 Hey guys, welcome back to the young investors podcast. I don't know to be honest. I don't even know is it episode 25 today, Hamish I think it's so 25 is cheese. I just launched into that intro before even looking at what number we're on But yeah, it's episode 25. We've hit the quarter of a century. How are you going Hamish? Yeah, I'm good I'm good. It's uh, yeah, we're getting through them We've got another 25 25 25 and then we can finally do out 100 episode. That's gonna be a hundredth episode special Gosh, that's you guys. We've got some big big plans. I tell you We've got no plans But yeah in this podcast again, we've got another guest our third guest now And I'm I'm really pumped to have our guests on today. So I hope you guys really enjoy Us picking the brains of this investor that we've got on today. You guys all know him from YouTube We've got Sven Karlan from the YouTube channel Sven Karlan. How you going mate? Thank you for having me feeling great So let's do this. Yeah, how's things over in the Netherlands flat? Flat and cold Flat I like that how the markets flat. Well, I can tell you the markets are very flat in Australia as well Yeah, pretty much. How's the weather over in the Netherlands? Rainy hot here at the moment Yeah, here. It's rainy winter is finally over, but it's shitty weather in the Netherlands Oh, no, we have had the longest summer in more. I don't know about in Canberra, but in Melbourne We've had can we start talking about investing because you are making me feel bad I Think that's a fair. I think that's absolutely fair. No one likes to talk about miserable weather And no one likes to talk about long hot summers when they're not in one themselves. Thank you guys All right guys So you guys know the deal as as per usual we just go through the indices first up We've got a couple of news stories to get through and then of course the middle section of the podcast We're going to be talking to Sven all about Sven's his background and especially his background in investment analysis And what he does with his YouTube channel And then also talking about portfolio structure a bit at the end and then of course we've got a couple of Q&A questions Hopefully we've got time for and we'll see how we go So hey, Mitch, did you want to jump in and just run us through what the indices have been doing in the last week? Interesting week for the indices this week. We had the Dow down 3.12 percent We had the Nasdaq down 3.6 percent the S&P 500 down 3.2 percent and over in Australia We had the all-ordinaries up point two percent and the ASX 200 Up point one eight percent pretty flat pretty flat in Australia. It's interesting that interesting that America came down a fair bit But I think that's to do with one of the news topics that we've got to discuss today So yeah, I was one so Sven do you look at the indices much with your personal investment kind of Analysis or is it something that you don't really factor in? I don't really care about the indices and what those do Yeah, yeah, because I focus on the business and if I find a good business at a good price I know that somewhere in The long term I will be rewarded and if it goes up and down left or right flat or hilly Doesn't change much for me. Yeah, I think that's quite in line with the way that that we go about our investing as well So I think this should be a I think we might see eye-to-eye on a lot of the topics that we talk about in the podcast because yeah I don't know. It doesn't really factor in much for me again all about individual businesses. Would you say the same Hamish? Yeah, yeah, it's something. I really don't watch it all Like Sven said it's all about the individual business what's happening Within the business and its industry and over time if you get that at the right price And of course we'll talk about our different strategies as we go through this podcast then you will be rewarded over the long term But yeah, you said the the US markets down quite a bit. Did you want to jump into the first news story? Brandon and tell us why that might be Yeah, well, I just I saw this the other day One of the big headlines was that the Dow slides by 200 points as fears that the world economy might be slowing But the the actual reason it wasn't to do with America stocks fell on Thursday after the European Central Bank slashed its economic growth forecast for 2019 and actually announced a new round of stimulus To help the banks to help the banks out in the region So obviously people are just getting a bit concerned over the global economy The European Central Bank president said that the central bank cut its growth estimate from for sorry for 2019 to 1.1 percent Which is down from 1.7 percent that they released in December So although it's not like a huge number when you actually figure that as a percentage It's quite a difference in terms of percentage The European Central Bank as part of this news story they announced Some new longer term refinancing operations like a stimulus program pretty much just loans provided by the ECB They kept at a low rate So it essentially just makes it makes it easier for the banks to lend to consumers Which overall just helps stimulate the economy But I thought what was interesting is that this is the third stimulus injection from the ECB since 2014 so fears that the world economy is slowing down. What do you reckon Hamish? Do you care? I mean, it's it's interesting that they've been doing stimulus like three rounds of injections and It's still very slow And I feel like there's a lot of countries at the moment that are experiencing quite slow growth Australia is experiencing quite slow growth. I mean I care in the way that if there is some kind of World economic downturn that there will be a lot of individual businesses that go on sale But to any other extent It doesn't really worry me too much Sven do you look do you know much about the European sort of economy? Do you watch it? What do you think about? Unfortunately, I've unfortunately, I know a lot about it And it's very simple in Europe People are getting older. They have no kids So you cannot expect growth Secondly, just take an example of what we are doing now. I'm sitting in the Netherlands You're sitting in Melbourne and Cambera, right? Yeah, and what is the cost of what we are doing? Yeah, next to nothing. Yeah, next to nothing So you cannot have you have quality of life growth But you cannot have economic growth if the cost of the most things that we are doing especially you millenium Millennials is next to nothing Yeah, so so people are simply focused on these numbers growth economic growth, but that's completely wrong because Actually, we should be happy that there is less economic growth because we will spend less money But we should focus I think for the next 100 years on improving the quality of life and not so much on what was the right thing to focus on in the last 100 years because the industrial era is over and Politicians simply don't get that yet Hopefully they will but it's not like because Germany for example European Union everything they are printing so much money and Stimulating the old economy instead of focusing and developing the new economy and It's simply just kicking the can down the road. So yeah, yeah, that's a good way to put it Actually, I never really thought about it that way because you're right a lot of the things that Make life really