Expert Investor: Tobias Carlisle – Value Investing During COVID-19

Bryce: [00:00:57] Hello, Equity Mates, given how quickly things are changing in markets at the moment and a lot has happened over the last few months, we just wanted to put some context to the date at which we recorded this interview with Tobias. We sat down with him on the 21st of May 2020. So just keep that in mind when listening. And we very much hope you enjoy this interview with him as we had a fantastic time. So enjoy. Welcome to another episode of Equity Mates, a podcast where we help you learn to invest in 45 minutes or less. We break down the world of investing from beginning to dividend so that you can hopefully make some returns. My name is Bryce and as always, I'm joined by my equity buddy Ren. How's it going, bro? [00:01:38][41.7]

Alec: [00:01:39] I'm very good. Bryce very excited for this interview. We have another returning guest who we first had on the show in our very early days back in 2007 time. [00:01:49][9.7]

Bryce: [00:01:49] Yes. Continuing with our expert investor series. And perhaps we managed to convince our guests back in the day how big we thought we were and for him to come on this show. And he fortunately said yes. But since then, a lot has changed. And we're very excited to welcome Tobias Carlyle back to the show. Tobias, thanks for your time today. [00:02:08][18.9]

Tobias: [00:02:09] Thanks so much for having me. I only came out because it was called Equity Mates and it sounded like fun. [00:02:12][3.8]

Bryce: [00:02:14] Hopefully the fun continues in this episode [00:02:16][2.0]

Alec: [00:02:17] and we've got a lot more serious in the last three years. [00:02:19][2.1]

Tobias: [00:02:20] Serious, spurious, [00:02:21][0.8]

Alec: [00:02:23] or you'll find out, I guess, [00:02:24][1.3]

Bryce: [00:02:25] for those that haven't had an opportunity to to listen to our first episode with Tobias, we recommend that you go back and do that. But just a quick rundown on who Tobias is studied at the University of Queensland, Bachelor of Business, majoring in finance and a bachelor of law, as you probably heard by his accent. He is an Aussie and now living in the States, started his law career at a couple of Australia's more prominent law firms before pivoting into investment management in 2010 with Trudgen Investment Management. He's now the founder and managing director of Acquirer's Funds LLC. He's the portfolio manager of the Deep Value Strategy, which we'll dig into in a bit. He's the author of The Acquirers Multiple and Deep Value and founder of the Acquirers Multiple, which is a website offering stock screening and portfolio investment strategy. So a lot to unpack. We're pretty pumped to have you to buy. So let's get stuck in that sense. [00:03:23][58.0]

Alec: [00:03:24] Fun. Tobias, we like to start these interviews with a bit of a game. We call it overrated or underrated. Perhaps it should be called overvalued or undervalued, but essentially we throw out an index, an investing theme or an idea, and we get your thoughts on it just to get a sense of who you are as an investor and how are you thinking about markets. So you're up for playing? [00:03:44][20.3]

Tobias: [00:03:45] Yeah, for sure. Let's do [00:03:45][0.8]

Alec: [00:03:45] it. Well, we're an Australian podcast, so we like to start locals. So overrated or underrated. The ASX 200 index, [00:03:53][7.3]

Tobias: [00:03:54] globally underrated, overrated by Aussies [00:03:56][2.5]

Alec: [00:03:58] and I. I like that. [00:03:59][1.1]

Bryce: [00:04:00] And that's overrated or underrated. The Nasdaq overrated. [00:04:03][3.6]

Tobias: [00:04:04] Overrated everywhere. [00:04:05][0.6]

Alec: [00:04:06] As listeners will hear, you're a deep value investor. And so looking at some of the valuations in that index, that's not a surprise. Yep. Next one, overrated or underrated index investing. [00:04:18][12.2]

Tobias: [00:04:19] Yeah, that's a tough one because it depends on the index. I would say it's probably mostly overrated, but there's nothing necessarily wrong with index investing, [00:04:30][11.3]

Bryce: [00:04:31] overrated or underrated. Investing in emerging markets [00:04:35][3.5]

Alec: [00:04:36] underwrite a nice one. Now, this next one might be a little bit unfair given your now based in the States and probably aren't keeping too close an eye on it. But it's obviously a big topic in Australia, so we're going to ask you it anyway. Overrated or underrated? The Australian residential property market. [00:04:52][15.7]

Tobias: [00:04:52] Yeah, that is that is a little bit tougher. I do read I do read the Aussie newspapers every day just so I know what's happening. I think that property has been, you know, since I was like earning money, since I started working and I started working 2000, April 2000. It's always been really expensive. So I'm guessing I would guess that it's still overrated. But I probably need to get some advice from you guys in a moment. [00:05:16][24.1]

Alec: [00:05:17] Yeah, still very expensive. Nothing's changed. It's just keeps running. [00:05:20][3.6]

Tobias: [00:05:21] The only place more overrated intended property than Australia is bloody. [00:05:25][4.4]

Bryce: [00:05:26] California is really where you're living right now. [00:05:31][5.3]

Tobias: [00:05:32] It's just bananas expensive here. [00:05:33][1.4]

Bryce: [00:05:34] Yeah. Wow. So overrated or underrated. The impact of coronavirus on the U.S. economy. [00:05:40][6.5]

Tobias: [00:05:41] Yeah. That's that's a really tough one. And that's it's getting really political over here. I would say. I was nervous about it, really nervous about it initially as it's going on, I think I've got less nervous about the virus itself, but I think that the impact is pretty serious. And if you look at the market over here, you wouldn't necessarily know that. So let's say that it's probably underrated at the moment. [00:06:05][24.2]

Alec: [00:06:06] Yeah, we're keen to unpack that in later in this conversation, because watching from afar and seeing the disconnect between the market rebound and the conversations around the US economy, it's deeply confusing and something's going to have to give one way or another, it feels like. [00:06:22][16.0]

Tobias: [00:06:22] That's it, I'll just be adding to the confusion, just to be clear, but I have I have some thoughts. [00:06:27][5.2]

Alec: [00:06:28] That's great. That's great. But to finish off this game, last one, overrated or underrated Bitcoin? [00:06:34][5.3]

Tobias: [00:06:35] Yeah, that's another that's another really tough on from my perspective. Bitcoin is currency and I just don't trade any currency because I don't have any edge in it. So it's hard because it's I would say that for the Bitcoin it's it's overrated. But for the very vast majority of the population who don't know what it is, it's probably underrated. Probably got a way that underrated. [00:06:56][21.6]

Alec: [00:06:57] Yeah, well, we're on finance Twitter. We're not so much participating, but we definitely observe it. And there's definitely a lot of people writing it on finance Twitter. So we're interested to see how the Bitcoin story plays out. Yeah, for sure. So, Tobias, if we move to your background, hopefully a lot of people have listened to the last episode. But for people that have Bryce obviously gave an overview of your background. But can you tell us the story of how you went from studying law at the University of Queensland to managing money in Southern California? [00:07:29][31.5]

