Shortly after this, John asked me if I’d like to do an interview for his site and of course I said yes after our fantastic chats.
Below is a brief excerpt of the in-depth interview I did with him for his site
To view the entire interview please go to this linkwhich will take you to it.
The interview includes talk about value investing, self-improvement, the $8 million acquisition I attempted last year, inspiration from Bruce Lee and Grant Cardone, and more.
I hope you enjoy it.
I’m very excited to be sharing this interview with Jason Rivera, a man who in his first five years achieved better returns than Warren Buffet did in his first five years. Who is Jason Rivera? Let’s get into the interview and you’ll find out!
John: Can you provide some background on yourself and Rivera Holdings for those who aren’t familiar with you or your company?
Jason: Yes. I’m a self taught value investor who focuses on small and obscure public companies to buy for my investors. And I’m now also looking for private businesses and cash flow producing real estate to buy as well.
I’m the author of the acclaimed value investing education book How To Value Invest. Have run the blog Value Investing Journey for more than five years now. Wrote a 60-page booklet detailing the immense power of investment float that I released for free to readers of my blog and followers – on Twitter and Facebook – titled All About Float. Have written for several publications and investment newsletters including: Seeking Alpha, Guru Focus, Insider Monkey, and Palm Beach Research Group among others.
I mentor others on how to become great value investors, consult on projects requiring business analysis and valuation skills, and run my investment holding company Rivera Holdings LLC. out of the Tampa Florida area.
John: When you were a kid did you know you wanted to grow up to be a value investor?
Jason: Ha ? no. I don’t have any stories like Warren Buffett where he was buying things at wholesale prices – gum if I remember right – and then selling them at a higher price to his classmates as a kid.
Unfortunately, I was far more interested in playing sports, chasing girls, and playing video games than investing when I was a kid.
I always knew I wanted to make money, start businesses, and help people but the value investing part and putting effort into making those things happen only began happening in my late teens and early twenties…
Thanks a lot John for asking me to do the interview. I hope our readers gain something from this.
Today’s post is the complete opposite… It’s about the five months of consistent failure I’ve endured since October 2016 and the magic this is now leading to.
I planned for this post to come out shortly after the last one. But until now, I didn’t have enough time to write it. Or the better term is that I didn’t make enough time to write it until now.
I’ve been busy building the Rivera Holdings investor base. Busy looking for deals. Busy building my real estate career. Busy making connections. And busy trying to make money.
But those are excuses.
If I really wanted to I could have made time to write this post. The main reason I didn’t is because it’s about failure.
Failure is hard on the psyche. Failure isn’t fun. Failure is hard to talk about. And it’s certainly not fun to write about.
Even when you’re learning, improving, and growing as I did in 2016 and have continued doing in 2017, failure without much success – or perceived success – takes its toll.
I’m extremely hard on myself, have been ever since I was a kid, and likely always will be. I’m always trying to improve, learn, and succeed in anything I do. And no matter how much I do always think I can do more.
Because of this anytime I endure consistent failure, thoughts like the following begin to creep in and lead to even more doubt and frustration.
Should I keep going?
Why am I doing this?
Is this worth it?
When is this going to work out?
Will this ever work out?
When will I begin to succeed?
Will I ever succeed?
Should I do something else?
But because I’ve gone through this many times now I know this is the process I go through before figuring things out.
I spent a month or two in the “this is terrible” and “I’m terrible” phase while writing, editing, and getting the book ready for publishing.
The whole process from planning the book, to writing it, to publishing it took almost 10 months. So this means I spent about 20% of the time while working it in the “This is terrible” and “I’m terrible” phases.
I don’t remember what got me out of that mindset other than continuing to work and grind every day and then publishing the book.
Earlier, I went through this same process before knowing what it was while beginning to learn about value investing. And I’ve gone through this process multiple since then when starting businesses, raising capital, and with various other ventures.
I’m talking about all this because from October 2016 until now in Spring 2017 most of what I’ve done has failed.
But through failure comes progress…
We’ll talk about progress soon but let’s finish talking about how much I’ve failed in the last five months.
The Failed Acquisition
In November 2016 I posted that Rivera Holdings was going after its first acquisition target. The owner and I agreed to an $8 million purchase price for the business and the land. And we agreed on a 60 day exclusivity period.
The land, property, and equipment by themselves were worth between $6 and $7 million and I valued the business – including operations, land, and equipment – at between $10 and $15 million.
The business produced excess cash flow. Had long-term competitive advantages. And with some cost cuts and expansion, I projected cash flow to almost double within the first two years we owned it.
We had the chance to buy a cash flow producing business with long-term sustainable competitive advantages at a cheap price, with a huge margin of safety, and good potential upside.
So what happened?
The short answer is I failed…
Not because I didn’t put in the effort or time to query and pitch to investors. But because I was a horrible sales person and didn’t have the right connections.
I sent emails, called, Skyped, and talked in person with more than 2,054 people during our 60-day exclusive letter of intent before informing the owner I wasn’t able to raise the capital to buy his business.