simple for us are free like exactly what you're saying before like what we're doing here We don't have to pay a huge amount just to access Facebook or Skype or something like that So I think that's a really good point that I guess I never really never really thought about is a lot of these things That make life what it is today. They they kind of just they're free for us We kind of take them for granted a little bit sometimes and when they are free. They don't they are not included in the GDP growth Exactly. Yeah. Yeah, so it's an interesting Interesting effect, which I never really thought about on yeah on the kind of how we live our lives Today and all the convenient the free conveniences that we have and that's that's relationship to lower economic growth So I think that what you say about kind of an old old economy versus a new economy is is bang on the money I think what is yeah, especially what you said with like just kicking the can down the road It seems like that's definitely the case and then as investors we have to see okay How are we going to invest given the trends that are going on? given what the politicians are doing and really focusing on The businesses that will do well because it's always again Coming back. Okay. What what will this business do? Is it perhaps a subscription service? Is it a podcast service? Is it something that will be used or some metal that will be used no matter what in Electrical batteries or solar panels or something that will be used no matter what happens to the economy and therefore News this week is about this next week is about that a few weeks ago It was about something else and there is always something to keep the media entertained To get to the clicks to get to the views, but it doesn't really help your portfolio and your returns. Yeah Yeah, absolutely. I couldn't agree more. It's a really interesting insight So, I mean in Australia, we've got an aging population as well And now we've seen quite low growth just recently as well Brandon Did you want to talk about what's happening happening with Australia's economy? Yeah, yeah, sure. We might just I did chuck this in because I know obviously all you guys Listening to this are pretty much Australian, but we'll just fly through this because I really just want to talk to spend more Yeah, so we've got our next news stories that Australia's economic Sorry, Australia's economy has just slid into a recession on a per capita basis so on a per capita basis Australia's total GDP growth level has shrunk over two consecutive quarters it shrank by 0.1% and 0.2% in the September and December quarters respectively according to the ABS the Australian Bureau of Statistics So overall the annual growth has fallen to just 2.3 percent Which is below the Reserve Bank's 2019 forecast of 3% Yeah, what do you make of this Hamish? Honestly, like like as I said with the European stuff It doesn't really affect me too much. I mean, I'm just focusing on individual businesses I mean, it's interesting to watch it unfolds because We're both very young So I had I mean for me personally, what was I when we had the last recession? I would have been 10 So yeah, I had no idea what was going on So it is it's interesting as like a learning lesson to sort of go through this process Whether or not we're there yet on or not But just to see these things happen and sort of see some of the cracks in the economy sort of appear Maybe I find it interesting to watch, but I don't really have anything Particularly interesting to say about it. I think that yeah I think that this news story is really just a Australia specific version of the first news story. Yeah Really, it's just about slowing economic growth and people getting a bit worried But yeah, I think like that going back to what Sven what you were talking about it's just all about, you know focusing on individual businesses and identifying not old trends but identifying new trends and thinking to the future and and thinking about your investment strategy going forward and and not really relying too much on Oh, what was Australia's GDP and that sort of stuff. Shall we head into the new next news story gents? Yeah, so the last news story. I've just got here was that Next week on March 14th. Tesla will be unveiling their Model Y, which is their new Model electric sedan. I believe it is a sedan. I believe I think it's a SUV. It's an SUV Okay, but it's a V but it's based off the Model 3. Is that correct? Yeah, that's correct. Yeah Yeah, it's a I think it's 75% parts of the same with the Model 3. Okay, interesting. Yeah So that's I expected to start production of that in 2020 Although I guess Elon's notorious. What is it Elon time? He's a long time. He's notorious for delaying his initial production targets Yeah, so who knows if that's actually gonna be accurate Yeah, what do you reckon about this friend? Do you follow Tesla at all? Is Tesla one of those companies that you like to keep on the radar or not really? It's so much in the news that you have to follow it and you have to Check it out and everybody's so crazy about it. But Just a funny note Tesla Nikola Tesla the famous electrician was born about a two-hour ride where from where I was born in Croatia Oh, wow, so so awesome So it's a nice connection to Tesla and whenever you hear Tesla Tesla Tesla Tesla, you know Oh, this guy was born so close to where I was born and That's one and on the company I think it's very simple Elon Musk Has nothing to lose because the worst case scenario the company goes bust Yeah, and he's really pushing on that growth on those increased sales on those Improved margins scalability and everything and as long as he has the money to play the game As long as there is capital injections that Whatever the refinancing he's doing he will do well and the more stories He's always selling those stories to get to the capital to fund the stories And it's a self-reinforcing cycle as long as it goes well what would crash What would kill Tesla would be a slowdown a real recession because then Demand for cars and especially such cars that are usually leased from companies or something like that those drop 15 20% plus on the other hand the competition from others is Increasing so I would say okay Tesla Elon Musk in this case is really betting okay I have a 20% chance of winning. I have a 50% chance of Keep it going without profit profitability, and I have a 30% chance of going bust So I better do whatever I can do to make this work And I actually hope it will work because I like the electric vehicle trend the renewables Healthy lifestyle and so but it's simply a game of chances, and that's not what I like to invest I like to invest with margins of safety the value investing so I like to watch Tesla I hope it succeeds, but let's say it's not my style my kind of investment. That's it Yeah, I mean you certainly have to assume massive amounts of growth and I mean like there's I think it was Ron Baron is Someone who's heavily invested in Tesla and he was saying it could go to a trillion dollar market cap and you know He's explaining the maths of they could sell 10 10 million cars and that's a that's a lot of cars like there's a big assumption You have to assume a lot of future cash flow in order to come to a reasonable Valuation for this company in order for the downside to be worth the upside So 10 million cars 10 million cars is what the largest