Interview With a Value Expert
I remember when I finally “got” what successful value investing was all about. It was the late 1990s; I was a financial journalist in those days.
And I was prepping for a planned trip out to Omaha, Nebraska, to cover Warren Buffett’s Berkshire Hathaway annual shareholder meeting. So I started reading everything I could find on the guy.
In my opinion, the best resource, then and now, are the shareholder letters that Buffett publishes every year, filled with easy-to-understand nuggets about the importance of “intrinsic value” and looking deep into a business for what others missed.
So when I recently met someone who thinks the way Buffett and I do, I told my publisher here at Banyan Hill: “Let’s see if we can get this person into our team as soon as possible.”
So I’m pleased to introduce Brian Christopher, who joins me at our fast-growing Total Wealth Insider newsletter service as senior analyst.
The Search for Value
Brian is a modest person, so he won’t tell you this … but, he has the resume every value investor needs.
He was a senior accountant, controller and internal auditor at Archer Daniels Midland in his early years out of school.
Next came an MBA from the University of Chicago, and then a decade-long stint as a bankruptcy turnaround consultant.
There’s nothing like doing bankruptcy “workouts” to get a good grip on value. Brian served as interim CFO or chief accountant for several restructured firms, provided investment banking advice to his firm’s private equity unit and prepped a lot of business valuation reports for his firm’s clients.
Drawing on all those experiences, Brian will be a huge resource for all of you who will soon be reading his work in The Sovereign Investor Daily, my Total Wealth Insider newsletter and for several premium trading services we already have in the works to make maximum profitable use of Brian’s expertise.
Q. So, Brian, welcome to the team! Tell us a little about yourself…
I grew up in Iowa. It’s really a nice place to grow up.
My parents are my heroes. It’s interesting to think about that now. They’ve always been my heroes … but when I was a kid, I was too busy rebelling to realize it.
My mom taught me to be a good person, to be empathetic. You can be a top-notch professional in the boardroom or a superstar in your chosen sport … and still take time to help someone who needs it.
My dad is my hero, too. His forte is all things business.
I studied accounting in undergrad because he and I agreed it made sense. I didn’t have to become a CPA (I eventually did, however), but having a knowledge of accounting would help me no matter what I did in the business world.
We talked about stocks when I was growing up. Like most investors, he liked certain industries and types of investments more than others. I didn’t know exactly how to assess everything when I was a kid, but I learned through our conversations and osmosis.
He also introduced me to the world of financial newsletters. So, being in the business myself now, I care for the readers because I am one of them myself.
Q. How did your career — at Archer Daniels Midland, earning an MBA and then years of bankruptcy consulting work — influence your views on investing?
My work history and education provide me with experience and contacts.
I know how companies run because I’ve been a part of teams that ran them. And I know where to go to gather more information by reaching out to peers from business school, CEOs I’ve met at conferences and the peers of each.
Working in the turnaround world has helped me recognize what not to do. This can be just as important as doing the right thing.
Companies have limited resources. Founders and CEOs would love to change the world … the problem is their business needs to serve its shareholders.
A company should create a cash-flowing business before it enables people to travel back in time (or pursues some other novel concept). It’s my job to recognize those situations when the business plan is too optimistic and cast those stocks to the side.
Q. And all that in mind, how do you go about figuring “value” when it comes to stocks?
My dad and I are both value investors like you, Jeff. Much of my research starts with stocks I consider to be underpriced. The stock may have sold off in a data breach or because a foodborne illness harmed its sales.
Many of the reasons for declines are bad, but they already happened. The question I then ask is whether the company can fix the problem and create incremental value for shareholders.
This said, my definition of “cheap” may not be consistent with traditional ones. I don’t like to pay too much, but I will pay for value. If a stock is trading at a price-to-earnings ratio that’s higher than its industry, I will still consider it to be cheap if it’s growing even faster.
I’ve got a variety of methods for finding these stocks. I plan to share all of these with readers in the future. They will learn from my years in the markets.
Q. Give me an example of how you find value in a stock.
In January 2016, precious metals stocks had been left for dead. I told readers of a free e-letter I was working for at the time that they should consider buying shares.
The stock was Royal Gold Inc. (Nasdaq: RGLD). The shares peaked in price in September 2012. By January 2016 it fell almost 75% in value.
And the company just received bad news on one of the projects it owned a royalty on. The company that owned the gold project said it expected to recover far less gold than previous estimates. Royal Gold’s shares fell 25% in three weeks after this announcement.
However, Royal Gold owned royalties on 39 produced properties at the time. And things were getting better. The gold price had started to move higher. Royal Gold increased its dividend.
Royal Gold’s stock price tripled about six months after that recommendation.
Q. So what will you be talking to readers about in The Sovereign Investor Daily?
Jeff, mainly I’ll be talking to them about the tools I use to assess businesses. I’ll also provide my take on recent events in various stocks and sectors, and how they provide us with investment opportunities.
Together, I hope we will learn how to think about stocks.
What I mean is this: It’s great to make money after buying a stock. But it’s also important to know that it’s OK not to buy a stock because you don’t like something about its operations.
Sometimes the best thing you can do is scratch it off your list and move on to finding a better investment idea.
Q. Final thoughts?
I am super excited to join Banyan Hill.
The advice we offer is very important today. Companies are cutting pensions altogether, and governments are cutting back.
Employers have recognized they don’t have to offer everyone a salary and benefits … sometimes just an hourly wage and a part-time schedule. And banks pay next to no interest on your savings.
Our customers need us to help them through the sometimes confusing landscape that is investing. I am qualified to do that — and I want to do that — so that is why I am here.
Jeff L. Yastine
Editor, Total Wealth Insider
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