Out of the more than 2,054 people I was in contact with about acquiring the business I got no response from more than 90% of them. Major failure.
The people who did respond to me were receptive and said I impressed them with my analysis and detailing of the business. But I heard two things over and over about why they wouldn’t invest.
The first was that I lacked experience running a multi-million dollar business like this.
And the second was that because they didn’t know me on a deep personal level we didn’t have enough trust built up between us for them to trust me with millions of dollars of capital.
I had an estimated 98% failure rate talking with people about becoming Rivera Holdings investors so we could buy this business.
But what did all this failure lead to?
It helped me realize I needed to work on several things to get to the level I want to be on.
The first thing I needed to fix was being a horrible sales person. Because by not closing this great opportunity I failed myself, my investors, and these potential clients.
The second thing was that I needed to gain experience owning and running a business. This is one of the reasons I got into real estate. I’ll talk about the other reasons in a separate post.
And the third thing it helped me realize is that I needed to grow my network of connections.
This leads us to much more failure…
Much More Failure
After the acquisition failed, I stopped to think about what I needed to do going forward and where I needed to improve.
I talked about these above and then got to work again.
This now leads to major failures – yes multiple – every day.
A typical work day of mine now looks something like the following:
Call 10 to 20 people to talk with them about their home or property. Either for Rivera Holdings to acquire for investment purposes, or for me to list for sale as a real estate agent.
On average I hear back from only one to two of these people. Or about a 90% failure rate.
Email 20 to 30 people about the same as above. Generally, I hear back from 1 to 3 of these people. Or a 90%+ failure rate.
Go to any appointments I’ve set to either list a home for sale or look to buy it for Rivera Holdings.
Learn by listening to Audiobooks anytime I’m in my car… The only time of my day I’m not failing.
Send out information to potential investors every week on deals I’m looking at now or have looked at in the past. There’s a 99%+ failure rate here.
Do preliminary due diligence on 5 to 10 assets I’m considering investing in. This includes looking at single family real estate, multifamily real estate, public companies stock, private businesses, etc. After doing this I generally only consider one of them a good investment. Or a 90% failure rate.
After doing more due diligence I generally will put one to two offers in on properties per day. Or consider doing further due diligence on a public or private business. This is after looking at more than 100 potential assets.
So on average for every 100 assets I look to invest in, after doing due diligence I will only consider investing in at most two of them. Or a failure rate north of 98%.
As of this writing, I’ve had zero of the 30+ offers I’ve submitted accepted. Or a failure rate of 100%.
And I have a wife and two young daughters so I get told “no” and am failing on a constant basis at home :).
After reassessing what I needed to do after the failed acquisition I now fail every day on a massive scale. Something I haven’t done on this large of a scale since I began learning about value investing 10 years ago.
I now swim in failure. But by doing this over the last five months or so something magical has begun happening.
The Magic Of Massive Failure
For years I’ve known I needed to take more action every day.
That I’ve needed to call and email more people, meet more people in person, research more public and private businesses for investment, and recently to research more properties to invest in and talk to more people about helping them buy and sell their homes.
But this is hard because it involves a lot of failure and discomfort through things like cold calls or sending out mail or email advertisements.
Without failure there is no learning or improvement. Without massive action you’ll never reach your goals because you’ll never be putting anything into practice and others who are doing more will leave you in their dust.
But by doing both of these things you’ll kick learning and improvement into overdrive. And this will get you towards your goals and dreams faster.
And we all want to succeed faster.
So where has all this massive action and failure over the last five months gotten me?
I outlined some of the great things that happened since putting in massive amounts of effort every day in the 2016 Performance Review post. And I repost these below:
Started Rivera Holdings LLC.
Began raising capital.
Grew personal connections by an exponential amount due to capital raising efforts.
Grew from 320 subscribers between Value Investing Journey and Press On Research to now 455 total subscribers between those two services and now also the Rivera Holdings Mailing List.
Read between 50 and 75 books in 2016.
Grew from 720 followers on Twitter as of the beginning of 2016 to 1,008 now.
Grew from 790 connections on LinkedInas of the beginning of 2016 to 896 now.
For the first time in three years expanded my circle of competence in terms of industries. I now understand and feel comfortable evaluating three new industries – marinas, hotels, and multifamily real estate.
Also expanded knowledge and experience into the private equity/investment arena as well.
But the above aren’t the only things that have begun happening since taking massive action and experiencing massive failure. I’ve also…
Continued expanding my personal network and connections by an exponential amount.
Had lunch with, rode in cars with, talked in person with, and talked on the phone, through email, or through Skype with people who are worth more than $700 million combined in the last few months. And who have access to more than $1 billion in capital.
Have even talked with a few about consulting with them on some projects.
Built up a huge deal flow. After losing the original acquisition I had nothing else to attempt to acquire for a couple of months. I’m now looking at and putting multiple offers in every day on assets.
Expanded my knowledge of sales and the sales process immensely.
Gotten Rivera Holdingson more than a dozen distribution lists for businesses, homes, investment properties, multi-family properties and more. These give us access to deals before they hit public market sites like Loopnet.
