Answering A Question On Quora – Is it possible to learn invest securities simply by reading?

Is it possible to learn invest securities simply by reading? If so name the books

Below is an answer I wrote on Quora to the above question.  The question and answer are important to how we all learn our craft of value investing so I’ve decided to post it here as well.

In this post I even show my first ever “analysis” article I wrote less than four years ago to prove how much someone can improve in a relatively short amount of time.

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As Matus said the answer is no.

Books are a great place to learn concepts and theory but if you don’t know how everything works together in the real world it won’t matter. One of the best ways to learn this is by practicing a lot.

How does someone practice value investing?

There are several ways but the best thing to do once you know the basic finance and value investing terms is to begin reading company financial reports – 10K, 8K, Proxy, 10Q’s, etc – then taking notes while reading these financials. Value the company if you know how. And then build an investment thesis from all that information.

It’s then best to show this analysis to someone who knows more about value investing so they can give you feedback on where you can improve. Things and concepts you may have not thought of that you want to add for the future. Etc.

The best way to do this if you don’t know anyone personally who knows about value investing is to start a value investing blog to get feedback. And/or also by posting analysis on sites like Seeking Alpha and Guru Focus.

Beware and don’t take it personally but your first shots at analysis will be crap. Mine was and I post my unedited first ever written “analysis” below to prove this. Be prepared for the suck.


Vodafone Group PLC, ADR, (VOD) info

All information taken from Morningstar – Independent Investment Research, Vodafone’s website, The Motley Fool, or Vodafone’s most recent annual financial report.

Overview:

With 343 million proportional customers (total customers multiplied by its ownership interest), including its 45% stake in Verizon Wireless, Vodafone is the second-largest wireless phone company in the world behind China Mobile. It is also the largest carrier in terms of the number of countries served. Vodafone has majority or joint control in 22 countries and minority or partnership interests in more than 150 total countries. The firm’s objective is to be the communications leader across a connected world. They have four major markets that they break their financials into: Europe, Africa Middle East and Asia Pacific or AMAP, India, and the United States through a partnership with Verizon.

Pros:

1. Huge company operating in more than 150 countries making them more diversified and able to withstand drops in revenues and profits coming from a single region or country.

2. Generates huge free cash flows of at least $8.25 Billion in each of the last 8 financial years. Free cach flow or FCF is basically the money thats left over after expenses, dividends, payments, etc. that the Vodafone can use as it pleases. Generally VOD uses their FCF to increase their dividends, buyback their own stock, acquire other companies, or pay down debt.

3. Current dividend yield of 6.97%, the average company in the S&P 500 has a yield of around 2%. Pays a semiannual dividend in June and November of each year. Also receiving a special dividend from Verizon, $ 1 billion of which will go to paying down Vodafone debt, $3.5 Billion will go to pay a special dividend to Vodafone shareholders in January or February of 2012.

4. FCF/Sales ratio over 16% each year since the 2002 financial year. Anything over 5% means they are generating huge amounts of cash.

5. Interest coverage ratio of 23.4, anything over 1.5 is good. Interest coverage ratio is how many times they can cover the payments of interest on their debt.

6. Payout ratio of around 50% for the dividend meaning the dividend should be safe for the foreseeable future.

7. Raising their dividend an average of 7% per year for the next 3 years.

8. Lower debt/equity than their industy competitors.

9. Growing a lot in Asia, Middle East, India, and parts of Africa. Also still a lot of room to grow in those areas as they are relatively new to them, especially India.

10. Paying down debt with FCF.

11. Gross margin, net margin, and EBT margin all over 17% which is very good.

12. Still a lot of room to grow their revenue through people upgrading to smartphones and paying for data packages which they make more money off of then regular phones.

13. Executive pay is linked to how well the company does, and they encourage their executives and directors to own company stock.

Cons:

1. Still a lot of debt even though they are paying it down, around $40 Billion

2. Most of Western Europe except Germany, are having huge economic problems which has led to lower sales an profits in those areas.

3. The fear or actuality of another global recession would hurt their sales and profits.

4. Problems at Verizon which VOD owns 45% of would hurt future payments from Verizon to VOD.

5. Most of their revenue is generated in Europe where as above, there are big financial problems.

6. Since they are in so many countries they have to deal with many regulations and sometimes even lawsuits from other goverments or companies in those countries.

