as Kris and Conor, I think they do a great job with their research and transparency.
Finally, do you have any books or podcasts you would recommend to people new to investing?
I would strongly recommend “Common Stocks and Uncommon Profits” by Phil Fisher because he was one of the first investors who “broke the rules” of valuation multiples and started to invest in companies that seemed expensive but ended up being bargains.
I don’t listen to many podcasts although I do listen to Business Breakdowns when I have a long drive. I get to hear about many companies that I don’t know about and that might be great sources to start a DD.
*END OF INTERVIEW*
Thank-you Leandro for taking the time to answer these questions. There were some super insightful answers which I hope my readers will find useful.
I really enjoyed doing this segment and think it’s a valuable addition to the newsletter, so I will be continuing to contact various investors in order to produce more of these interviews.
If you have any suggestions on people I could interview, contact me at firstname.lastname@example.org or send me a DM on twitter.