Tobias: [00:07:29] That does sound like a funny path, doesn't it? I grew up in a country town. I grew up in a little country town. The Australian Outback had no idea. I grew up in Roma in Queensland, just had no idea what kind of jobs you could do. I thought there was like you could be a doctor. I mean, as a professional, you could be a doctor, a lawyer, an accountant, maybe like a dentist. They were the only professions that I really knew about in town. None of them sounded very good. My dad said, be a lawyer because they make lots of money. Turns out that's not true. But I did that anyway and worked at Minter's and cause in I don't even know if they're called that anymore because they've all been taken over by Magic Circle firms. They've got brand new names now, but they were I was in M&A, did some private equity and it was just an interesting time because I started close to the top of the market in the dotcom boom in 2000, April 2000. Thought I'd be doing like lots of venture capital tech type deals. Market crashed. Like in the first few weeks that I was starting there, I didn't really know that the market had crashed. I didn't know anything about the stock market, wasn't really following it. I just noticed that the work went from being kind of all of this capital raising and IPOs or floats in Australia to mergers and acquisitions and fixing these busted listings and that sort of thing, which I found really interesting. And there are these new guys who appeared who are all corporate raiders from the 80s who came back and were chasing after these cashed up dotcom businesses. And I couldn't figure out why I could read Buffett's I'd read intelligent investor, read Buffett's letters, read security analysis, you know, not very closely, but I read them. And I had that rough idea that Buffett like these high return on equity businesses that were kind of undervalued. You know, none of these things had businesses. They were just basically selling books in Australia at a loss, raising venture capital, selling books or something like that at or don't know if you remember those kind of companies. There are lots of these things around. There was this bloke from Western Australia who was a lawyer for Farooqi. I think his name was for it. Can maybe I'm forgetting that I still around the thing. And he went he would chase after these and, you know, try to get control of the cash, finally figured it out that that's what he was doing. And I thought is a really interesting strategy. And so I went back and reread security analysis. There's these chapters in the early editions because I was the kind of freak who thinks you've got to read the first edition to kind of get the real juice, that everything gets worse as it gets published, as it goes along and they talk about then it's like Chapter 28, Graham talks about liquidation value investing, net current asset value investing netnet. And I kind of got that you could look at the balance sheet and work out what these things were worth. And Australia's got this history of corporate writing for these kind of businesses. It was Robert Holmes, a court. And then subsequently, guys, he didn't do it as well. But like Alan Bond Circusy and all these guys who did it, that was what was sort of happening when I was growing up. So it's kind of aware of it. I thought if these nets ever come around again, I want to go and try and invest in these things. And in 2007 to 2009, they actually reappeared. And so I had worked in the States as a lawyer by that stage in San Francisco doing some tech M&A. And then I'd come back to Australia to work as general counsel of a listed telco called Pipe Networks, which has been taken over, got taken over in 2000, eight or nine. And I was working in Trojan investment management work, Fitzroy Harry. He was looking for undervalued assets with a catalyst and he'd provide the catalyst sort of like actor activist investing, but not always. He's just he's looking for undervalued assets, very similar strategy. And I didn't want to have any conflict with what he would do and what I could invest in. So I started looking at the states also because my girlfriend at the time is that my wife was American and I had a plan to come back eventually. So I thought it would be more helpful to be familiar with the US markets and with Gap. And there just a lot more net nets around in the States because it's a bigger market and they're just things that get picked over. If you're an Aussie, you get used to investing in these smaller, you know, stock prices below a dollar. Don't bother because the listing rules say you can list at the 20 cent stock price in the states. That's like a busted IPO. So people get really nervous, you know, the penny stocks and things like that over here. That didn't bother me at all. And I found that through Twitter. I started writing a little blog in 2008 called Green Backed. The whole idea was just find these net nets or sub liquidation value companies where they had an activist on board who was trying to bust them open and get the cash. And I bought a whole lot of them did really well. They were all very public. The opportunity then disappeared. And so I had to kind of work out what I was going to do. And I wanted to use the same philosophy of like finding these things that were really deeply undervalued. You kind of looking for balance sheet value, but with a little business attached to it that is doing really badly but could do better. And when it does better, you get valued on a business basis rather than kind of on the balance sheet. I did some research, found this guy through my blog, through Greenbelt, who was a PhD at Booth, which is kind of the best quantitative school over here at the old Chicago School of Business. And we partnered to go and find every bit of academic and industry research that we could on invest value, investment, fundamental investment strategies, credit, anything that would tell you whether a company was healthy, whether it was undervalued, whether it was in distress, whether there was earnings manipulation of fraud, where whether was making lots of money. And it was just kind of hidden. If it was buying back stock, it was heavily shorted. All these things we built this model. The book is called Quantitative Value. It came out in 2012, published by Wiley. And there's a fund that was set up to trade that strategy called Quantitative Value Ticker in the States as Kevo Cuvee. I have nothing to do with it, but it runs that same strategy. While we were doing that, though, I was sort of because I'm more of a Deep Valley guy there than a kind of Buffett style investor. I just noticed that there are all of these really weird things that happen to these businesses when they get deeply undervalued. So I wrote a second book that came in 2014 called Deep Valley. That one talks about what activists do, what private equity firms do. And that's sort of that's the real genesis of the strategy that I run today. So I wrote another book. I realised that basically picking stocks is about half the battle. You've got to be able to manage your portfolio. That's that's literally half the battle or more. So you can, you know, make sure you sizing up good opportunities and sizing down worst ones. And that's called concentrated investing came in 2016 when interviewed all these guys who had twenty five year plus track records of outperformance, including Munger, Charlie Munger. Oh, well, Lewis Simpson, who ran Geico equity book for a long time, Christian s.M, who's known as the Nordic Warren Buffett, because he's like an oil and gas kind of investor with this incredible track record. Glenn Greenberg, who's the brave warrior, used to be a shift in capital and basically then did some quantitative analysis as well. So final book there in twenty 2017 was called The Acquirers Multiple, which is just basically a distillation of all of my strategy. And then I launched a fund called the Acquirers Fund, which is US domestic equities, only mid-market and above mid-cap. So it's roughly two billion billion minimum up to anything up to the biggest companies in the market. And we look for the kind of things that activists and private equity firms do, try to get long about 30 names and try and short about thirty names, which tend to be much more heavily along than we are short. So we're currently one hundred per cent long, 30 per cent short, but we're likely to be most of the time like one hundred and thirty per cent long, 30 per cent short, which is about net one hundred percent, and that's been running since May last year, just had the one year anniversary. And that's the story. [00:15:15][465.1]