producer in the world is selling which is Valk's Yeah, and they have what? 600,000 employees 25, I don't know 40 factories around the world and Cash flows they are extremely cash flow positive They they didn't even feel the 20 billion fine that they Received a year ago and they have the capital and they are investing More than Tesla is investing in the electrical trend. They will be launching new cars. So it's a highly competitive Environment and I'm seeing now I live in a let's say relatively one of the richest areas in the Netherlands and a few years ago all the new electric cars were Tesla's and the last six months all the new electric cars are Jaguar Ipaces oh really? So just one car came as competition and I see no new Tesla's no new neighbors with Tesla's But I see a lot of new neighbors with the new electric thing So it's not really the Tesla has a mode it had first mover advantage But that quit quickly erodes it practically built a market for the others that are just coming in which is Unfortunately a bad thing for Tesla. Yeah, I saw I'm volts wagon They unveiled an electric car and all electric car just recently And I watched the unveiling for it and it looks really good They partnered with Google for the all of the in-car tech And it it looks really good And it's interesting that you say that the Jaguar cars are popping up because I think Google's also partnered with Jaguar for their art For their Waymo car fleet that they're testing at the moment Yeah, I think that's true. I mean Elon has said in the past that moats don't matter. It's just all about innovation And I mean I'm not sure how true that is because there's only so long that you can stay ahead in of innovation You really do need some intrinsic characteristic in the business that gives you an advantage over other companies and you don't that didn't that Didn't exist over the last 100 years in the car industry and that will be the same over the next 100 years there is simply no moat in the car industry and As you said the expected model y production start is in 2020 Where and everybody will come with five to ten electric cars from Mercedes BMW or the Chrysler Hyundai You name it everybody will come with ten even Porsche is coming out with a brand-new all-electric So it's simply highly competitive Which makes it risky from an investing perspective and which makes it very difficult to reach the 10 million cars Sold to justify the valuation. Yeah, just too much competition. I do yeah overall I do like the story of Tesla. I think you're right Sven I think that it will be a very testing time for Tesla if we do hit some sort of major recession I think that will be a tough time for them But I do think well, I guess Elon when he started the company His goal was to just make Tesla try and advance the world's transition to sustainable energy And I think if you if you don't even look at Tesla from a business or investment perspective I think he's really achieved what he's set out to do. Absolutely. Yeah, and now you're seeing that all these He's essentially his company him himself and his company is basically single-handedly Forced all of these other car companies to start to think about and produce Electric cars. So yeah, I agree with you. I think that a Definitely a recession might be a tough time for Tesla, but overall in terms of the company I think they're achieving what they're hoping they would achieve But yeah, as you're saying car car the car industry the auto industry So competitive and just so hard to operate in. Yeah, I agree. I don't think there's any Tesla Tesla would deserve to make it They would deserve to be able to reach that target of 10 million cars in the next five years Because of what they did, but you know just deserving something because you did something good for Humanity or the world doesn't help much in business. That's unfortunately, so yeah, that's it business is business, right? Yeah, and if there is profit everybody else will just chase the same profit you are chasing Even if you did so much good as Tesla actually did so I'll keep cheering for Tesla But I will not invest my money in it. I think that's fair And that kind of rounds out the The week of news we had a couple of good news stories in there now we hit the middle of the podcast Of course, we've got our long section today. We've got Sven on the podcast So we're gonna have a really good chat about his YouTube channel and his background and also talk about his style of You know investment analysis and how he structures a portfolio and that sort of stuff So I guess then a lot of the viewers or the listeners wouldn't necessarily know Yourself and know what you do and and what your background is So did you want to kind of give us a bit of a background of who you are? Where you're from and kind of what your background is in finance and that sort of stuff. All right, so Let's start from the start. I started investing in 2002 which gives me seven seventeen years of experience Yeah, so when I started I Always was I don't know why I immediately looked for companies that have value that have a good yield some growth and I did pretty well and Then that was in 2002. I did really well up to 2007 and Then there was the recession, but I did I sold a lot of things prior to that 2009 I wanted to dig deeper into the finances investing so I after my master in international economics, I started a PhD Where I really went into finance and the topic of my PhD was I developed a model for the analysis of Risk when it comes to investing in stocks, especially on emerging markets so I have a When you do a PhD you have to analyze Everything else that other academics did and then develop on that So I have an academic investing finance risk analysis Background when I finished my PhD. I was teaching accounting international financial accounting for three years at the University of Applied Sciences here in the Netherlands in Amsterdam. So yeah that's my academic background and While doing the PhD I was always teaching so that's Later it went into YouTube because I loved teaching. I was a high school teacher So I always try to explain things in a simple way I also tried to work To see how it looks like in corporate finance in London So I worked for a short short period of time in at Bloomberg in London I was a data researcher. So how was that? So it was great, but you work 60 hours a week on what Mr. Michael Bloomberg wants and the terminal was great the friends the Contacts and everything you get was great, but I always wanted to develop something for myself I wanted to have time to learn more to grow more and let's say London is like the car industry extremely tough extremely competitive and You just if you get a raise you get a better salary You just want to move to a better neighborhood where the rents are Much much higher. So nothing changes in your life. And so I decided I resigned from Bloomberg And got a job as a teacher in the Netherlands, but then teaching for three years You always teach always new people and students as they are they just care about Getting their grade grade not that much about really learning something. So I as you you were a teacher Summers are off. I started writing a little bit started writing some articles analyzing stocks and Publishing on seeking alpha published a lot of articles there then I got hired from an American company to write articles on a weekly basis and I