All Roads Lead to Rome, But Only One Road Leads Into Value Investing

And It All Starts With a Copy of The Intelligent Investor.

My Background

My name is Anders and I have been investing for close to 15 years. I have a fairly academic background with two master degrees within auditing, law and economics.

I have used my academic merits to work in the auditing industry (Big 4) and the private equity industry (something equivalent to SKion Gmbh). As of currently, I work with risk management in the financial industry.

Now I am launching a newsletter, reflecting my investing journey. I actually used to run a blog, but that was about fly fishing and in my younger days.

In the following, I will give some color on my background story. I will also inform you about what you should expect from this newsletter which is about uncovering high-conviction cheap bargain stocks to be found obscure places. The kind of stocks an early Buffett would look for.

I hope you will read along.

An Unconventional Way Into Value Investing

Back in high school, I was selected for a concentration in physics, mathematics and astronomy. One day, I found myself a little lost in a physics class revolving around particle or high-energy physics. I remember, I thought … damn … this is hard stuff, how am I going to perform for the exam.

While at class, I figured out I had a winning betting ticket on some ended football matches. I am not a football fan and it was only a tiny bet on a suggestion from one of my good friends, who played soccer professionally.

Anyway, I had that winning ticket. Not a big amount but I recall it was around $1,000 to 2,000. I kept thinking what I would do with the money while in class. At last, I figured out it would be a good starting point for accumulating and kick-starting my investment portfolio. This made my day, even though I felt mentally exhausted from the class and from my frustrations about the exam. It made my day because I thought I might instead excel in investing and might one day be able to amaze a larger sum of money which I always could fall back upon, should certain things in life not turn out as expected. Hence, after class I hurried to the local bank for redemption of the betting ticket so I could get started investing.

Lessons Learned From Short-Term Trading

When you are young and receptive, you are also very sensitive to what the internet throws at your way. And I was not spared in this regard as I had an early time experiencing more frequent trading, but I actually met a mentor who really did earn his living this way - Flemming Kozok. He actually had amassed close to DKK 30-40 million in trading gains from primarily short-trading activities in relation to washouts in small- and nano-cap stocks. There have been writings on him in several books (e.g. the Danish book ‘‘Spekulanterne’’).

Although I really tried to chug along, I never really got familiar with the methods he used and his repertoire. Trading just was not for me.

I do not have contact with Flemming as of today, but I read that he used to help the Danish SØIK (Danish State Prosecutor for Serious Economic and International Crime) with localizing the defrauded 12,3 billion DKK from the Danish Government in relation to the CumEx-trade and the dividend scandal, primarily involving the notorious mr. Sanjay Shah.

The Pick Up of Graham’s Intelligent Investor

After my short ‘‘profession’’ as a fancy day trader, I began to elevate towards Warren Buffett and other prominent value luminaries.

One day, I ordered the ‘‘Intelligent Investor’’ by Graham as I quickly found out that this was the place to start and together with ‘‘Security Analysis’’ by the same author was the bible within the value investing community. The book took some time to find its way to my door.

Eventually and finally, the book found its way and I just jumped into it. I recall, I just felt - this is it - this makes sense fundamentally, logically and above all it was time-tested. Especially, the net net way of compiling a portfolio. It just made sense, you would do well by buying securities trading below their conservative measures of their liquidation values on a group basis.

From Net Nets To a More Sophisticated Value Investor

You might have guessed that it all started out with net nets. And so it did. I compiled the best global cigarbutts, I could find. Preferably with a catalyst, low burn-rates and with positive earnings. I tried to implement Joel Greenblatts original forgotten magic formula, i.e. a portfolio of stocks selling for 85% of NCAV with a PE of less than 5 times. This strategy has been tested to deliver 42% in annual returns after all.