Final Thoughts:

Overall I feel very good about Vodafone’s prospects to be a great investment for the long term. We are buying them when they are valued at a very good price, especially compared to their competitors. They have huge growth potential in India, a country that has over 1.3 billion people, as they have only penetrated that market by around 10%. They are paying down debt, upping their dividends and receiving a special dividend from Verizon. Even if their share price doesn’t go up over the next few years, which I believe it will by quite a bit, then we are still covered by the near 7% dividend that they are going to keep growing atleast 7% a year for the next 3 years. Also, with their huge FCF they can maybe pay down debt faster, acquire other companies to keep growing, pay more dividends, or buyback their stock.

As always if there are any questions let me know. I believe we will all do well with this stock in our portfolios over the long term.

Jason Rivera


Man that’s painful to look back on. But it’s also inspiring as well.

The analysis is painful to look at because along with the obvious misspellings I didn’t even attempt to correct for whatever reason the analysis doesn’t do anything but spout off random stats I pulled from it financials and places like Morningstar.

That’s not analysis. That’s a regurgitation of facts.

You can see glimpses of analysis in the above piece such as the paying off debt with FCF line. But I don’t take these lines any further. I again chose to just leave off by stating facts. Not what the underlying effects of these things would have on the company. That’s analysis.

At this point I’d been learning about value investing off and on for years but wasn’t improving much because I hadn’t written anything down or shown it to anyone else until the above post.

I actually sent the above “analysis” to a family friend who I was managing some investment money for. Bless their hearts they still stuck with me. They must really love me to have done so 🙂

But the above is also inspiring because in less than four years I’ve gone from the above train wreck to being hired by a prominent investment newsletter due to my analytical ability.

Writing regular 30 to 50 page analysis reports on companies for subscribers and investors I manage money for.

Have written an acclaimed value investment education book teaching everything from the concepts of value investing, to various valuation techniques, how to develop the proper mindsets and processes. Etc.

My stock picks and portfolio have crushed the market in the last four years 2014 And 2015 Portfolio Reviews – Still Kicking Mr. Market’s Ass.

And am told a version of the following on a regular basis – “If I were to go to anyone in the entire company to get a second opinion on my company analysis I would go to your first.”

Posting analysis – and the above one less than four years ago was my very first written remember – jumped my analysis articles, abilities, thought processes, and education into hyper speed.

Doing analysis on a company. Writing it down. Showing it to someone who can give you feedback. Implementing that feedback into future analysis. And then repeating over and over. This is a great way to learn value investing.

But it’s still not the best.

Study after study shows that teaching is the best way to learn any skill and value investing is no different.

This is also another reason you should start a value investing blog so you can teach others.

The below learning pyramid graphic is from the National Training Laboratories showing the best way to learn things.

Now to get back to your original question you see reading at the top showing you only retain ~10% of the information you read and why I struggled before writing things down.

This is how my value investment education jumped into hyper speed by combining practice by doing and teaching.

Anyone asking me how to learn any skill I always tell them to do the same thing that worked best for me.

Doing analysis on a company. Writing it down. Showing it to someone who can give you feedback. Implementing that feedback into future analysis. And then repeating over and over. Then start teaching others as soon as you can to help retain even more information.

If you are looking for book recommendations to learn value investing I recommend going to this post I wrote the other day on Quora What advanced books would you recommend for an aspiring self taught value investor? And this post for more information on How do you learn value investing?

Within the last post is a post on my blog titled 10 Tips To Becoming A World Class Investment Analyst.

I hope this all helps and if you have any further questions please reach out to me at jmriv1986@gmail.com

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In the comments below please let me know your method and processes for learning and retaining information.

Book Giveaway Update

Book Giveaway Update

Well that didn’t go as planned…

In the post at the end of March The Winner of The Book Giveaway Is… I announced a subscriber as the winner of more than $300 worth of books.  The books were supposed to go to David at my cost.  Key word being supposed.

At this point I’ve tried multiple times to get a hold of David with no response so another subscriber is getting these books sent to them at my cost anywhere in the world.

I’m a huge believe in Charlie Munger’s Mental Models and Worldy Wisdom philosophies that the more we read about a wide range of things the more we can know.  And the more we know the closer we are to reaching our goals, making a ton of money, and changing the world.

These books represent knowledge, power, goal and wealth attainment, and much more.  True knowledge is one of the most powerful forces in the world.  But few hold this power…

My goal is to help spread this power to as many as possible.  And today a lucky subscriber is getting a step closer to their goals by winning the following 20 books valued at more than $300.

And the new winner of more than $300 worth of books is now Andrealiz.  Your email starts with reyesa.  I will get a hold of you today to get your contact information so I can send you more than $300 worth of books at my cost.

