 Good day, fellow investors. I've been now researching full-time for six months the stock market and the more I research, the more, let's say, my perspective on what's going on in the investing world clears and I know what are my possibilities, what are my limitations. In that light, I really want to discuss my investing strategy to show what can be done, what do I think can be done, what are the risks and rewards when it comes to investing. We talked a lot about macro yesterday, we discussed inflation in the stock market news. But if you focus on great businesses, minimizing risk, assets, margin of safety, value investing, that a lot of those other things become noise and aren't really that relevant. So value investing, that is the key and I really have found really something that really explains what I do and therefore I want to explain the history of my investments to really clearly explain okay this is who I am, this is what brought me here, this is what I'm looking for and then we'll discuss okay what are the criteria when it comes to selecting an investment for the long term and then we'll discuss also my two portfolios. I have one portfolio and I add some money each month and now I'm launching a lump sum 100,000 portfolio that I'll develop over the next few years, you'll see about that in the strategy. So let's start with my history that will give you a good perspective and also it will be a great educational perspective on what can happen when investing for the long term. So let's start with my investing history. I'll describe three stocks that I'm, three investments, two stocks and one real estate investment that were the best investments over my history and that I invested a lot of my capital in them because I found them low risk, high reward so investments that you can put your money in and forget about them and that is also what I'm looking for but you cannot find that at will. You have to look, look, look, look, be patient and when those come to you then you invest and this is a key concept when it comes to investing. I'll talk a lot about something and then someone wants to change their portfolio immediately. You build your portfolio over time. This is a message that I will never get tired of repeating. Portfolios are built over the long term. They are not created in one day. Let's start with my history and I'll explain what's going on much better. Now this is a company that I put about 70% of my net worth into between 2009, 10, 11, 12 up to 2013. So it is a hospitality business in Croatia and I think I did put about 70% of my net worth into at the beginning of the 2010s. The dividend was about 8% to 10%. The revenue growth was between 10% and 15% and the company was investing half of the yearly cash proceeds and half was paid out as a dividend. The book value was very high, outbid hidden as it was at historical cost and the management was fair as they owned and still own the company. The top manager owns 8% and the other managers own between 8% and 5% of the company. Now there was one issue here and it was liquidity. The stock was very thinly traded in the downturn and my buying was done at 50% above the 2009-08 lows. So I was buying the lows were around 500, I was buying between 700 and 1000, 1100. So I was paying 50% to 100% more than the lows and this is also something to keep in mind. What was the issue there? Well investors were fearing another decline, more sales oversupply. It's always about supply and demand on the stock market but the business was still doing great. The business had a mode, there was a highway being built to it and everything looked so great in the business but the market was looking at supply and demand and that's an amazing opportunity you want to jump in. Today the stock is much higher I sold in 2014-15 as we turned into real estate which we'll discuss later but how to find such a company, how to find such an investment. I recently did a video about the Dando investor by Monish Pabrai and he shared seven great questions that helped finding stocks such as the one we mentioned and these are the questions and these are also the questions that I will be really focused on in the future because are great questions to finding great businesses at a fair price. Is it a business I understand well within my circle of competence? Hospitality in Croatia is something I know really well. I did a PhD on the Croatian stock market. Do I know the intrinsic value of the business today with a high degree of confidence how it's likely to change over the next few years? The business had a P-Ratio of 7, growth of 15%, high cash flows, price to cash flow of 5, dividend of 10%. Let's say the intrinsic value was a dividend of 5% for such a good business so there was a margin of safety which leads to question number 3. Is the business priced at a large discount to intrinsic value over 50%? I was somewhere there at 15%. Would I be willing to invest a large part of my net worth into the business? I said 70% I invested. If it would go down I would invest more which would increase my compounding returns, dividends, reinvest the dividends so it would be really great long-term investment. Is the downside minimal? The downside was 50% but here we have to differentiate between permanent capital loss. I don't think there was an opportunity for long-term permanent capital loss and this is also the difference between me and Pabrai. He's focused on the market to give him the returns and focused on the business so that's the difference. Does the business have a mode? Of course it was the only hospitality there and they were building a highway. Is it run by able and honest managers? I already said that there was no issues with it. So that was one stock. Now let's go to one of my first investments. The first investment that I really went big into and here the lesson gets a little bit trickier. The company actually went bust now 15 years later so it wasn't a great long-term investment but I fortunately made a lot of money on it. Let me show you. So this is a bottling company in Croatia. One of the first stocks that I was buying when I was 19-20, the P ratio was around 7, it was growing at 15% a year. All of the people I called all over the country had its products, had its water in their fridge so it was a really strong brand but the problem there was a 77% majority holding company and when you have such an owner you never know what will happen. The results for me were very positive but the story is much riskier. So I was buying at 10,000, I sold most of it around 50,000, two three years later. The company later went to 140,000 in 2007 in the bubble. It fell to 20,000 again but then I didn't buy because the company was guaranteeing all the loans of the parent company and that was a big red flag for me. Look at what happened. The stock went up as it is a great business, great brand, good profits, good margins but then the contingent liabilities, the