With time, my investment portfolio grew. Contrary to the opportunities, which dried up a little. I naturally evolved and graduated to also invest in other companies than the plain vanilla NCAV-type of stock, partly due to the net net supply drying up, the level of funds that could be allocated to individual names and because many of the companies morphed into perennial net nets, especially in Japan. I began looking into opportunities with more value accretive business execution, which ought to inflect the businesses and drive returns.

I thus also began to source ideas from corporative events like right offerings, spinoffs, divestitures etc., which I found out to be good hunting grounds after reading ‘‘You Can Be a Stock Market Genius’’ by Greenblatt. It was also at this point in time I met my second and right mentor and really expanded upon my network.

Later, I was also accepted for membership at MicroCap Club. Still working for the perfect pitch for the application for the majors (VIC, or Value Investors Club) hosted by mr. Greenblatt himself.

How I Invest Today

The one common trait that can be attached to me would be - bargain hunter. I love the game of uncovering bargains hidden in plane sight. This is so closely embedded in my nature as I am from a classic middle-class family with two hard-working parents. We would always be savvy and shrewd about our money, especially from my mothers private business endeavours which has made me very prudent and skeptical of banks and one’s dependence on them.

I am that guy who truly feel that price is what you pay and value is what you get. It’s in my dna. Therefore, I am also very flexible in my idea flow and very independent of specific ways of investing. To me, growth and value are joined at the hip and there is no such thing to differentiate between growth and value stocks. Growth is an element in the valuation of a business and the same goes for returns of invested capital, capital allocation and the like.

What I will say though is that growth and on-going business execution with decent returns on capital is in favour of time and the longevity of holding a stock. The wonderfull business should thrive and do well in time, contrary to the usual net net stock, where the waiting is in the one-off price appreciation to fair value. Hence, I am often willing to pay up for the superior business, but I almost never buy something above 15 times earnings as I would always be well-protected from a high margin of safety reflected in a low price paid, if my expectations should turn out wrong.

What to Expect From This Newsletter

I hope this gives you an idea of my background and my investing style. The past seven years have been remarkable, delivering returns in the high 20s—not to boast, but to give context. My largest regrets have been in relation to alternative costs in terms of companies I have ended up not investing in and not ordinary losses.

With time I have found out that I enjoy shooting my ideas out there and like to discuss with fellow and like-minded investors. I already have met some amazing people, but I hope to meet many more. While being contrarian and independent often makes a good and rational value investor, swarm intelligence also do its trick from time to time.

You should expect articles and write-ups on specific companies, with no limits as to country nor size (although I usually rotate in the micro-cap sphere). I can’t guarantee a certain frequency on my posts, as I don’t want to sacrifice quality for the sake of meeting a publishing cadence.

I will search for bargains, the early Buffett Partnership used to aim for in their pursuit of compounding at 50% a year, which Warren himself has confirmed as achievable as of today if he were to manage smaller sums.

The securities mentioned usually are to be found in obscure places, like on minor exchanges and with low float ratios or minuscule market capitalizations. Do not expect the stocks to be mentioned on Seeking Alpha, Twitter or in your local business magazine like Bloomberg or the Financial Times.

You should therefore subscribe if you would like to be informed about bargains up for grabs in today’s market which have not found their ways to the ordinary investor. In other words stocks that are flying way below the radar in their pre-discovery phases.

I try to be authentic and will primarily write about securities, I hold in my own portfolio or from a result of my research on prospective portfolio companies.

Thank You For Now

I hope you will follow along and read my posts. Some will be paywalled, primarily due to the stocks mentioned which may be very illiquid, but I also expect to publish a lot of free content.

And on another note, I passed my physics exam with a good outcome. I guess, we all may feel ourselves a little lost at times.

Remember to subscribe, if you want updates sent directly to your email.

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Until next time. All the best,

Anders

Legal Disclaimer

The Bargain Newsletter is a publication and only for informational and educational purposes and does not constitute personalized investment advice, a recommendation, or a solicitation to buy or sell any security.