27 minutes | Sep 26, 2014
TFI008: How to Evaluate Company Managements
What are the factors we should consider when evaluating a management team? How to figure out whether the management team is shareholder friendly? These are the questions I addressed in this episode. High insider ownership Owner operated? Shareholder friendly? How do they make use of the company money? (allocate capital well?) Dividend (Return to shareholders) Stock buyback (Return to shareholders) Pay down debt (De-risk) Capex (Invest in business – internal) Acquire companies (Invest in business – external) How do they communicate with the shareholders? Annual letters Press releases Conference calls Experience and execution track record Career path How they are compensated Look in SEC filings and annual reports Based on sales growth? net profit? operating profit? ROI? Excessive compared to industry peers? Assess how important is the management to the business? Type of management Visionary – Works well in early stage companies Efficient operator – Works well in established companies with a strong moat around the business.. relatively secure against competition Efficient Capital allocator – Works well in fragmented industries on the verge of consolidation Mediocre management in a great business? Any red flags from past experience of the management? Right click here to download the MP3 Book on Spotlight: The Outsiders:Eight Unconventional CEOs and Their Radically Rational Blueprint for Success Action Item: Subscribe to the Podcast on iTunes or Stitcher The post TFI008: How to Evaluate Company Managements appeared first on The Free Investors.
26 minutes | Sep 4, 2014
TFI 007: An Overview of Economic Moat and Competitive Analysis
What is the moat of a business? In this episode, we explore Business life cycle Importance of qualitative analysis 4 different types of economic moat Pricing power as a key indicator of competitive advantage Right click here to download the MP3 Book on Spotlight: The Essays of Warren Buffett: Lessons for Corporate America Action Item: Subscribe to the Podcast on iTunes or Stitcher The post TFI 007: An Overview of Economic Moat and Competitive Analysis appeared first on The Free Investors.
33 minutes | Aug 28, 2014
TFI 006: How to Analyze a Company
Basic framework about how to analyze a company and the four pillars of analyzing a company: A. The Business: What do they do? Segment analysis Growth prospects Revenue drivers Cost drivers Power Paradigm Reliance on major customers Reliance on major suppliers Threat of substitutes Intra Industry Inter Industry Competition Barrier to entry Competitive advantages Experience in the industry Brand: Pricing power Management team Customer service Product quality Ownership structure Order backlog Environmental, Legal, Tax and Regulatory issues B. Financials: How is the financial health? Look at financial over time…. may be 5-10 years Income statement Revenue Cost – in line with revenue? Tax rate Interest expense Balance sheet Cash and equivalent Debt Lease Capital expenditure Compensation – Options expense etc Cashflow statement (Important) Operating cashflow (Important) Free cashflow Financing cashflow Investing cashflow C. Valuation: What’s it worth? Range of scenarios It is just one data point “It is better to be roughly/vaguely right than precisely wrong.” D. Risks: What can go wrong? Annual report / SEC filings Right click here to download the MP3 Book on Spotlight: Business Model Generation Action Item: Subscribe to the Podcast on iTunes or Stitcher The post TFI 006: How to Analyze a Company appeared first on The Free Investors.
36 minutes | Aug 21, 2014
TFI 005: The Two Sides of Common Investing Strategies – Part 2
We continue our deep dive into common investing strategies and rules of thumb and look into the flip side of those topics. In this episode, we take the following 6 commonly cited investing strategies or rules of thumb and discuss the two sides, the positives and the negatives/risks, of each of those ideas. Contrarian Stories Acquisitive Companies Momentum Stories “Good” Companies Growth Companies Patient Long-term Investor Stories Right click here to download the MP3 Book on Spotlight: The Intelligent Investor by Benjamin Graham Action Item: Subscribe to the Podcast on iTunes or Stitcher The post TFI 005: The Two Sides of Common Investing Strategies – Part 2 appeared first on The Free Investors.
32 minutes | Aug 14, 2014
TFI 004: The Two Sides of Common Investing Strategies – Part 1
So often people talk about common investing strategies and rules of thumb without adequate discussion about the flip side of the topic. In this episode, we take the following 4 commonly cited investing strategies or rules of thumb and discuss the two sides, the positives and the negatives/risks, of each of those ideas. High Dividend Companies Stable Earning Companies Low Price to Earning Ratio Companies Low Price to Book Value Companies Right click here to download the MP3 Book on Spotlight: Investment Fables: Exposing the Myths of “Can’t Miss” Investment Strategies Action Item: Subscribe to the Podcast on iTunes or Stitcher The post TFI 004: The Two Sides of Common Investing Strategies – Part 1 appeared first on The Free Investors.
