This is the content of the third part of our interview:
In April, Li Lu and Bruce Greenwald took part in a discussion at the 13th Annual Columbia China Business Conference. The value investor and professor discussed multiple topics, including the value investing philosophy and the qualities Li looks for when evaluating potential investments. Q3 2021 hedge fund letters, conferences and more How Value Investing Has Read More
- At the beginning we discussed Rob's idea generation and how it changed over time. He also explained how he currently finds ideas.
- At 03:08 we are talking about filters he uses.
- At 04:53 Robert Vinall explains what minimum standards he has on a country level.
- At 05:15 we are talking about factors that make a company perfectly uninvestiable. We also look on debt or cyclical companies.
- At 07:09 Rob explains the next steps in his investment process.
- At 09:22 we are talking about the role of numbers in his process.
- At 10:55 Robert Vinall tells more about his preferred sources to gather information about a company.
- At 12:37 we ask the question: How long does a research process usually take? Rob answers it with two examples.
- At 17:13 the value investor Rob Vinall explains how he spends his time researching companies.
- At 18.34 the question "How much detail is important for you?" is raised.
- At 19:48 we discuss the relation between details and key drivers and mechanisms. We also discuss some examples for this relation.
- At 23:10 we are talking about selling and the reasons for selling.
- At 25:24 we discuss the question "How do you track companies you have sold?".
- At 26:31 Robert Vinall gives some insights in his watchlist.
When does Robert Vinall buy and sell? A talk about the process of the Value Investor
Welcome back to interview, in this episode we want to talk about process again like from the beginning from a new generation to invest or sell to a certain point, lets start with the lead generation. Where you get your ideas from?
Yeah, I think that's a great question because if you think about it there's you 10000 plus public companies out there that probably the biggest single factor of what you end up ultimately investing in is what you actually. Which of those 10000 you actually start looking at because you know they have to make it to the top of the field or if they're going to make it to the bottom of the order at some point. And my opinion on how to you know where to start with an idea has changed quite a lot over over the years. You know when I started investing I was very much sort of enamored by being Graham and he was a very a very quantitative outlook. He is famous for the so-called net nets. You know companies trading at a discount to the tangible assets they had on their balance sheet. And you know I too would typically do is looking for companies which are trading at a discount to their book value very low P or 52 week lows share price. So this type of stuff. And then over time I realized that this was actually really the wrong way to go about things because you know on average not always but on average companies which are trading on big discounts are the tangible book value or other types of metric you know kind of below average companies because you know the market is not completely stupid if it says something is worth any four times earnings then on average it's going to be a pretty crappy company. You know the long term investor I don't want to be spending my time analyzing the crappy companies and I hope that every now and again one crops up which is not going to be looking at really great companies. Yes I mean to start screening many years ago. You know as thinking about you know what is the the single most important thing that gets me excited about an investment in my particular case sure other people it's different but my particular case it's you know it's a very passionate allied entrepreneur running a business. So given that that's sort of the main thing I'm looking for.
You know the MA pretty make sense to use that as a starting point which ideas to look at you know now without a need for me to get sufficient excited to start reading the report for a company or trying to learn about what it does what I love what I like is to find that there's a sort of a passionate entrepreneur who is somehow connected to the business either as a major shareholder or ideally as the seed CEO of the company as well. So how do you find out about that. It can be through a referral you know someone else points out to you you know there's this great entrepreneur running the company you should check it out or maybe read an article in a newspaper.
So there's different ways you can come across it but that's really the trigger for me to now to actually start analyzing a company like maybe talk a bit also about filters that great management filters and put you in a filter to say no maybe like yeah if you say I don't invest in certain countries for instance.
Yeah. So what we're talking about and I was like literally the first five minutes of an investment sort of analysis where you are literally somebody throws a name of a company at you you've never heard of it before. You know I do it what it does. Yes. The first the first filter would be like I just said you know there's someone running the business that has the potential to trust but there's other filters as well such as you know the most important one is just on a brief look at the business. Do I think this is a business where I have the potential to understand it is it is the business of a nature where you know I think it's going to be within my capacity to kind of build up an understanding of what it does what the risks are going to be and stuff. So if it's a sort of a you know biotech company which is the early stage cure for cancer and realistically as a biologist never going to be able to answer that question. So I'll kill the idea very very quickly. But you mentioned countries that's one thing I'm very indifferent to. Not bothered about which country a company is based in which sect or whether it's a big company or a small company. Well listings things which a lot of people use as themes or for that funds that's not something that particularly interests me perfectly happy to look at and indeed invest in a company whether it's from South Africa or Germany or anywhere else.
So you don't say to invest in countries.
Obviously that has to be the rule of law and it has to be upheld and you know copyrights have to be properly protected and in a country so you know.