When it comes to stock market investing, one needs to have a good strategy, sustainable philosophy and clear investment goals as we discussed in this video about investment goals. In this video, we discuss my strategy, philosophy, general investing goals that should give a great overview on what is this stock market channel all about.
Q2 2020 hedge fund letters, conferences and more
- Investment philosophy
- Good investment
- My goals
- Portfolios
- How many positions
- Portfolio allocation
- Holding period
- Current work
Investment Goals & Ideas: Good Buys And Portfolio Q&A
Seth Klarman: Investors Can No Longer Rely On Mean Reversion
"For most of the last century," Seth Klarman noted in his second-quarter letter to Baupost's investors, "a reasonable approach to assessing a company's future prospects was to expect mean reversion." He went on to explain that fluctuations in business performance were largely cyclical, and investors could profit from this buying low and selling high. Also Read More
Transcript
Good day fellow investors. I recently received an email with a lot of questions from a subscriber telling me how Sven, I think you should answer those questions to really give perspective on what you're doing, what this channel, what your research is all about. So I've decided to really answer all those questions to give a perspective on what we are doing, which is key, especially over the last months, we have gained so many subscribers so that also those subscribers know why are they subscribed to this channel. What is the value? What's the main message? And what is the strategy and the goal of this channel and everything that I do? So let's start.
My investment philosophy is very simple. I love to own parts of businesses. When I was a kid when I just started investing. I had six shares of this Croatian bottle company that had a total of 22,100 shares. And I was going around what if you haven't been to Croatia you have probably seen the bottle and I was going around I think I was 19-20 I was going oh, you know, if you're drinking one litre bottles 0.275 millilitres of that I have sold to you. So that's how I feel about owning businesses. I am feel as an owner, I look for the growth in the business, the quality, quality in the business and I own businesses even if I have shares. That's the difference between others, buying stocks, selling stocks, what's the stock to buy, and really owning businesses that will deliver value over the long term. Secondly, I'm trying to buy value so that no matter what happens, I am fine. We have seen recently Ray Dalio warning us about zero interest rates, about negative returns for investors over the next decade. So the environment is always, has always and always will be uncertain. IMF, I think they are right on their predictions just in 6% of situation. So they're always wrong, all the predictions are always wrong, which means that the environment is very uncertain. So how to find certainty? Well focus on value, focus on things on businesses that no matter what will do well. For example, I am invested in Gazprom, which is the largest producer, owner of natural gas in the world supplies 38% of European natural gas demand of the market. So it's very unlikely that there will be tectonic shifts there, that in one winter, Europeans will say we are not going to use gas anymore, perhaps in 30, 40, 50 years, but until then, I'll be getting a lot of dividends that I will reinvest for new cash flow streams. So I'm such an investor that looks for value and the margin of safety and that's also the message I want to give over this channel.
And then also the market is extremely volatile, but If you focus on the value, the value doesn't go far. If you buy an apartment building in Paris, okay, perhaps this year, we won't have a lot of tourists. But over the next decades, you are sure that people will come to visit Paris over and over again. So that's very, not temporary, but long term value. And then that's also my difference between my focus and the markets focus the markets always focused on maximally year, maybe some analysts analyse two years, and they model what's going on now into eternity, no changes allowed there. And the world doesn't work that way. The world is stable, stable, stable, boom, big shift, boom, big decline, big shift. And if you can understand those big shifts, then you have an advantage as an investor, let me show you. if we just take a look at Google stock, so now it is where we are 1463 as I'm filming this, let's look at this. It was $54 then it went up to 355, 2007, then down to 130-200 something but when it was here in 2009, analysts were focused on what will happen on the next year or two. Nobody was analysing what could happen and what actually happened, because the market is really, really myopic. So if you can be a proud owner of businesses that have the potential to do this over the years, then you have also the time to buy them at the right time, and patiently wait for beautiful things to happen. This is what I believe I believe that the market is really focused on the short term. I don't know where stocks will go over the short term, but I know that great businesses will do well and will deliver cash flows over the long term.
What makes a good investment? Well, as I said, cash flows over the long term growing cash flows, compounding etc. We recently discussed Nike in a video and this is the trendline, the compare trendline between owners earnings per share and the share price. Do you see the correlation as owners earnings went up, so did the share price. And that's pretty much it. If you can, individuate businesses that have growth in owners earnings per share. Well, that's all you need to focus on. And that is what will deliver excellent investment returns on what's my investing goal. It's pretty simple. I believe that investing in the financial instruments and if you put a lot of effort into it can really reward you improve your financial well being in your life quality. That's what investing is for me. And that is why I am investing. I have been investing for 20 years started with really small capital from born in a communist country, lived five years in a country that was in war so you don't have much capital but slowly, slowly I started that compound that it is allowed me to live a great life with the gains from the stock market. So I'm very grateful for that. And now I'm happy to share my story, my ways, my style with all of you here. So I thank you, again, for being subscribed to this channel. It really helps a lot. And then we also do a lot of charity with the proceeds from YouTube ads. So again, thank you for that each time you watch a video, feel good, because you are doing good.