Alec: [00:15:16] It's a fascinating story. I think it's a particularly cool story that you started in one field and just found an interest in finance. And, you know, you started with a blog and it's taking you to three books in a managed fund in another country. It's a pretty inspiring story for what Bryce and I are, you know, trying to do as we work one job but have found a passion for finance. I appreciate that. Thank you. I think if we move to your investing philosophy, because it's a fascinating one and it's one that I think intuitively makes a lot of sense for people. So deep value, I guess. Can we start with what's the difference between value investing and deep value investing? [00:15:54][38.2]

Tobias: [00:15:55] Value investing is just the catchall term for trying to buy something for less than it's worth. And that's easy to say or the ratios and things are easy enough to calculate, but it is pretty hard to do. You find over time companies are, for the most part, pretty much correctly valued or overvalued on the market. But if you patient, you can find stuff that's undervalued when. Deep value, that's to distinguish it from so Buffett has this method of valuing companies where he looks for what he calls wonderful companies at fair prices. So his definition of a wonderful company is something that has a sustainable high return on invested capital. So that means it's better than average. Basically, it's a business that you can put it that the management can invest a dollar into, and it returns better than about a dollar 13, which is about the average return on equity, about 13 percent for stocks listed in the US. And so that company should be valued at a premium. And if you can find them available at a discount to the market average, this is not exactly the way it's done. But just just as a rough idea of what is happening, then that's a company that you can buy and it will compound over time. And so the growth in the company, your own holding your own return will eventually match the growth in the underlying business. Plus, you get a little bit more because you've bought it at a discount to what it's probably worth. What I do is something a little bit different. Buffet says he doesn't like to invest in fair companies at wonderful prices, but that's my strategy. So basically, I don't care so much what the current return on invested capital is for a business. What I'm looking for is something that's just deeply undervalued. And the metric that I like is the acquirers multiple, which is enterprise value to operating income. So I'm just looking. What are you paying? You take account of the debt and the cash that it has in any other kind of liabilities, preference shares, underfunded pensions in the states, minority interests, those sort of things, give it credit for the cash. That's what you actually pay in addition to the market cap. And that can be bigger or smaller than the market cap. And then you compare that residues of what you're actually paying for to the operating income coming into the business. And that's the recurring income that comes in that excludes any one off sales. And the idea is that that sort of company is something that's attractive to when it's cheap on that basis, that's attractive to private equity, into activist, because private equity likes to leave these companies up when they take them private, pay a little premium, take it private, make some money, flip it back onto the stock market. Activists like something similar, maybe the balance sheets a little bit lazy because it's got too much cash. And so they want to pay that cash out and that's just found money if the valuation doesn't change when you do that. So if you can hear my kids in the background, we're all quarantined together, basically. Joel Greenblat, another great US investor, tested Buffett's strategy, quantitatively, wrote the most successful value investing book over the last like 15 years, probably called the little book that beats the market. And he updated it to the little book still beats the market. His strategy is called the magic formula. Basically, just wonderful companies of ones that have a higher return on invested capital at a fair price is sort of the low price on an Ibut basis, very similar to my acquirers multiple. When I test that strategy, it does quite well. It beats the market throwing everything that you can think of at that strategy to make sure that it is the returns are real. But when I take away the quality metric, when I take away the wonderful company requirement and you just use the value requirement, you find that you get better performance on a raw basis and on a risk adjusted basis, which really makes no sense at all. But it's the case and it and it works the only times that it sort of underperforms through periods like we've just gone through where the market is overvalued and it tends to be picking companies that are growing at a faster rate. So there are periods like this. There are about six times where this has happened in the data. They all happened at the very end of bull markets and we're currently going through one. Now, this is the longest one that has ever occurred before. So there's lots of big quantitative investors over. AQR is probably the most well known run by Cliff Asness. He's written a series of articles saying this is the best value opportunity he has seen in the data. Rob Arnott, who runs our research affiliates, another multi 100 billion dollar firm, has been saying the same thing. I did some research over the weekend and published this on Monday called Is Value a Value Trap. Same thing. Just take any value metric, price to earnings, price to cash flow, price to book enterprise value to EBITA and enterprise to ibut run it back against its own average there in that value portfolio. Everything is is cheaper than it's ever been before, basically. And that's funny because everybody remembers the dotcom pick as being the last time that value really materially underperformed. And we're kind of there or maybe even a slightly better opportunity than men. So deep value is sort of not so much caring about the quality of the business, looking more for the undervaluation. I have it it's not that I don't care about the quality of the business, it's just that I have a different definition of quality. And my definition of quality is a cash rich balance sheet, accounting earnings that turn into cash flows and a management that's taking advantage of the undervaluation by buying back stock or doing something else that enhances value. And I find that those things together do very well. But it hasn't done as well in in this market that sort of favours the Tequilla kind of names. [00:21:27][332.0]

Bryce: [00:21:28] That's it. I'm sure by now our audience are probably wondering how on earth you actually find these stocks. And I'm sure there's a lot that goes into it. But are you able to just broadly explain your your process of of finding such stocks? [00:21:42][13.4]

Tobias: [00:21:42] Absolutely. So, you know, I've got this quantitative model that has been built. You know, we built something like it for quant it for the book Quantitative Value, and it's been refined over about a decade. And the reason that you need to refine your quant model is the first time you do any kind of back testing and then run a screen. You find that the numbers that it's the names that get spit out of the screen kind of don't make any sense for whatever reason. It just sort of fills the model. And you look at these names and you know that they're all sort of uninvestable. And so it's taken a long time to keep on iterating between the model and the output to get a strategy that works really well in practise. So it looks like it's a good strategy when you run it over all of the data that we have running to running back to about nineteen sixty three point in time, but also gives you a portfolio that you could buy that you'd feel comfortable investing in. So it's not spitting out silly names, spitting out names that intuitively as a value guy you would look at and you would say, well, I know that's a good business, it's got a good balance sheets, got lots of cash flow and I think it's undervalued, so. That's the first stage of the process as a lawyer, I did a lot of, you know, one of the things that you do as a junior lawyer is diligence on acquiring companies or on, you know, if if stock is going to be part of the transaction or on on the target. And so that's going into a data room with a whole lot of sweaty accountants and investment bankers and other lawyers and picking through all of these folders. So I've done a lot of that through my career. I don't do that now with the data Ren I've got to do it with public documents. And that's a tedious kind of process that takes a long time. So actually, it's a service now that does it for me. But it's the same idea. They do a forensic accounting diligence on the on the accounts because there's a lot of wiggle room in the publication of accounts. There's a lot of stuff that gets pushed into the notes and there's a lot of interpretation and that can affect the valuation. So you don't want something that's hidden in the notes, that is material that should be on the balance sheet or, you know, could be reducing earnings or something like that. So I use a service that digs through all of these things, and that's the final sanity check just to make sure that there's no convertible note or something that will convert and will hand a big chunk of the company to some v.c or something like that. You've got to be very careful of that stuff in the States. And so that's the process. Basically, the model spits out the names long and short fed through this forensic accounting diligence service that actually hasn't ever resulted in many changes to the portfolio. I think it may have they may have eliminated one long once. It's mostly the model, but that's basically the idea. So we're just making sure that. We take what has been tested in what we know to work doing a final sanity check, and then that's the portfolio rebalanced on a quarterly basis, but we try to hold for longer than a quarter so we don't rebalance the whole portfolio. We're only rebalancing a portion of the portfolio when we do that. [00:24:37][174.2]