What I Do To Fight Depression

What I Do To Fight Depression

I talk about my past experiences to try to help anyone I can in whatever situation they may be dealing with.  I’m an open book and always have been.  If you ask me a question I’ll do my best to answer it if I know the answers or can just share personal experiences.

I share the good and the bad because no matter what you read from others.  And no matter how good appearances are.  Everyone goes through rough times.

On this blog I’ve shared my failures and triumphs when it comes to investing.  Some issues both health and personal in my private life.  And have a series called Famous Failures detailing now hugely successful people and some of their failures, problems, and haters they had to deal with on the way to success.

The hope being with all this like everything else on this “investment” blog is to help people.

One of the things I’ve talked about here besides value investing and finance that strikes a chord with readers is how I’ve dealt with my depression.

Even in the developed world mental health issues are still a huge taboo due to fear, embarrassment, masculinity, arrogance, shame, and other emotional responses.

But this is nothing to be ashamed of…

According to research about 20 percent of people in the United States deal with a mental illness in any given year.  Classified as minor anxiety and going all the way up to schizophrenia.

This site breaks down those numbers even further to specific illnesses.  And this three page PDF talks about some of the demographics and economics of mental illness.

Today I want to shed some more light on this topic…

Below is an unedited email I sent to a reader/emailer who asked how I’ve dealt with depression.  How I continue to battle it when it crops up.  And some of the things I do to keep myself out of that state.

I was going to keep this private but with the blessing of the emailer I’ve decided to make this public.  I’m doing this because in the last several weeks a person I went to high school with committed suicide after silently dealing with depression.

Like in many cases everyone I’ve talked with said they had no idea he was dealing with anything.

I hope by releasing this someone who may be dealing with similar issues may find some answers.

The person who emailed me asked specifically about habits I used to get and keep myself out of a depressive state.

I also want to preface the following advice by stating that I’m obviously not a medical expert in any fashion.

I’m only stating what worked for me in the hope of helping others.  If you are seriously depressed please talk with a professional or someone you trust to start getting help.

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Hey (NAME REMOVED),

Thanks for reaching out.  And hope you’re doing well.

The problem with recommending specific habits is that changing any habit – either good or bad – takes time.  Hard work.  And dedication.  Only you can know what your true passions and goals are.

The best thing specifically I recommend for you is to read the books The Power of Habit.  Willpower: Rediscovering The Greatest Human Strength.  Choose Yourself.  Mindset.  And The Brain That Changes Itself: Stories of Personal Triumph from the Frontiers of Brain Science.  Also my blog posts “You Can Do Anything You Put Your Mind To.”  And 17 Things That Changed My Life – which it looks like you’ve already read.  These will help you learn for yourself what may help you when you need it.

Outside of that I can recommend some more general things that helped me fight through depression.

  1. Find someone you trust absolutely that you can talk to when you need to.

I’m close to all my family but didn’t want to burden them with how I was feeling.  And didn’t want to be embarrassed if I told them what I was thinking about and dealing with.  If I didn’t have someone I could have talked to – my wife – I don’t know what I would have done.

      2. Read as much as possible about things that interest you.

I’m interested in a variety of things now so this is easy.  But growing up I never read and I hated it.  I’ve learned more in the past 5 years about things I’m interested in – including how to make myself get out of a depressive state when I’m falling back into one – than I have in my previous 20+ years of life.

This is a dual goal as well…  At least for me the more I learn the happier it makes me because I love learning and am curious about everything.  Not sure if this will work for you or not.  But if you’re like it me its crazy how much learning helped me.

     3.  This may be the most important thing – Find something you’re deeply passionate about and pursue it.

When I was at my worst health and depression wise it was when I felt worthless to everyone and everything.  Finding some passions and feeling like I was useful to others helped me out of that state more than anything.  For me it was learning, value investing, and helping others.  I’ve added saltwater fishing to that list now that I’ve moved to Florida and I’ll talk more about this next.  Again, these helped me more than anything else.

     4.  Find something that helps you think and relax.

I’m a workaholic, especially now that for the most part my dizziness is gone and I can do more things.  I also have two young daughters I have to take care of and a wife that I’m always trying to make money to contribute towards supporting our family.

To this day I have to force myself to stop worrying about what I’m going to work on next.  What needs to get done now.  How many hours did I work today. And what I “should” be doing instead of taking some time for myself.

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MY UPDATED NOTE HERE: This is all pressure I put on myself…  No one else says I need to be doing anything.  Even as a kid I can remember always being like this and pushing myself as much as possible.  Many times in the past to the detriment to my physical and mental well-being.