guarantees materialized as the parent company went bust and now you see all the equity gone as the company was guaranteeing much bigger loans to the parent. So this is an example of how the market doesn't focus on the risks until those materialize. If something didn't materialize in the past it doesn't mean it will not materialize in the future so focus on risk is key. So let's say that between 2003 there haven't been such guarantees which is important but let's say this was a little bit more risky than the previous one so you learn with time. Now this is okay I was young the next great investment was real estate and I'm discussing real estate because it's extremely important to put things into perspective. Real estate is grounded much different than stocks prices don't go up that much all the time and I was living in the Netherlands I was renting and I was seeing that rent prices are 50 percent above mortgage prices not just the more the cost the interest plus repayment of the mortgage over a fixed rate for 30 years were much lower than the rent. Rent was 50 percent higher than the mortgage so I said okay let's buy it will lower our risks and probably the mortgage costs or the price of the houses will come in line with the rents because I have never heard that rents go down. So we did that we bought a house 103 percent mortgage no down payment we have extra money too because we went to buy a house that we had to completely refurbish and I'm still finishing on that and over the last two three years we did very well because we bought at a good moment in time. Why were housing prices in the Netherlands so lower than rent prices because nobody wanted to buy in a market that was going down because of fear. Since then everybody's rushing into buying and the market has exploded and now we are looking to sell to get the equity out because I don't want to hold so much equity in a house. So this will allow me to release some liquidity some will go in the long term 100 000 portfolio that I'll do for stocks and the other part will probably go for another piece of real estate if it will still be selling when I sell this house because I found an amazing piece of real estate that I want to invest. Now when it comes to real estate the usual comment is on YouTube do you think investing in real estate is good now? Investing in real estate is like stocks even more important than stocks you have to look at 1 000 10 000 properties narrow it down to five on the five make five extremely low ball offers and one of those files will be a buy. When you can do that then investing real estate is good just buying something at market price is crazy to invest in real estate so please refrain from asking me whether now buying a house is good or not. Do your research and then you will see. So the moral of these three stories except for one where I was young the other two had practically no downside so the risk of permanent capital loss over the very long term was really minimum the most I could lose with the house was I could return the house the keys or rent it out so that the rent pays the mortgage and after 30 years I would have the house highly unlikely that I would go to permanent capital losses there so and that is something I really want to do on my stock market research with everything that I do limit permanent capital loss be it through buying at a margin of safety being too true taking advantage of a volatility if I know it's a good business I know I can buy more if it goes down so having some cash and managing that volatility if something goes down and I'm happy about owning it I buy more when it goes up I sell part of it to balance portfolio exposure and so I increase my return over the long term but I take advantage of volatility because volatility is the best friend of the value investor so when it comes to investment strategy I will start with the seven questions from pubry and then I'll add something more on it which is something different than what pubry does I think that pubry focuses on getting his part of his return investing written from the stock market he wants to buy undervalued stocks and then hoping that the market values them fairly which he says usually happens in three years and get the return from there that worked very well in the first 15 years not in the last five years I think his annual return is now 6% but that's still okay however I want to focus on businesses I hope to never sell my businesses and that's where I want to get my return and that's a big difference a big difference when it comes to investing I don't aim to make 26% like pubry let's say I aim for 15% but with limited permanent capital loss and if it is higher than 15% that depends on the market that's something I cannot know whether it will happen or not if we have a lot of volatility up and down then we might go to 20-25% over the long term if we don't have volatility we might be between 10-15% that's not up to me that's up to the market up to me is to find great businesses limited permanent capital loss happy to buy more if it goes down and from this situation in the current market it takes a lot of work to find such businesses and it takes a lot of time additional portfolio keys 10 year investing horizon when analyzing a business nobody knows what will the world look like in 10 years but let's go for high upside and limited downside or unlikely downside and this is something key as I said investing is done through time and this is something 20 investment punch card for the next 20 years if you're patient if you are willing to accept the market is irrational you can do this and you can really invest in a few businesses over time just buying five or six of them over time give yourself the time to find them and that is what I'm doing I'm giving myself the time to find that over the long time apart from that when you look for such businesses the focus has also to be on return on invested capital from the business reinvest and hold for the long term if the business is likely to continue to deliver returns treat the portfolio as a fund okay think of hedges when opportune to do so so to conclude this is the SAP 500 and you can see either it goes up or it goes down there is no in between with stocks with the market with people which is completely irrational there is a line that can be drawn that balances all out you have to see how to behave when the market is overvalued and when the market will go into panic mode as it always goes sooner or later so I also have another portfolio this is the lump sum a smaller dollar cost averaging portfolio but that will be the story for probably somewhere next week when we do a portfolio update on the smaller portfolio before I finish if you want to see all that I do please check my stock market research platform there is my portfolio my strategy everything written down and really I show my skin in the game and how it works see you in the next video