Alec: [00:24:37] Hmm. Now, Tobias, if people are interested in some of the names that your screens are spitting out, they can actually do that online. Can you just tell us where we can go and look if we want to see it? [00:24:49][11.8]

Tobias: [00:24:49] So I have a website called Acquirers, multiple dot com that's got this free screen or it just looks in that top 4000 names and it spits out the 30 names that best meet the criteria that I've just described long. It doesn't look at financials or utilities. There's a paid service that you can access, looks at the all investable as the top half of all stocks by market cap, small and micro, is the smaller part of smaller half of the market. The fund itself sort of takes that screen as and includes financials and utilities and then has that additional bit of work that I described before done to it. So the fund and the screen itself are sometimes a little bit different, but there is quite a lot of overlap between the two, because I do think that the the screen on the site is quite good, but the model for the fund does just a little bit more in it because of that second stage. And the universe is slightly different. But the fund is the Acquirers Fund and the ticker, Ziggy, all of the holdings for that are publicly available to on Acquirers Fund dot com. [00:25:50][60.9]

Alec: [00:25:51] I like it. I like it. Now, if we look at the acquirers multiple you said it before, was operating earnings to enterprise value or about enterprise value. When we think about the economic situation that we're in now, where operating earnings for the rest of the year and potentially for years to come are so uncertain, do you do anything in your screens or in your models to account for that uncertainty? [00:26:16][25.0]

Tobias: [00:26:17] So here's the thing. As a value go, it always kind of going into situations that are uncertain. It's just sort of the nature of value investment that really good opportunities don't appear until the company stubs its toe. And so there's always a question, will the next quarter or two look like the last one or will there be some impact on the business? So I haven't at all changed what I do through this process because I just think it's one of those opportunities that you rarely get where. So we rebalance March 20, which was very close to the low this time around, and we picked up names that I would never have expected in a million years to get cheap enough for me to buy it because there's such high quality names. And so I can give you as an example, Berkshire Hathaway, which is Warren Buffett's company through my entire investing career, has only been cheaper on one other occasion or was as cheap on one other occasion. And that was March six, 2009, right at the very bottom. And it's only announced a little bit from that. So it's still an incredibly cheap business, but it's also a very high quality business. It's got one hundred and thirty seven dollars billion in cash. It's got cash for about twenty billion dollars a year. Plus, it owns all of these other securities that have looked through earnings of about twenty dollars billion. So it's got forty dollars billion of cash flow. Four hundred and forty dollars billion market capitalisation. If you back all of that out, you can see basically on an on an orbit basis, it's trading somewhere between seven and 10 times, which is just sort of crazy cheap for something that's run by the greatest value investor to probably walk the earth, certainly who's alive today. So that's the sort of company that we would buy where there's some concern. Have they written some insurance that might be impacted by the shutdown? What will the next quarter look like? What will the next year look like? Maybe we don't know. But you've got to kind of trust that management know what they're doing. The company has been run conservatively for a really long period of time for fifty years. And it's unlikely that they've done anything silly this time around. They've probably got the financial resources to weather whatever happens. So that's the kind of stuff that I'm looking for. I want a really conservative balance sheet, solid cash flows, kind of almost no matter what happens. Although I Southwest Airlines, which is a domestic carrier over here, which is important because international flights are largely stopped, domestic flights are still ongoing, even though they're still losing money. You get this opportunity to buy it at this ridiculously reduced price. Some question over whether they can make it through. But if any airline can make it through, it'll be Southwest because they've got the lowest cost structure, the best balance sheet, and they're the most profitable on assets. I don't think there's any question about what happens to these things long term. The question is what happens to them in the short term? And that's exactly the kind of opportunity that you want as a value go. [00:29:10][173.0]

Bryce: [00:29:10] So you mentioned, Tobias, that there's a lot of opportunity out there at the moment, but over the last sort of 10 years or so, we've witnessed a record bull run across the markets. And I imagine that it would mean that finding deep value becomes harder and harder. So firstly, is that a correct assumption? And if so, do you adjust your process somewhat to increase that pool of opportunity, or do you just sort of sit tight and wait for a moment like this to come? [00:29:38][28.0]

Tobias: [00:29:39] So it's a funny market. It's quite a bifurcated market in a sense that the very techie names. So if you look at the S&P 500, for example, a very large portion of it is what they call fan mag, Facebook, Amazon, Netflix, Google, Apple, Microsoft. And that's generating something like 20 percent of the free cash flow of the index. And that's driving a lot of the return of the index. And so the other 80 per cent sort of become less and less relevant to that index, which is kind of amazing. It's something that you really only see at market peaks. That's not to say that I don't think those businesses are great. There's a phenomenal businesses. They're just very, very expensive at the moment. And that has happened before. In the late 1990s, stocks got very good. Stocks got very, very expensive and then traded sideways for a decade. That doesn't exactly answer your question. So what is happening is that these stocks have kind of they did really well, depending on how you were doing, but you could basically kept up with the market or beat the market up until about 2017 or 2018. This is assuming that you're not just running a straight systematic value kind of strategy, which nobody really does. Most people are running. You know, they've got additional quality metrics like I was describing before, cash on the balance sheet, cash flow, conversion of accounting, earnings into cash flow for the business, buying back stock. All of those sort of things indicate a high quality management and a high quality business when you add those things and you kept up with the market until about 2018, but it's lagged since then. And so that value opportunity set has actually been getting unusually rich and unusually high quality. And it's now at this point where the value opportunity set in the states in particular is amongst the best it's ever been, despite the fact that the market's really overvalued. In order for that to happen, value has to kind of lag and it doesn't do as well. And so it's been painful, you know, basically since the end of 2017 through to date being a value go because the market has rocketed ahead in value, hasn't done as well. But now when I look at it, the spread between the most overvalued and the most undervalued is the widest it has ever been. And that's being driven by both an overvaluation and extreme on the expensive side and also on the valuation extreme on the cheap side, which is very unusual to see both of those things together. So I think what happens from here value is an unusually good opportunity. The spread will close eventually over time. I'm not calling it right now, although there's some indication that it may have started happening around about April 2nd. That doesn't necessarily mean anything. It could find a new low. It's just that I watch it pretty closely. So I have watched it sort of start closing a little bit. And the undervalued leg has started outperforming the market since April 2nd to. So I sort of think where the opportunity doesn't last very long, you can go back and look at other peaks. There was one in 2000 and that was one at the very bottom in 2009. There over very quickly. And the very vast majority of the returns of the whole cycle come in this year or two from the bottom. And I think we're kind of the opportunity set is great and it looks like it's closing. So I'm very fortunate to have got the fund that in time to capture that, which is what I was eager to do. It would have been an absolute disaster catastrophe if I missed that. But it looks like it looks like we've caught it, even though that means that the first year of running the fund, it's underperformed, hasn't been great. But I kind of think the future is much better for it. And it should be a good five or ten years or so, I think. [00:33:07][207.8]