26 minutes | Aug 6, 2014
TFI 003: 8 Cognitive Biases that Every Investor Should Know
In this episode of The Free Investors Podcast, I discuss 8 common cognitive biases in the context of investing. The cognitive biases I discuss in this podcast are: Anchoring Confirmation bias Endowment effect Gambler’s fallacy Hindsight bias Loss aversion Recency bias Survivorship bias Right click here to download the MP3 Book on Spotlight: The Most Important Thing: Uncommon Sense for the Thoughtful Investor Action Item: Subscribe to the Podcast on iTunes or Stitcher The post TFI 003: 8 Cognitive Biases that Every Investor Should Know appeared first on The Free Investors.
31 minutes | Aug 6, 2014
TFI 002: Basics about Investing in Stocks for Long-term, Investment vs Speculation
In this episode of The Free Investors Podcast, I am excited to talk about some basic concepts as it relates to investing in stocks for long-term and much more. I talk about: Basic concepts about investing in stocks for long-term Investment vs Speculation LT investor vs ST trader Edge that regular main street investors can have over large wall street firms Right click here to download the MP3 Book on Spotlight: Buffett: The Making of an American Capitalist Action Item: Subscribe to the Podcast on iTunes or Stitcher The post TFI 002: Basics about Investing in Stocks for Long-term, Investment vs Speculation appeared first on The Free Investors.
13 minutes | Aug 6, 2014
TFI 001: Introduction | What to Expect | Show Format
We are ecstatic to announce the launch of The Free Investors Podcast and this is the first episode of the podcast! You can download the podcast to your computer or listen to it here on our blog. We will be submitting the podcast feed to iTunes and other podcast directories soon, so you can subscribe there as well. But, that is probably going to take a couple of days. In this episode, we introduce the idea behind this podcast, explain what to expect from the podcast, and cover other specific details, e.g., typical frequency, show length, and show format etc. As this is an introductory episode, it is a short episode. Going forward, the subsequent episodes are going to be approximately 30 minutes in length. Right click here to download the MP3 Book on Spotlight: One Up On Wall Street by Peter Lynch Action Item: Subscribe to the Podcast on iTunes or Stitcher Raw Transcript (with minimal editing for accuracy): Announcer: Are you frustrated with the short term focus of the financial media? Tired of looking for information about how to invest and grow your money over the long term? Look no more. Welcome to The Free Investors podcast, the go-to podcast for independent long term investors. Hop on aboard for this journey and learn the mindset, principles, and tools of successful long term investors. Now, here is your host, Gopal Gantayat. Gopal: Hey, fellow investors. Thank you for listening to this very first episode of The Free Investors podcast. I’m super excited that you decided to check this podcast about long term investing and I hope that this podcast helps you in becoming a better long time investor in stocks. Today, this first episode is going to be slightly different than the typical episode of this podcast going forward. In this first episode, I’m going to go over some basic questions about, number one, who am I and why should you listen to me, number two, why am I doing this podcast, number three, what I will talk about in this podcast and how it is going to be useful to you, and a little bit about the format and frequency of the episodes and some of the [details] around that. So, OK, let’s get started. Simply put, in this podcast, I’m going to talk about stocks as long term investments in businesses. That’s going to be the core, essential, premise of this podcast. A little bit about myself, I’m the founder and portfolio manager at my invest management firm, The Free Investors. It is an independent registered investment adviser registered in New Jersey. I manage the portfolio stocks, called the Mosaic Portfolio, for me and my clients. I have a long held passion for analyzing stocks and investing in stocks. Please keep in mind that I said investing, not trading or speculating. We’ll talk about the distinction between those two a little bit later, maybe in the next episode of this podcast series. So I have been investing as an individual investor for more than a decade before two year ago I started professionally managing money using the same business focus principles that I have learned over the previous decade of investing as an individual investor. I live in Preston, New Jersey with my lovely, lovely wife and two beautiful daughters. So the reason I started this podcast is that I think there isn’t a good podcast that covers the topics of interest for long term investors in stocks. Or at least I haven’t found one. If you look in iTunes or any other podcasting platform and search for some investment related podcasts, most of the podcasts you’ll find are in one of these topics, either commentary on the market or commentary on the macro economic data that is coming out day to day, stock recommendations, trading and technical analysis, real estate related podcasts, and some personal finance podcasts like saving an d budgeting and all those topics. Those are great topics, but I think none of them specifically address what a long term investor in stocks should be interested in and will be interested in. So I’m starting this podcast to talk about those topics because those are the topics that interest me the most as a