Liked it liked it and liked it and I decided okay. I have all these articles. I can do something with them So I started YouTube Videos and that got traction. So I resigned as a teacher. I resigned Writing articles and I Just I started my own business where I do research on stocks and that's what how I passed my weeks for now the last year I'm a full-time stock market researcher. So I just research research research publish my Reports manage two portfolios and just try to accumulate that knowledge when it comes to investing because Investing returns in the form of dividends earnings also Cumulate but also investing knowledge because the more I research the more it's easier to connect the dots Oh, this happened. I remember five years ago. It was this on that and now that I can spend 40 50 hours researching stocks a week Everything is much much easier. So With the accounting background with the academic background with the behavioral finance background That was also part of my PhD. Let's say I can now get to a good picture on what's going on in the markets Yeah, well, it sounds like you've got a lot of experience in sort of the traditional side and Sort of your own side the behavioral side and that sort of thing So full-time right now. You're just doing your YouTube and you have your research platform. Yeah, you I'm I'm actually not that much of a YouTuber I lowered it down to I think four videos Five to ten minutes videos per week. So I usually film film those videos Friday morning from eight to ten I prepare them during the week when I have a little bit of time So it practically YouTube takes perhaps five hours of my week and that's it And the rest the rest is all about research and then also that research goes into YouTube So it's really just sharing mostly what I do and that's it So I'm not really focused on YouTube, which makes me lose a lot of subscribers But I prefer to focus on the research. Yeah. Yeah. No, that's fair enough And and what's the can you tell us more about the research platform that you're working on as well? Year and a half ago. I asked my American employer. Well, what are these articles bringing you? And he replied to me. Oh, we have 120,000 subscribers on your newsletter And then I thought oh my god if I I'm getting a monthly salary and I got 120,000 subscribers for this guy then I said, okay, I can maybe not 120,000 But I can surely do the same for me and I have seen all the articles that I have written in the past They were always positively received by the people people always wanted more and so I have launched paid platform It's I think it's now 349 US dollars per year. So what's that? $30 per month and everything that I do all my research. I constantly I Analyze one sector per month. So I'm researching food stocks this month And I have a list of 100 food stocks and I go through each food stock Find the five stocks that I will dig in deeper and on those stocks I make really 20 40 pages reports to really understand the risk reward and That's what I offer to my subscribers and the feedback is really positive for now So I just keep doing what I do. Yeah It's it's kind of like the it's kind of like the ideal business because Well, it would be for me at least I'd find that really interesting because you get to run your business and you get to help people But all of the research that you do it, of course, it helps them, but it also helps you I mean you're doing the research for your own portfolio as well. I presume That's that that's the focus and the start of everything was actually three four years ago I wanted to go to the normal route So I was a professor I was teaching and I opened an investment fund here in the Netherlands So for years, I really had my own fund. I have the few clients and That was also one reason to do YouTube was okay I'm going to show my research what I do and then maybe gather more clients for the fund then then new regulation in the European Union The difficulty in scaling Globally because I could only get to Dutch professional investors And then YouTube really got off Exploded let's say and then I said, okay, I can maybe Change the business model. I don't have to do a fund I can just show people what I do all my research and then they can pick whatever they do and Let's say I went into a modern business model and it's working much better than managing a fund and I don't know. I'm for now I will see whether I will start the fund in the next few years, but in the last few months I declined about 40 million US dollars in assets under management because now focusing on the research and Not on managing other people's money. Wow, that's unreal Man, that's a really you've got a really Great background. You've you've done a little bit of everything. But yeah, like I've followed your channel since probably you're Probably under 5,000 subscribers and that has grown unbelievably. So yeah That's really awesome that you've been able to work on that and now work on your research platform as well I think that's um, yeah, we're living the life. I think we've we've got it good Certainly a lot of fun being able to do you know what you enjoy for a living And I really switched also to the this modern business models Subscription business models and I have closed my Dutch fund last year because it was simply It's an old business model. It's difficult to scale it a lot of costs a lot of regulation and everything And why when you can do it as we spoke at the beginning of this podcast You can do so much for free or for very little money and you can scale that globally and scaling Scaling a fund globally costs a lot of money So when you can do it in a simple way helping people invest Educating them in a financial way. Why not? So yeah, I was to be honest Very surprised by what can be done with this modern way of doing things But here we are we're doing YouTube now talking to you on the podcast and it's exciting and I'm just enjoying the process and we'll see where it leads. Yeah, I've always found that the the internet how it's created this sort of Like infinite scalability and like like you said, it's completely free. I mean you do your research It's probably mostly free research on the internet. I mean we can get access to all the annual reports You don't have to do anything The platform that you can run at say a course on or a platform on could be free And YouTube you can get your own marketing for free just by providing free content and getting viewers that way I mean the whole thing can be done at a very low cost and it's It's something that is just completely new to the business space Yeah, I think people really forget about just how good we've got it. I mean the internet It really opens up scalability. It really opens up the potential for anyone to do their own business I mean I was looking at some YouTube channel the other day There's this like nine-year-old kid and his YouTube channel It gets millions of views and he just opens toys and plays with toys on the camera It's like how's that this this nine-year-old's getting like five million views for every for every video he makes He's let he's less than age probably like three But yeah, I agree and I think that's that's really powerful. I think that's kind of what what we do with Going back to like online business is what we do with stocks as well. I mean we I guess we chase growth I mean we're looking for growth and the internet