Alec: [00:33:08] Well, we're looking forward to watching it all play out. You've said that there's a great time for value and there's a lot of opportunity. Are there any specific names that are, you know, really flashing up again and again in your screens and that you're paying particular attention to at the moment? [00:33:22][14.4]

Tobias: [00:33:23] Yeah, I'll come back in a few years time and you can you on it. I said this and I've got a handful of names that I really like at the moment. Berkshire is really hard to pass up just because it's going to be hard to lose money in it. You know, the downside is very minimal, I think, because it's got such a high quality balance sheet and it owns such high quality businesses and it's run by Buffett. The issue is Buffett is getting older and it's it's a little bit morbid, but he's going to pass away at some stage in the next decade or so. Probably that's not a stretch to say that, because I think he's nineteen now, which is a good, good innings. But lots of blokes get through to one hundred Kievan going, carry a bat, get to 113. That'd be great. I'd like to see that, but I still think it's almost doesn't matter what happens because the guys, if there are other guys in there who are Ajayan who runs his reinsurance business, and Ted and Todd, who are the guys who sort of manage a lot of the Capitol. Now for Berk's you know what they're doing, so I don't think it's it's a disaster if he passes away, very sad, but not a disaster for the business. Then there's Marquel, which is another insurer run by a sort of buffet like investor operator and a gentleman by the name of Tom Gayner. He's 58 years old. That company has a market cap of about 11 billion dollars against Berkshire Hathaway's 420 Dollars billion. So they've got many more opportunities to invest than Buffett does because they can find things that are smaller and will be meaningful for that business. And he's got a much longer runway because he's younger. [00:36:21][177.3]

Tobias: [00:36:22] very good track record of doing the right thing as they've gone along? Seem to be pretty careful, but you know, they're not Buffett and it's not Berkshire Hathaway, but it's still a really, really interesting opportunity. I like stuff like Schwabe. So that's online investment and asset management. Brokerage business in the States probably got the most recognisable name. It's the biggest it's got a fantastic balance sheet they've just purchased or they're about to close on TD Ameritrade, which is another big one over here. They paid a premium. So I think that paid about two cents for each dollar of assets in TD and they're currently trading. Schwab is trading for one cent. So that tells me that the valuation that they're putting on other asset management business is about two times where they're currently trading in the market. I think that they've been growing over the last three years at about 13 per cent a year. I think that's likely that they keep on going around that kind of right. Sounds like everybody is trapped at home for quarantine's doing a lot of trading. Probably need a better app than I've got. That's pretty easily remedied. So I think those are the kind of businesses that there's really no concern for me about the business. There's no concern about the balance sheet. You're not going to lose money in them. And there's a pretty good opportunity to make. I would say that each one of those outperformed the market over the next decade. That's kind of the way that I think through the investment opportunities. [00:37:45][82.4]

Bryce: [00:37:46] So, Tobias, recently we've had the Berkshire Hathaway annual general meeting, something that all investors pay close attention to. And we'd love to know your thoughts on the fact that we've had this market correction and Buffett and Munger and the rest of those that work at Berkshire, I have decided not to actually buy anything. What do you think about that? [00:38:06][20.2]

Tobias: [00:38:07] Yeah, that was spooky. Honestly, I didn't go to any meetings until kind of a few years ago. I went to my first one in about 2017. I think Omaha is like going to Toowoomba and I come from a little country town. So I says with the greatest love and respect for a little country towns. But American country towns are different to Aussie country towns. I've got a city centre that looks like downtown Brisbane. It's pretty big, but you don't have to go very far away from the city centre. And you basically in cow paddocks, which is not quite Brisbane, maybe it's more like Toowoomba. So it's a funny kind of place to go. And it's a fun being because there's 50000 of your best mates all come in and then everybody goes out in the town centre and drinks and you run into Bill Ackman or, you know, all these legends are running around drinking. It's really fun to do only for that reason. Didn't go this year for the obvious reason that it wasn't on the it was televised as very weird. Buffett sitting alone in the auditorium that usually has 50000 people kind of under a spotlight with this little slide deck that looked like he'd put it together in like times new for you would be disappointed if you'd seen anything else, like if it had had animation on it. I actually think that would be funny if it had a few swirly changes to the to the slides, but it was as pretty good. He rather [00:39:20][73.0]

Bryce: [00:39:20] just handwritten [00:39:20][0.2]

Tobias: [00:39:21] it. Yeah, well, maybe he didn't hand it to the secretary and she was like, here it is, the graphics, the message, the message was a sombre one and the message was a little bit I was a little bit spooked for it, but I got the sun. It was here on Saturday and then I got the Sun Skerries in the Monday Skerries from it. It was basically they hadn't bought anything which is completely out of character for them every other time that they have done, you know, every other dip. I don't think Buffett has ever missed a dip in his entire career. And this time around they weren't buying as the market went down. And Ted and Todd, who have their own 13 billion dollars or so to manage, they didn't buy anything either. Instead, what he did was he sold out of the airlines. He sold down a few banks to get under 10 percent. And he gave this very sombre Dow kind of view of the potential impact of coronavirus on business, that the interpretation that I've seen afterwards as well. They're kind of they're right, this super cat, these big disaster bonds as well, they insure against these things. And so what happens if a hurricane comes through and hits New York while this is going on? You know, that would be catastrophic and they'd have to pay it a lot. So they need to be kind of impregnable of something like that happens. It's still something that really makes me a little bit nervous when I think about it. Why does a company with one hundred thirty seven billion dollars and 20 billion dollars in cash flow need to be selling down and not kind of taking advantage of those opportunities that they're around? Some people say, oh, it was too fast. I remember much really well. Much went for a thousand years time. I don't think I slept all month long. I think he knew what he wanted to buy either. He thinks that there's a second leg to this thing which is looking, you know, and I've been thinking that, too. It's it's looking increasingly kind of silly. But at the times that it looks like the coast looks clearers, that's really the time that you need to be most concerned. So it's possible that there's a second leg. It's possible that the whole collapse is not due to coronavirus. I know that sounds like a weird thing to say, but there's this Cam Harvey over here has this yield curve inversion theory. Basically, when the three month gets over the 10 year treasuries, that indicates that there's some underlying issue with the economy. And so he wrote this PhD thesis in 1996 and he looked at crashes in the 60s, 70s and 80s when it preceded every single one of those. And then since he published, it's preceded every other big crash and recession or depression that the states has had without ever having a false positive. And it went inverted in about July last year. And the median time from when it inverts to when the market crashes is about ten months. And right on cue, this collapse kind of shut up. Everybody would say that's silly. Coronavirus is clearly the most proximate reason for that. But it makes me nervous that there is some other thing lurking underneath and the market has kind of skated well over the top of it. And if anything, we're in a slightly worse position than we were before the collapse. And here we are with Ford peers as stretched as they've ever been. Meanwhile, there's like thirty million Americans out of work or something like that. I don't know what the exact numbers are, but they just sort of mind bogglingly large numbers that look like kind of Great Depression numbers. Probably a lot of those are furloughed. They're going to come back, but there's got to be some damage. Some businesses are just never going to open up again. I don't know, maybe the market doesn't doesn't care. I find it hard to believe that. I sort of think that Buffett's got this incredible insight into the economy because of the nature of work. She's got a big insurance company's, got a big railway. He's got all of this power generation so he can see what is happening at a fundamental level. And he still hasn't bought anything. Either he knows something or he's kind of just getting too nervous as he gets old. But he's pretty smart and he doesn't look like he's lost to me. So I think it's probably the former. [00:43:20][239.3]