long term investor in stocks. So we’ll be talking a lot about topics such as, like, common myths about investing, how cognitive bias’s impact our investing approach, different types of business models and their key drivers, and everything related to the business aspects of an investing. So if you own a stock, essentially, you own a small part of the company, even though you’re not actively involved in the management of the company. I think it is essential that we, as long term investors, understand what makes the business tick, what are the core competencies of the business, what is the competitive advantage that the business has over others, what are the key drivers of the business, what are the risks in the business, so on and so forth. So we’ll be talking less about stock market and more about the businesses underlying the stocks and some of the temperamental and psychological aspects of investing. So I think those are going to be super exciting. My hope is that this podcast, in this podcast I give you some food for thought about investing for long term and then start a conversation around that, maybe back and forth over emails or some other forum as we figure out. So we are not going to talk about technical analysis, or trading strategies or market commentary and analysis, or specific stock recommendations. Though we may talk about some companies as examples of different types of business models. When we talk about different business models, but we’ll be talking about those companies as examples, but not as recommendations. When you think about investing, you might have heard already so many different terms used by the pros like value investing, growth investing, growth (inaudible 06:44 ) value, and so on and so forth. In the end, long term investing in stocks, as I see it, it is all about buying part ownership in a business with the expectation that over time the value of the business grows bigger and consequently your share of the business grows higher too. That’s as simple as that. Sometimes, because of the excitement around the stock market, people forget that there’s underlying business and there’s less focus on the business than, at least in the financial media, the day to day stock price movement of those businesses. So we’ll focus on how to look at those businesses and analyze them and what are the noises and information overload that we should ignore. You know, the financial media is filled with coverage of, like, minute to minute market movements. You know, a thousand trading ideas a day and all sort of very [sort of] focused tools and techniques. So I want to create this content and this podcast that hopefully will be useful to you if you want to grow your wealth over long term by investing in stocks as part ownership of the businesses and in the years and decades to come, understanding the businesses, as well as understanding the potential risks around it. Overall I hope you’ll find it useful. I’m going to publish one episode each week. After this first episode, my goal is to keep each subsequent episode about 25 to 30 minutes and cover topics around long term investing in stocks that will be interesting to you too. So, I think this is going to be a lot of fun, at least for me, because I love talking about this stuff and thinking about this stuff and, hopefully, you’ll get some value out of it that will help you become a better long term investor. I’m sure you’ll agree with some of my points and disagree with some other points. Either way I encourage you to shoot me an email and let me know and we can have a conversation over email or any other forum. So feel free to just write me anytime about what you think and about the topics we discuss. And finally, we’re going to do couple of things every episode. One is I’m going to highlight one book in spotlight and again I have no association with those publishers or writers, this is just a book I think is interesting. So this week’s book in spotlight is “One Up On Wall Street” by Peter Lynch. Peter Lynch was a legendary portfolio manager in the 70s and 80s. He’s one of the best portfolio managers in the mutual-fund industry ever and he has written this book. It’s very accessible book and it doesn’t have too many technical terms. It explains in plain English how you should think about business that’s underlying the stocks and if you’re not from Wall Street, how you can still have an advantage when you’re investing. Overall it’s a great book. So that’s the book in our spotlight this week. Today’s investing quote comes from, again, the same, Peter Lynch. The quote goes, “Although it’s easy to forget sometimes, a share is not a lottery ticket, it’s part ownership of a business.” So in this financial media noise, I think that’s an important point to understand and we’re going to use that thinking behind that quote throughout the subsequent podcast episodes. So let me know what you think. You can email me at Gopal@thefreeinvestors.com. Gopal@thefreeinvestors.com. I appreciate any feedback as I mentioned, both positive and negative, are most welcome. If you want to get this podcast to automatically download it to your listening device, make sure to subscribe to the podcast in iTunes or (inaudible 11:26) or whatever podcasting platform you use to listen to this podcast and that way, every week, when I publish the podcast it’s going to be all ready for you to listen. All right. Thank you again for listening to this very first episode of the Free Investors Podcast. Until next time, take care. Bye for now. Happy investing. Announcer: Than