is such a fantastic way for a Fantastic business opportunity to try and get that scalability and get that growth So I think that's even when it comes to investing. I I think it was in December I was contacted by a person. He has a trust fund and he has a 13 million dollar portfolio and Wow, of course He just got that inherited and he went to I will not name the bank, but to a large global investment bank and They put 50% of it in us Medium-term bonds 22% in the US stocks and 22% in international stocks, so For that what they did he's paying a 1% fee on 13 million. So and he could get the same By simply putting it in three different index funds where yeah, the fee would be 0.04 percent yeah, so that's One staggering 1.20 of what he is paying for the same service He could pay by simply doing and going away from that investment bank. So we are in a We are in for a lot of disruption a lot of those old school buildings Will have it tough because yeah, thanks to the internet and this again leads to less economic growth But leads to a better world and this is what people don't Comprehend yet everybody that wants to that has a lot like investment banks They want to hold to the old instead of transforming into the new and you see that around the world There's so many examples of just clinging on to the old and not embracing. What's what's in the future? well, I guess it's kind of that kind of transitions and transitions is quite nicely into Starting to maybe talk about more your investing style and kind of what you What you look for in different companies? So are there any I guess my first question would be are there any kind of main areas that you focus on? Particularly when you start to dig into a business and start to analyze it Are there any kind of like key pillars to your approach or key areas that you look at with individual businesses? There is one simple key and that is my belief and That worked extremely well over the last 17 years Business earnings are the key to your investment returns Yeah, so whenever I look at the company I look at okay what is The potential the what are the potential or what are the current earnings that the company is Delivering or can deliver in the future and then I compare that to the price I have to pay for that now to the risks what can go wrong what can go right? And then I usually I have a threshold that I want 15% Business returns for my investments which should translate into at least 15% returns per year And now people say okay, that's extremely high But just look at Warren Buffett when he bought Coca-Cola He's now getting a 60% dividend yield on what he paid. Yeah, it's unbelievable. That is unbelievable So he paid $1 and he's now getting 60 cents per year on that dollar Wow Yeah, it really shows you the power of just leaving your investment like picking obviously finding really strong businesses but also the power of Holding for the long term. I mean that is a staggering 60% dividend yield each year now is that's quite staggering So it's just the that's what I focus on I look at the more businesses as I can I look at businesses businesses businesses, and I just try to find those that okay If all goes wrong, I don't lose my much much money, but if things really develop well Then I Somewhere in the next 10 years. I get to a dividend person of I don't know 20 30 40 percent on my initial investment Yeah Where do you sort? Where would you start looking like if there was someone who just had no idea what sector to start looking at? Would you pick a particular industry and then you would look through all of the main businesses in that industry? Or what is your approach to sort of starting to look at a new set of businesses say? well, let's say I Look at the sector and then I really dig into the complete sector and I do probably a sector a month So this this month it was food Last month this month is food stocks last month It was zinc miners before that I looked at all the stocks in Russia, and I simply try to look Okay, I know Russia is the cheapest market in the world. So let's see what's there then I Read an article how zinc miners are on average 50 percent down in the last six months of 2018. Oh Let's look at that sector then food food prices. I know that they are Relatively low compared to what they have been over the last 10 years Therefore lower earnings for food stocks. Okay, let's see if there is some businesses like that last summer was Brazilian stocks were very cheap Everybody was afraid about Brazil going bankrupt or something like that But then I think okay Can I find a business in Brazil that will do well no matter what happens and I had some students from Brazil? I call them up. Do you still watch television? Yes Do you still turn on the light and your airco during the day and the light during the night? Yes, yes, do you still drink your water? Yes. Yes. Yes, and then you can find a utility that's Giving you six seven percent dividend yield and you know that you can't lose And the fact is that with all those index funds, they are simply selling everything related to Brazil Of they sell everything related to Russia without looking at the individual businesses And that's simply something that gives you an opportunity as for your question. Where to start You can simply look around What where you're living what's going on? What are people doing? What are the trends that are growing and then you can Just write Google I don't know 5g stocks and then you will get a list of 25g stocks And then you can slowly start looking at the fundamentals at the book values at the return on capital potential earnings, etc. So That's how I would start so yeah, okay So you start kind of for you personally I guess you start with what you do you start kind of sector Sector by sector and then from there you hone it in For someone maybe just a new investor you might start out with kind of what you see around you What you like or what you observe and then try and dig deeper by kind of starting off with googling and that sort of stuff Once you get to that stage now where you've kind of okay So you're analyzing food stocks, and then you start to dig in deep onto a particular company What are some of the are there any I guess some key Measures or key metrics or or things that you like to see maybe it's like an economic mode or perhaps It's you know PE ratio or something are there any things that you specifically like to look for When you start digging in deeper with individual businesses Well, I didn't mention it before but I also wrote a book last year It's called all right modern value investing and there I discussed 25 tools for analyzing stocks in a modern let's say value investing way right, right, so you look at 25 even more factors that go from okay, what the management said five years ago and what really happened from the balance sheet from the tangible book value in tangible book values impairment risk, so I really look at everything and then the key is okay, what matters for this company? A month ago before the stock crashed a lot Kraft Heinz I made a video and I said, okay, they really have a lot of Intangibles from their acquisitions and intangibles usually get impaired if The acquisitions do not deliver on those expectations and unfortunately for Kraft Heinz Shareholders that happened later, but that is a risk Okay, I'm looking at this company and you point you simply depending on the