Alec: [00:43:21] So, Tobias, on on that point of the disconnect between the market rally we've seen and the underlying economic conditions, we see some commentators out there talk about it being fed driven or a liquidity driven rally. How much truth do you think there is to that? And it's just money being pumped into the system? Or do you think there's something else at play here [00:43:44][22.6]

Tobias: [00:43:45] that looks like the most obvious reason? Like it's not surprising strength in the economy, because any reports that we've seen from companies, any earnings reports that have come through have been bad. Looks like earnings are down about I think it was like twenty per cent plus across the board on average. And they were pretty stretched going into this. The only thing that I'd say to that is Jon Huntsman, who's an investor over here. He's been quite bearish for a long time. And so a lot of people write off what he says, but he does have this quantitative approach that I really like. He says if you go back and look at 2007, 2009 crash the Fed was printing. Firing the bazooka all the way down and it didn't really make any difference, and he says what drives the market? It's not directly related to the printing, it's the psychological impact of what the Fed does that kind of drives it. And if you look at any big crash, they always have this very big dead cat bounce in them. So 2007 to 2009, the crash started in about June 2007, but the market was pretty much flat in June 2008. All of the crash happened in the second half of that, and that was when the VIX spiked. Once the VIX spiked again, back to those very high level sets, the volatility index and all of the volatility guys made all of their money in the second half of that crash and there were 14 lower lows, which is excruciating to think about. The 13th one came in November 2008, and everybody was well and truly worn out by that stage. And there was still another one to come in March six, 2009. If you go back and look at any other big crash. So last time there was a big flu pandemic in the states, 1918 market didn't bottom until 1921, but it did crash and that rebounded. And then it sort of eventually found its bottom. Same thing in 1929, there was a big initial crash, but the bottom didn't come around until 1932. This is very common thing to have a big bear market rally that eventually gets sold off and ends up lower. I just think it's hard for the markets forward looking, but it's got imperfect information. Everybody's trying to adjust and find the right level. And I think we're kind of in that period now where everybody's sort of saying this is weird, that the market is this high. It looks like the Fed had us on the way through. But what now? If we start looking at the fundamentals, it looks increasingly ugly. I don't know what happens, but I just I find it hard to believe that the market just skates over this without kind of at least adjusting a little bit lower. [00:46:16][151.4]

Bryce: [00:46:17] Are you going balls to the wall, though, despite all of that and just taking opportunities as they come or much, much more of a conservative approach? How are you thinking about that? Because a lot of our audience at the moment are also sort of thinking, you know, about how much they should be allocating at the moment. Is there more to come? How do you think through that process? [00:46:36][19.3]

Tobias: [00:46:37] I'm in a very fortunate position to have a portfolio that is long and short. And so what that means is I can pick off the long opportunities as I see them and not worry so much about what the market's going to do and pick up short opportunities as I see them and equally not worry about what the market's going to do. Having said that. The fund can run 130 adits, so that's a gross 160 when it's like fullscale, the most aggressive along, I can get 130 at the last rebalance it was 100 long, 30 short for a net 70. And the reason for that was just that I didn't know how much I could trust some of those longs just because the market didn't have any reporting. We had no idea. Even Berkshire Hathaway, that was no indication of what Berkshire Hathaway looked like. And I know because I've done a lot of testing that you don't really have to buy the very bottom of the dip you can get in kind of a quarter either side. And it doesn't really impact your returns that much of the full dataset. But if you go a little bit early, you can rip up a lot of capital. So I tend towards the slightly more conservative side because I know that I've got all my own money in this thing and I've got friends and family who are invested in it. And I know a lot of people have put a lot of money into it. So I don't want to blow any of that money up. But I am kind of confronted with this incredible opportunity on the long side. Equally, I think these sort of these names that are that I'm sure are very, very junky and are just balloons looking for something sharp to run into. And I think that at some stage, all of that is going to close up. I would like to get a lot longer soon. I don't really like being in this position. I would much rather be kind of as long as I can possibly be, but I don't think we've kind of finally seen it yet. I think that, you know, basically 70 percent exposure, still pretty exposed to the market. But I would like to be 100 percent exposed. I want to be 100 percent long. These value names be on eager, itching to do it. But I just don't want to do it too soon because I'm conservative. So I guess that's the perfect answer. [00:48:42][124.4]

Alec: [00:48:43] So, Tobias, if we get back to the deep value strategy and you know, you're saying there that you want to be more long, I guess we've spoken a lot about what the value is and you know, how you screen for deep value. I guess the second part of the equation is actually how the value that you found is realised by the market. Can you talk a little bit about if our listeners or yourself or other investors are finding these deep value names and they're putting their money in them, how do you actually expect the market to realise that value and for your shares to actually appreciate? [00:49:17][34.1]