Begun setting and going to more appointments with potential investors, home sellers, business partners, and business brokers.
And have hired two part-time independent contractors that I plan to hire full-time within the next month.
Not only am I doing all the above things, but because I’m acting in such a huge way I’m learning faster than I have at any time since first beginning to learn about investing almost a decade ago.
So is failure really failure if you’re learning, improving, and getting closer to your goals? Or is not trying failing?
Case in point – the picture below is from a post I wrote on Facebook in February.
The picture on the left is truly failure… While I have always read and learned as much as possible it doesn’t matter if you never put anything into action.
March was almost completely filled up. And April will be even more productive than March.
So am I failing? Or am I gaining the wisdom, knowledge, experience, and connections required get to where I want to take Rivera Holdings?
The goal of this blog is to help us all improve as investors and thinkers so we’re a little wiser every day. The hope being that our knowledge will compound over time so we’ll have huge advantages over other investors in the future.
The aim of today’s post is to continue this process by talking about a topic few investors know about. And even fewer understand.
Most people overlook float when evaluating companies because they either don’t know what it is. Don’t know the power it can have within a business. Or don’t know how to evaluate it.
This won’t be an issue here.
Press On Researchsubscribers already know this as I talk a lot about float in many of the issues I’ve written. But I want to begin talking about it more here because float is one of the most powerful and least understood concepts of business analysis.
Today’s post is a continuation of the earlier posts:
Today we’re going to answer the question “Is Float Ever Bad?
Is Float Ever Bad?
I’m a guy who likes to live by the above quote. If I can make things simpler I always do. Not only does this make things easier to understand but it also can save a ton of time.
When analyzing investments and dealing with complex topics like investment float this isn’t always possible.
Understanding the good things about investment float is definitely one of those things you can make only so simple. The concept is simple to understand but the there are a ton of different nuances to understand which leads to complexity. You can likely tell since it’s taken me 51 pages thus far in the five earlier posts to explain the good things about investment float.
Luckily the answer to the titled question is a simple one. And also involves simple and easy to understand concepts as well.
Yes, certain investment float is bad. And no, not all float is equal.
The heuristic or mental model I use when evaluating float is that if the company isn’t profitable – or near profitability – its float is useless. And can even be a negative burden for a company.
Remember, float are liabilities that can become positive leverage if used well by management and the company is profitable. But always remember leverage can go both ways as well.
If a company isn’t profitable and hasn’t produced profits in several years float turns into negative leverage. This is because in the long run float are liabilities the company will have to pay at some point.
The longer a company goes without earning profits the longer it will take a company to pay its liabilities because it’s not earning enough money. This also makes it harder to fund operations and grow in a healthy way without taking on a ton of debt or even more liabilities.
Let’s go through a quick example to show this.
Let’s say we have two insurance companies. Company A has an average combined ratio of 90% over the last five years and Company B has an average combined ratio of 110% over the last five years.
Not only does this mean Company A’s profits are 20 percentage points better on average than Company B. But it also likely means that Company B has continued racking up liabilities it can’t afford to pay when due or when a catastrophe strikes.
This is because Company B hasn’t earned a profit on average over the last five years. And of course all else remaining equal a company earning 20 percentage points better profit’s on average is the higher quality company.
The same general rule goes for non insurance companies as well. If they aren’t, haven’t been, and show no signs of becoming profitable float should be viewed as negative leverage for a company.
I use the following rules when evaluating all companies float…
To view float as a giant positive for any company I like to see consistent profitability in the last five years. And/or seven of the last 10 years.
If a company has off and on profitability I view float as neutral.
And if the company is consistently unprofitable I view float as a huge negative for the company.
I consider profitability of operating margin, ROIC, ROCE, and FCF/Sales. The company doesn’t have to produce huge excess profitability in each category. I look for consistency and trend of profits more than anything when evaluating float.
This idea is a lot simpler to understand than the concept of what float is and makes it potentially great for companies and investors.
One last thing to remember when evaluating float is that whether the company has positive or negative acting float doesn’t matter if the company doesn’t allocate capital well. And the management doesn’t know what float is or how to use it.
To evaluate these potentials see the previous five posts on this topic.
If I’ve explained everything well enough in the series so far we should understand –
What float is.
Why it’s important.
How companies can use float as positive leverage.
How Buffett got so rich using float.
How to find float on a balance sheet.
How to evaluate float.
How float affects a company and its margins.
Maybe the most important thing why float affects a company and its margins.
How float affects a company’s value.
And answered the question is float ever bad?
In the next and final seventh chapter of this series I’ll share the best resources I’ve learned from about float with you.
Knowing what we know now we should have a gigantic advantage over other investors who either don’t know about float. Or aren’t willing to put in the time to learn what it is and what it can do for a company and investment.
If you have any questions, concerns, or comments on float up to this point please let me know in the comments section below.
Remember if you want access to my exclusive notes and preliminary analysis you need to subscribe for free to Value Investing Journey. And this isn’t all you’ll get when you subscribe either.