business Okay, this is a risk for this company. This can happen. This can happen. So there is not really Strategy, okay, you do the same approach Mechanically on each company each company is different like each person is different and you always have to see okay What works for this company and what doesn't yeah, yeah You briefly mentioned management there looking at what they said in the past and then seeing if they Followed up on those promises if what they said would happen actually happened And that's something I actually do and I tell my audience to do as well because it's a good tell of whether or not The management is just constantly flip-flopping on what they say I mean sometimes you'll read a letter to the shareholders from five or ten years ago and the the CEO will say something and Five years later, they've just completely ignored it and they've moved on to something else that they're they're chasing now Is there anything else that you use in order to assess the management? Or do you just sort of read through what they're saying in the letters to the shareholders and then see if they follow up on those Promises is there any other metrics that you use to sort of assess that so when it comes to the management I really love listening or reading the conference called transcripts. Yeah so I Just looked at the stock in the food sector and I read through the last six years of conference calls Because you you can really learn a lot not from what the management is saying, but from what the analysts are asking Yeah, because the analysts will ask usually if they are good analysts You they will go to the key points that you have to know about the company and then over the Next quarter conference call you see okay what the management did and then you see okay how did that end up into the cash flows because at the end it all boils down to earnings and cash flows and So you can get a feeling about okay. Is this management there? What's the really the focus of the management? Is it improving shareholder value or is it just improving short-term the stock market's price? so that they can sell their options or Telling a nice story because each CEO when you listen to a CEO you have to understand that he or she is a salesman Yeah, that's very true. They are there their job is to sell their own business So that the stock price goes up because that's what everybody wants and that's their job So they will do whatever it takes and the better the salesman the better the business will do Elon Musk is a salesman. He's constantly pushing new businesses new ideas new cars hyper loops Selling it to the investing community so that the stock price can go up so that he can get more cash in the form of financing better Leverage ratios and so on but you have to understand okay where does it where is the difference between a salesperson and Someone that's really focused on Returning value to shareholders increasing shareholder returns and that's the key differentiation for me is the management Oriented towards me as a shareholder or towards something else I think that's yeah, you have to have to dig deep on the management and have to understand where Whether the light Warren Buffett always says I guess whether the management team is Or whether you know the management is aligned with what the shareholders Are also hoping for and and being a what you say Hamish being a management team with both integrity and skill But I think that the integrity thing is something that sometimes Yeah, it's questionable in some management teams So I think overall so I guess going back so we kind of had a look at how you how you'd approach Kind of starting to look at a business I think a lot of what you're saying too comes back to the idea of kind of Understanding the business that you're investing in and then looking at obviously the management Do you try and look for? Companies when you're investing do you try and look for companies with economic modes kind of classic Warren Buffett Charlie Munger? Is that a big pillar for you? What I look is yes modes, but in the form Okay, what's the worst can that can happen in the sector on or in the industry? And can the company survive it? Yeah, right. Okay, and so if the company can survive it I know businesses sectors industries countries economies are cyclical and then okay if they can survive the downturn They will do extremely well in the upturn. Yeah, and on the up. Yeah Yeah, so I try to look for companies that can survive Whatever the economy or Trows at them. So that's let's say the minimum mode I need to look at because If you have a business with a great mode a great business Great cash flows It's usually fairly priced Yeah, sure. Yeah, you will get you will pay a price earnings ratio of 25 30 or something like that So as a value investor that aims to get higher returns that three than three four percent You have to look also at imperfect Things But you try to okay. You try to really assess. Okay. What are the risks? And what are the what is the upside? So it's it's a thin game But the market is irrational the market doesn't look at individual businesses So if you really devote yourself to doing that you can find Irrationally priced businesses Yeah, and I think that comes back to That this is probably the biggest thing that I take out of your videos Especially on youtube spend And I guess it comes back to what you did with your study and that sort of thing Is the the thing I always like about your videos is that it's not It's not a video where you're saying, you know, uh, look apple stock This is a great company because of this and this and this and this and this and it's a great company And it's a great company and it's a great company. I think the really valuable thing about your videos is that you do You bring it back to What, you know, what are the risks? Like what is the risk reward? Like that's always a big thing that you talk about and I think that's a lot of It's a it's kind of a an area that should be in a lot more videos that kind of gets a bit glossed over But I think it's definitely worthwhile Obviously for listeners out there checking out Sven's videos and looking because there's He talks a lot about you know risk reward And I think that's like a major major thing that a lot of people miss If you read set clarman's book margin of safety of war and buffets, uh, whatever he did He they first focus on risk because the important thing when it comes to investing it is that You are there playing the game tomorrow If you don't focus on risks sooner or later, you're wiped out And when you're wiped out, uh, it's gone. It's over You cannot simply rebuild what you have and therefore I first start on risk Okay, what can go wrong if this goes wrong if this goes wrong if this goes wrong. What am I left with? And then you compare it only then to the upside. So for example talking back to tesla I know there is a risk of 100 and even everybody knows it and even Elon Musk knows it There is a risk that you lose 100 of your investment. Yeah, uh, slower sales debt covenants lower rating ratios less sales Bum bum bum tesla is bankrupt. Some other company will buy it out for Just the debt which is about 40 billion and that's it and your stock goes to zero And then you cannot play the game Next next week. So I'm always looking for risk first compared to the rewards And that's it because nobody knows what will happen And