Tobias: [00:49:18] For the most part, it's just that they're too cheap. And when they report in the future, they've bought back a lot of stock. The value is further concentrated into the shares that are outstanding and they get rerated up. That's the theory. In the last little while, there's been a little bit of M&A activity. So I had two of my positions. I had Hewlett Packard, you know, Hewlett Packard split into two. That's HP, which is the Enterprise, that's the consulting side, and HP Kieu, which is the part that still makes printers because I'm a guy I bought the part that still makes printers. It turns out that was okay because they were super cheap, really, cash balance sheet and they caught a bid, which is most important, Xerox bid for them. Carl Icahn was kicking, but he's an activist writer over. He have been around forever. Really great investor. He was kicking both sides, trying to get them to do a deal. I sold into the bid, which is what I typically like to do because there's a time value of money. I've done some merger arbitrage in the past and I would do that analysis for any given position. In this instance. I just felt like it was a just a day risk a little bit. I sold into that bid, which is what I tend to do, but I always look at it. And the other one was ETrade caught a bid as well. And so I sold into that bid, too. So I expect that for the most part, it's just they're just too cheap and they just kind of go back to an average valuation. But there will be M&A and takeovers and activist attention on these things just by virtue of the fact that they're so cheap and they've got pretty good balance sheets. And so probably, you know, like five or ten per cent of them any any quarter will will get some attention. And that that generally gives them a little kick along. [00:50:55][97.4]

Alec: [00:50:56] So you're not specifically looking for a catalyst in some senses. Sometimes it's just mean reversion and the market realising that they've undervalued something. [00:51:06][9.5]

Tobias: [00:51:07] So there's some good research by Shaunessy Asset Management over here. Factors from Scratch is the name of the paper. They went and looked at what are the drivers to really undervalued companies? And it's a little bit of a maybe a little bit unexpected. But basically most value companies have subnormal profitability. That's why they're too cheap, because people look at them. This is a terrible business. They don't want to own this thing. And it gets sold off too far when you buy them. If you hold them for long enough, you get mean reversion up in the earnings. But over a short period of time, over about twelve months, the earnings do tend to keep on going down, but it doesn't matter because they're too cheap. And so what drives the return is multiple expansion and the reverse is true for the more expensive stocks. The earnings do tend to go up, but people have spent paid too much for them and the multiples tend to compress. What has happened over the last decade for growth stocks is they've had the earnings appreciating. And they've had the multiple expansion and values head the other way around, they've had earnings dipping and multiple compression, that's unusual most of the time. It's the way I described it initially. So what that means basically is that you get this mean reversion in the multiple, get a little bit of weakness in the earnings, but it doesn't matter because the multiple expansion more than makes up for it at some stage that returns to the market. And when it does, value will do pretty well and growth will have a little bit more of the glamour. Companies will have a struggle a little bit more. Can't wait for that to happen. [00:52:30][83.2]

Bryce: [00:52:32] Tobias, before we move to our final three questions that we always ask our guests on these interviews, we like to talk about bold predictions here at Equity Mates. We always do an episode at the start of the year throwing out a few predictions that we think might happen throughout the year. And, of course, covid and the market has killed all of those predictions. But if you were to make a bold prediction, perhaps about how the market might end or something crazy that Buffett might do, what would that be? [00:53:01][28.7]

Tobias: [00:53:02] So these are my bold predictions. I would never say this in public. So you can [00:53:06][4.5]

Bryce: [00:53:08] you can [00:53:08][0.1]

Tobias: [00:53:10] haze me as much as you want next time I come out. But basically, I think there's probably a second leg down as a lower low, but it won't matter for value because values are so beaten up. Same thing happened in 2000. Values started standing up, our values going up while the market was going down because part of the market got so expensive. Then glamour growth tech names struggled for a decade. Even though the businesses are good and they're still growing, they've got to grow back into their valuations and that takes 10 years. So I think that the near term is the second half of this crash that we're still in is tech names getting really beaten up? In 2007, 2009, energy was very strong coming into it. Energy sent a skate through the first half. Everybody said, well, it didn't really has this energy is up more than everybody else and it hasn't drawn down in the first half. But in the second half, it got taken to the woodshed. And I think that happens this time around. There's a lot of really junky tech names out there that have massively overplayed it and they're going to be beaten up really badly. Validus a little bit better. So that's my prediction for Berkshire Hathaway. It's hard to know that. I think that they did get front run a little bit by the Fed this time around where previously when they're in trouble, they go to Berkshire Hathaway and Buffett gives them really rough terms and Buffett makes a lot of money and Berkshire Hathaway makes a lot of money. But the companies themselves sort of overpay for the for the bailout. This time, they get bailed out by the Fed and by the federal government. I think that in a second leg. Well, that remains to be seen whether that happens. Again, I think Buffett gets one more kind of trophy just for sentimental reasons. I would like to see kind of the greatest to ever do it. Go back into battle one last time with a cashed up balance sheet and, you know, buy something really, really big would be awesome to see. So I kind of hope that happens for Buffett. [00:54:51][101.8]

Alec: [00:54:52] Yeah, I'm hoping he gets one more crack at it and he retires as the richest man in the world. He's he's so close. [00:54:58][6.4]

Tobias: [00:55:01] I think he's been there, but he's he's kind of given a lot away as it's gone along. [00:55:04][3.1]

Alec: [00:55:04] Yeah. Yeah, yeah. So, Tobias, we really appreciate your time. And as Bryce said, we like to finish with a final three questions. But before we get there, if people want to read more or hear more from you, is there a particular place where you're most active, where they can go and find you? [00:55:21][16.5]

Tobias: [00:55:21] I'm on Twitter all day long in the US market hours and handles a funny spelling. It's green backed GRV, NBA, CKD and I've got a website called Acquirer's multiple dot com that's got all of the we've got a blog and we put stuff up there all the time. It's got all the books and everything else on it. And if you want to see the fund or my so my firm is acquirers funds dot com and that just gives a little bit of an overview of the way that we value and the way that we invest. And in the fund itself has its own website because you need that for compliance here. It's Acquirers Fund dot com. And if you want to see the fund itself, the ticker zig zag, it's listed on the New York Stock Exchange, been around for about a year. You can see all the holdings of Zig. If you if you kind of want to know what I'm doing without paying the management fee, [00:56:08][46.9]

Bryce: [00:56:10] I give your secrets away. Yeah. [00:56:12][1.1]

Alec: [00:56:13] So we'll get stuck into those final three questions. The first one is, do you have any books that you consider must read and these can be investing or otherwise? [00:56:23][9.4]

Tobias: [00:56:24] I'm not going to say my own. [00:56:25][0.8]

Alec: [00:56:27] That's that's a given [00:56:28][0.8]

Bryce: [00:56:30] that [00:56:30][0.0]

Tobias: [00:56:31] if you want to do this stuff, the best place to start is Buffett's letters, which are all three. And I've read them I read them ten times over the over the last 20 something years. It's good to go in and just sort of and read the early ones, because that's when he's really thinking about investing and what he's doing. That's all free security analysis. Pretty rough trade, but you kind of need to do it once just so you can tell everybody that you've done it. Intelligent investor, everybody seems to love it. I don't really love it that much, but it's a very popular one. My favourite book is a book called King ICOM, which is about Carl Icahn and how he invests. They just give you his strategy at the start. That's a really fun read. White Sharks of Wall Street is awesome, really fun to read. And the dark genius of Wall Street is another great one that's about blanking on his name. Don't worry about it. It's basically about the robber barons and what the lengths that those guys went to. That was real kind of activist investing where you had to get your own. You had to get judges and police officers and things to kind of to foreclose on companies. That's a fun read. So what shocks of Wall Street is the 40s and 50s. King Icahn is about basically the 80s and 90s. And the dark genius of Wall Street is about robber barons from sort of the late 1907. [00:57:50][79.0]