On my investment goal, I have a portfolio and I hope to make it a multi million portfolio over the year. So we'll discuss that in a moment. And also perhaps in 20-30 years, just do Buffett style investing, look at what are the cash flows coming in year by year and then focusing on reinvesting those to create more and more streams of income for increase of my well being and wealth, all the wealth probably will be donated over the long term. So just like Buffett donating 99% of what I make during my life, enjoying it too, don't worry, but I really enjoyed the process if I can help people even better. So on my portfolios, how does my portfolio look like I have, let's say one core portfolio, same stock, same strategy, but just different capital addition timing. So, I have a private portfolio with stocks where I add funds when I have available funds and all the stocks in this private model in lump sum portfolio are probably or will be the same over time just depending in what is cheap when and when I add the money. Model portfolio as a lot of my subscribers add money each month so I said okay, here is a model portfolio, started in May 2018, 10k start and then I invest 1k per month. I buy something each month, so for those that want to buy something each month, I have such a portfolio. If I make 12% per year Over the next 20 years, it will be 1 million. Lump sum portfolio for those that have invested lump sum amount of money, I have a lump sum portfolio, we started with 1K over 2019, there will be no additions here. So that's the difference between managing this and this, the positions are almost the same.
And then I also have a research portfolio. So all the interesting stocks that I find, I see that if I own them, I know them much better. So as a service to my subscribers, I want to push it up to 50 stocks that I own, also small positions, but if I own them, I understand how those move I watch them much more carefully. And then when those will become great buys or I'm convinced that those are great businesses. I will put them into my core portfolio. So this is pretty much the strategy.
And then of course real estate, I'm looking At financing options at the moment for real estate investing opportunities, just to diversify and also probably do some good with this because there will be a greater good if we buy one of the real estates that we have an eye on so all positive here.
How many positions? My core portfolio, the goal is to just have a few positions because I prefer concentration into quality and value, something that I'm really sure of rather than diversification. diversification is for protection against ignorance. And I really concur with Charlie Munger and Warren Buffett on debt also depends on the market. Warren Buffett's portfolio went from three positions to 20-30 depending on what is going on in the market, on the research portfolio, hope to push it to 30-50 stocks, own those 30-50 stocks, and then simply follow them make models about them and say, Oh, this is really cheap. This should go in the core portfolio because it's a low risk, high reward investment.
What is my portfolio allocation? I'm really against portfolio allocation. Some say you have to have so much in bonds, so much in emerging markets, so much in Europe so much in US, so much in this, so much in that. I don't see any value in having something fixed. I see value in oh, here is value, let's put our money there here is well, let's put our money there. So my portfolio allocation we could say is 100% value, no matter whether it is in the world, if I can find low risk, high reward investments, then all in on value.
What's the holding period? Well, hopefully never hopefully you find businesses like Coca-Cola that keep on delivering for a century. Keep on paying dividends and keep on rewarding you and you keep just reinvesting the proceeds. But then the next step is selling if something isn't like you thought it was where the goals will not materialise. Then I sell them Immediately I love to cut to the weeds, it's better to cut the weeds. This is a very tough psychological situation for all of us. So it's better to cut the weeds and water the flowers. And that's also what I strive for when it comes to investing. If the risks increase and the reward goes down compared to other positions, other opportunities or compared to the portfolio positioning the way in depending on the portfolio, then I might also sell or trim some positions depending on what's going on. So I don't have a preset answer, just depending on what's going on in the market.
On my current work. I'm currently researching all the stocks in Austria. You can check that on my stock market blog, just so www.svencarlin.com. So you can see here the email address. You have my blog book, stock market investing free course, charity is what we do. Thanks to you on this YouTube channel. And here you can read many, many recent articles that I do as part of my initial research on things.
So I would like to conclude here that investing something that many miss and one of my key messages is that investing is a lifelong learning process, lifelong process. Everybody thinks okay, I have this money I have to invest it 15 minutes bam, bam, bam, bam, sold, and I can go on. No, that's not investing. That's the fastest way you can lose your money or sooner or later you will lose your money with such an attitude. Perhaps you'll have 10 great years like the last 10 years were, but if you have 10 bad years, you're likely to lose that even the money that you made in 10 great years. So investing is about finding the right vehicles that will bring you to your goals, adding a little bit here a little bit there overtime, and building a great fundamental portfolio. Over the long term, that's what I'm doing. That's what I'm focused on doing. That's investing for me. And that is what this channel is all about. If you have any other questions that you want to see answered, please put them in the comments. Thank you for watching, and I'll see you in the next video.