that's very dangerous if you try to know what will happen But you can estimate what can happen on the risk side and on the reward side And makes investing boring but much easier Yeah, I think an Sort of a simple mistake that a lot of people fall into is if they find something that they like like a tesla It's really easy to fall into a confirmation bias where you just don't look at the risk at all And you're all about the reward. How much how many cars could they make could they make 10 million cars? Yeah, they could make 10 million cars But you're right You really need to start with the risk because that is the most important thing What does Warren Buffett say don't lose money Focus on what your downside is And if there's limited downside and there's potential for quite a lot of upside Then it could make quite a good investment And I guess sort of the Another part important part of analysis Is to talk about how much you're paying for those cash flows because you can't those cash flows that a company is going to return to you Is limited it's not infinite And it doesn't change based on how much you pay So there is a limited amount that you should be willing to pay for a company And i'm curious as to Sven How do you assess how much you're willing to pay? How do you calculate sort of how much cash you could conservatively get back from a company? And then what do you work out as to what price you're willing to pay for that? So, uh, I think that the more you research the more the more stones you turn the more more opportunities you will find So, uh, also if somebody's only just starting with investing I would say okay aim for a five percent return And you will find a lot of good companies that will deliver that five percent return Just look at the earnings cash flows distribution dividend yield I mean apple is now delivering a six seven percent return And we'll probably deliver it over the next 10 years Because people are still going to buy iphone's and things like that a little bit less a little bit more But the core of the business is not going anywhere And if you buy apple you will get a seven six seven percent return, which is extremely Uh, an extremely good return for let's say 80 percent of the people But if you fall into that 10 percent that wants more more and more You simply have to look for businesses that deliver earnings cash flow yields dividends buybacks that go 10 percent and higher than that and for that you have to look at a lot of businesses and then wait For them to be fairly priced and you do that simply I have a list of stocks that I watch and I don't know one company that I'm just looking now I looked at it first time in 2015. It was 45 dollars I estimated that the intrinsic value was about 60 I didn't buy because I said, okay, it can go up. It can go down and Last week I looked at it. It is at 25 Wow, right. Okay. Yeah, and now it becomes very interesting for me Okay, now you are there. Why are you there? Okay, what's going on? Did the business change? The business is actually just growing and now I have to re-research everything And then I make a report on it and then I make a risk reward decision I see, okay, what's the risk? What's the reward? Is it still worth 60 as I think over the long term it might be And you simply wait for the market to give you those opportunities And here and there you simply get them a lot of stocks Everybody's waiting for a stock market crash, but last December I think that a lot of stocks even good stocks fell more than 50 percent over the past six months Yeah, and you just wait for those opportunities If you know the intrinsic value of the business you buy when that happens And that's it and you can get 10 15 20 percent business returns And that's all what I do. That's all what I'm focused on and that's practically the whole story Yeah, so it's for you. It's more about You know analyzing what the business itself can produce in terms of earnings and you know understanding the business and thinking about Where they're going and what they're producing right now and what those earnings and cash flows might be in the future to kind of try and to try and estimate an intrinsic value now And aiming then I guess discounting that to try and make sure that the company offers you good risk reward And it offers you a decent return. Would that be a kind of a good summary or have I got that wrong? Exactly that and there is always a nice question is okay. Let's say the stock market closes down for the next 20 years Would I be a happy owner of that business without a stock quote? So the only thing that I'm getting are Let's say dividends or reinvestments of earnings and if that hits a yes Then okay Whatever happens. I'm happy as a business owner because we are investing in businesses And when you switch from stock market investing to business investing everything is much easier I would agree with that. Would you agree with that more about the business? And I think like Warren Buffett He's always saying he tries to look at the stock price last. I think so many Especially new investors to be honest They get so caught up in just looking at the price And the price is going down the price is going up the price is going down But I think it's a much better strategy as we've kind of been discussing to Analyze the business and invest for the business as opposed to looking at businesses Just like stocks that have a price that move up and down. Would you agree with that Hamish? Yeah, yeah, I mean Warren Buffett. He says so many great things So one of those things was what you just said spend there Would you be happy holding it if the stock market closed for 20 years? Another one is you see how he explains it just invest in it like it's a rental property Like you're buying the house. How much rent can you get back? Net of your expenses and if interest rates are at 3% is that return satisfactorily above that 3% return and it's it's when you look into the businesses like that It becomes a lot easier than trying to work out and trying to speculate Where a stock price could move to especially in the short term Is yeah, I just I think Warren Buffett's got a lot of wisdom and It sounds like you you you have sort of a lot of similar philosophies as to Warren Buffett and all these other great value investors fen So in terms of what we're going to talk about next, I guess sort of we'll get into portfolio structure so This is another thing that beginners and will anyone investing in the stock market can struggle with is is how should you structure your portfolio Should you have stocks and cash? Should you have stocks and bonds? Should you have? Different assets should you have gold? How do you sort of approach that fen and what do you think is sort of the way to? Sort of build a portfolio The biggest mistake that people make when building a portfolio is They they think short term like they watch stock prices go up and down on a daily basis and they they think okay I have to structure my portfolio. All right Saturday morning from 9 a.m. To 11 a.m. I will structure my portfolio You build a portfolio over 10 20 15 years and that's what people don't get you simply say, okay First focus how much am I going to invest per month per year? And then you say, okay. What's now? What's cheap now three years ago in the netherlands? I could get 30 year mortgage for 3 percent and the rent yield on the house that I