Alec: [00:57:51] That's great. I haven't heard of any of those three books, so I'm adding them all to my list right now. So the second question is, what's your go to source for investing information? [00:58:01][10.0]

Tobias: [00:58:02] I love Twitter. I can't go past Twitter. It's sort of become an indispensable tool for what I do. If you follow the right people, the information flow is incredible and you get it hours before it appears on the television. I don't watch. I don't have I CNBC on in the office or anything like that. It's just I just have Twitter. And if you follow a mix of guys who are reporters and other investors and analysts, you get information as it's delivered and then you get analysis of that information. And I find it's a really great way of knowing what is happening and anybody who's, you know. So Cliff Asness runs a two hundred billion dollar firm. He's a billionaire. He's got a PhD from both worked at Goldman Sachs. And he's been running this firm for twenty years. He's on Twitter and you can interact with him. Jim O'Shaughnessy is on Twitter. He runs a Shaughnessy Asset Management similar multibillion dollar firm, and they will talk to you. And so you can kind of if you're polite and you've got a sensible, you know, good question for them, they will respond. So I just think it was phenomenal. That's that's really the thing that I would recommend to everybody. [00:59:03][60.9]

Alec: [00:59:04] Yeah. And if you're polite, you can tweet it Tobias and he might even answer your question. [00:59:07][3.5]

Tobias: [00:59:08] So I respond to everybody. If you're not a dick, if you're stupid and move [00:59:12][4.9]

Alec: [00:59:13] on, that's why you haven't been responding to us [00:59:15][2.4]

Bryce: [00:59:17] yet. [00:59:17][0.0]

Alec: [00:59:20] So last question. If you think back to your early days when you were studying law in Queensland or you were working at some of these big Australian law firms and thinking about investing in financial markets, what advice would you have for your younger self? [00:59:35][14.9]

Tobias: [00:59:35] Yeah, that's a great question. I get asked that a lot. So the things that you need to do to improve as an investor, this sounds crazy, but a lot of people don't do this. You have to have your own brokerage account and you have to stick some money into the brokerage account, do some research on individual names and buy them and then hold them for a period of time and see what goes right and see what goes wrong. You should either keep a journal or keep a blog. So when I wrote Greenback, I wrote it anonymously because I just didn't want to be associated with it. But, you know, blogs were just brand new and I started doing that stuff. So I had been following this guy who was a deep value investor who wrote this blog about undervalued liquidation names that he had found in 2000, I thought was amazing that you could look back kind of eight years later and see the positions that he had put on and some of the amazing returns that he had got out of those names over years and years and years. And that's kind of what it taught me, that it takes a really long time for some of these names to work out. And then you kind of get keeps you honest because you it's really easy to forget why you bought something or to forget how hard it was to sort of make the purchase decision. We're very good at taking on information and then forgetting part of it. So I always write down the faces for why I bought something. They get shorter and shorter as I've got older, but basically like a 250 word paragraph of why I like this thing. And then when I come back to it six quarters later or something like that, whenever it is, you know, a year and a half later or whenever. And I look at it because I'm like, what do I own this thing? Because it's gone. It's now down 50 per cent or something. And I forget why I don't look at it. And I can say, oh, yeah, that's right. They do have that. That was that reason for doing that. That's interesting. That has that progressed or not? Has management done what they said they were going to do? If they haven't, then it's probably gone if they have, but the market hasn't recognised that yet. Maybe buy a little bit more, read as much as you can, start investing as early as you possibly can and write down why you do things either publicly, publicly. It's a great way to interact with other people. Don't have to do it under your own name, do it anonymously if you want to, but just write it down to remember and you can learn if you write it down. [01:01:43][128.0]

Bryce: [01:01:44] Yeah, like that. We've had the the journal pop up a few times in this answer. So I do wonder though, do you ever look back and read what you were thinking and just think, what the hell were you thinking back then, you crazy? God, it's [01:01:55][11.3]

Tobias: [01:01:55] embarrassing. It's embarrassing. It's about. But what it's like I get back, I've got greenback has got every single thing I right ever starting in November 2008, what is crazy is one of those posts is now there's this introduction to corporate finance book, and it's in three editions of that introduction to corporate finance. But if they knew how little I knew back then, I don't know why they picked it up. But it's always it's in this book is like how to be a how to how to read liquidation value investing, which I love. But I go back and I look at those things and I'm like, that's just the analysis is kind of pathetic, but it doesn't matter because I know now that I've learnt a lot over that period of time and I'm kind of I still enjoy going to even though a cringe worthy I go back and look at them and think, oh, that's interesting, because I was thinking that then that's kind of fun. [01:02:42][47.0]

Alec: [01:02:43] The advice that we didn't take on was you did your blog anonymously, whereas Bryce and I pump out some of that embarrassing analysis, but we're just doing it in our names with names [01:02:54][10.7]

Bryce: [01:02:54] linked in your letter that [01:02:55][1.0]

Tobias: [01:02:55] I put my name on it pretty quickly afterwards, I put like two years later and then I never looked back from there right now and everything. It's terribly [01:03:02][6.9]

Bryce: [01:03:04] device. It's been a fascinating and fun conversation. So very much appreciate your time. And hopefully we can reconnect sooner than, you know, the last period of time, I think three years. So we look forward to seeing how how you go over the next 12 months or so and the progression of your fund. And I just encourage our audience to follow you on Twitter and keep track because it's fascinating the work that you do. So thank you very much. [01:03:30][25.8]

Tobias: [01:03:30] Yeah, thanks, Bryce. Thanks, Alex. There's a really fun conversation. I'd love to come back on again and hopefully some of the things I said turn out to be true. So it's not not really embarrassing. [01:03:39][9.0]

Bryce: [01:03:41] Yeah, she's looking forward to it. [01:03:43][2.5]

Alec: [01:03:44] Thanks, Tobias. Thanks for [01:03:45][0.9]

Tobias: [01:03:45] us. [01:03:45][0.0]

Speaker 4: [01:03:45] Thanks for listening to Equity Mates investing podcast production of Equity Mates Media. Please remember that everything you hear in Equity Mates investment podcast with general advice on link content has been prepared without knowing the personal objectives, specific financial circumstances or goals. The host of Equity Mates Investment Podcast may maintain positions in the companies discussed before considering any investment. Please read the product disclosure statement and consider speaking to a licenced financial professional. [01:03:45][0.0]

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