Yes, I know this isn’t the healthiest way to live.  And it’s still something I have to work on every day.  But I want to work, learn, and improve as much as possible to help build a better life for my family and others I’m helping.

To me if I’m not doing this I’m failing not only myself but others.

Now let’s get back to the unedited email I sent to the reader.

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Until I got down to Florida and started saltwater fishing nothing I did would get me out of the above mindset.  But when I’m in or on the water casting, retying line and lure, baiting up my hooks, and trying to catch fish I don’t think about anything else for the few hours I’m out there each week instead of what I’m trying to do at the time.

Ever since I can remember I’ve had horrible insomnia… Some days it takes me three, four, even five plus hours to fall asleep.  But now that I’ve started going fishing more I’ve also slept better at nights after letting my mind rest for a few hours each week while on the water. This all has helped my mental and physical health.

Try to find your version of fishing that will help you relax and take your mind off other things.  Something you can do by yourself or with a few close friends. Even if its only for a few hours a week.  This short amount of time has helped me a lot already.

I hope this helps.  And I’m looking forward to hearing your thoughts.

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Please let me know your thoughts on this in the comments below.  If it helped you in any way.  And please let me know if you have any tips you personally use to put yourself in a better mood.

If you know someone this article may help please pass it along to them.  You never know whose life you may change today with one of your actions so be as helpful as you can to everyone.

Alert: Corning To Buy Company I’ve Recommended

Alert: Corning To Buy Company I’ve Recommended

Note: I just sent versions of the following message to both Value Investing Journey and Press On Research subscribers.

Thanks for being a loyal email subscriber.

While working at the investment newsletter from September 2014 to February 2015 I recommended three companies to subscribers.

I wrote in my 2014 and 2015 Value Investing Journey and Press On Research Portfolio Reviews that while I couldn’t reveal the research or the names of those companies.  I may write new research reports about them at some point in Press On Research.

While doing research on them to write-up in Press On Research one of them ended up agreeing to a buyout offer from Corning (GLW).

Alliance Fiber Optic (AFOP) agreed to the buyout price of $18.50 per share.  A 22% premium to what I recommended the company at.

I can’t release the full analysis article I wrote but in short my thesis on the company was that it was undervalued by 22% to 65%.  That it had some minor competitive advantages.  That there was a huge $140 billion trend in the companies industry that could explode its shares.  And it crushed bigger competitors in terms of profitability.

Just to name a few margins that were spectacular it produced a 19.3% FCF/Sales Margin.  Had an ROIC of 34%.  And had an unlevered return on net tangible equity of over 100%.  The only time I’ve found a company whose margin was above 100%.  And this means it’s one of the best run businesses on the planet.

And this still wasn’t all…

Insiders owned 14% of its shares.  It paid a 1.2% dividend.  And planned to buy back 6% of shares outstanding.

I loved this company.  And its profitable operations were some of the best I’ve come across when evaluating companies over most of the last decade.  Especially considering it was only a $250 million company.

The buyout price of $18.50 per share in cash from Corning is a low-ball offer though.

AFOP is worth between $20 and $25 per share with no growth expected.  And like I said above there’s a huge $140 billion trend in the companies industry that could explode its growth and share price further.

At this point I’m not sure if shareholders will fight or not but lawsuits have been filed by at least two different law firms saying AFOP insiders breached their fiduciary responsibility to shareholders by not seeking a higher price.

I agree the price AFOP agreed to is low.  But it’s not egregious so I’m not sure if these lawsuits will continue or if shareholders will get any money at some point.

Either way the subscribers of the investment newsletter I worked for will gain ~22% in 14 months owning this great company.

If you’d like to see my other exclusive company recommendations where my picks have crushed the market over the last four years you need to subscribe to Press On Research.

And remember as Value Investing Journey subscribers you get a 50% discount on a one year subscription.  Full year price for you as a subscriber is only $49 instead of $97.  And newsletters similar to mine sell for several thousand dollars at prominent investment newsletter companies.

Thank you for being a subscriber

Jason Rivera

Value Investing Journey

Press On Research

Author of How To Value Invest

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To find out all the great companies I’ve recommended you need to subscribe to Press On Research.

And if you’re a Value Investing Journey subscriber remember you also get a 50% discount on a one year Press On Research subscription.

Similar newsletters to Press On Research sell for several thousand dollars at a big newsletter company.

If you have further questions about Press On Research please go to the link in this sentence or email me at jasonrivera@valueinvestingjourney.com.