bought was 7 percent. Oh, wow, right Wow, yeah So and that was the cheapest investment the best investments. I could find at that time I didn't think about structuring portfolios. I simply said, okay, let's put all our money there now Because that's a good investment. We are now we will now be selling the house. We are about 80 up on the initial investment, which was by the way leveraged So the return on capital is I don't know infinite Because in the Netherlands you can get the 103 percent mortgage no down payment necessary So so and now okay three years have passed two years ago 2016. There was a commodity crisis I think Australia was hit hard in the beginning of 2016. Yeah, and all these commodity stocks were lying there some trading at below net cash per share so Forget about the mine forget about the commodities forget about everything I'm paying two dollars for something that has 2.5 in cash. Yeah. And so 2014 I was investing in real estate 2016 in commodities The largest position was nevson resources that was acquired last year. Now. I'm again looking. Okay. What's cheap? And I tried to build a portfolio over The long term so I have invested in real estate I will reinvest that money in other real estate or in stocks or whatever is cheap at that moment So I would not going it's structuring a portfolio. Okay. It has to be like this or like that Just let the investments themselves Structure your portfolio over the next decade and you avoid a lot of mistakes Like I don't know buying bonds just because you have to have bonds or something like that I think I I I agree with you. I think that's a lot a lot of the pressure That newcomers face is they kind of especially in the stock market They might have a little bit of cash and they've heard Obviously the stories of you know, obviously with stock market investing It's it's better the earlier you get in and they might feel a lot of pressure To take their savings and just try and get into the market And sure, I mean if you want to be a passive investor you buy like a market tracking etf And you just hold of contribute to it for the rest of your life. That's great But yeah, I agree with you that sometimes and I guess I see this a lot in the youtube comments Sometimes it's worth just really thinking about what is short term and what is long term and and how long are you going to be investing for Because for me personally, I know I'm going to be investing for my whole life And I've got a lot of hopefully a lot of years left to live So I think it is like what you're saying less about, you know, I've got I've got $20,000 and I have to structure a portfolio today I think that you're uh, it's a very sound strategy what you're talking about How it doesn't you don't have to go all in like first up, you know, look around and see where Where the opportunities lie and you don't have to go you don't have to jump in straight away But maybe if there's you know, a really cheap stock you can start to build on that position If there's like what you're saying cheap real estate Then you can start to build on maybe a real estate portfolio and that sort of thing But I don't think that people should feel new comes to the stock market I don't think they should feel the pressure of having to get all of their money and just dump it somewhere that Cross their fingers and hope for a return So it's just applying common sense checking. Okay. What's the interest rate on my credit card? That that I have oh, it's 11 percent structure your portfolio by paying off your credit card debt Yeah, so so just just common sense looking at what is the yield What is the on the investment that you have the student debt loan on the rent you're paying Should you buy something should you keep renting and by applying common sense and thinking, okay I will be building this portfolio of my wealth over the next 50 years Then you say, okay this year I will invest only in I don't know Tesla if it works good Then next year the money I will invest in something else or something like that. So it's really people should Take off the pressure of structuring something just because an investment bank says or it sounds fancy to structure something Yeah, I couldn't agree more and I think that kind of that's a good way to kind of wrap up what we're talking about about portfolio structure It's maybe not necessarily about feeling the pressure that you have to structure it But yeah, like what you're saying look at look at you know Use your common sense and look at where your money is going. You know, is it worth paying down debt? Is it worth looking at now? There's some stocks that you really like that are looking cheap versus their cash flows and their earnings and that Is their property and that sort of stuff? So I think those that's really good and you you provided some really good insight into that area And I think that's a good time to kind of round it out And we'll just head into our last section of the podcast Which is of course our q&a section. So we've got three questions here. So I'm going to fire these actually I'll fire the first one at you Sven Um, I don't know. Have you have you heard of um, have you watched any of phil towns videos on youtube? Sven? Just a few just a few. Yeah, okay. Well, the first question here That's come in says phil town says to use a company with a 10 year history of numbers But what if you find companies say with five years on the market that do seem to have good numbers? Are they worth researching or do you think I should just look at stocks that have a longer history of financials? What would you say about kind of? history of financials and and risk in that area Sven I think that let's say phil town is doing a good thing educating investors But yeah, uh, what is uh easy to sell is when you simplify everything And that's what he's doing trying to make everything simple. That's an easy sell That's appealing to a lot of stock market beginners, etc But yeah, uh, what you care as an investor is not what happened in the last 10 years It's what will happen in the next three five 10 years So you're more about looking forward as opposed to Understanding what they have been able to produce in the past or you weight them both equally if we if we go back to craft Heinz 10 year numbers over the last 10 years look great And then less earnings came But if you would be focused on the numbers you would have missed that consumer trends are changing people are Millennials especially are less connected to brands And then you'll see okay the trends are changing the revenue The the earnings number the dividend is good the dividend is growing the earnings were growing But the revenue hasn't gone anywhere for the last six seven years Anywhere flat even if they did acquisition, etc So I think it's important to okay you look at the numbers But always try to go beyond the numbers always trying to understand the story beyond the numbers I was teaching accounting for three years And I always told my students now i'm going to tell you something that you will not like Accounting and the numbers won't tell you anything You have to always go beyond the number and understand. Okay. What's the number beyond? What's the actual real thing beyond the number? I have seen businesses that uh, they bought something in 1970 a building Immortized it over depreciated it over the last 40 years So property plant and equipment is zero on the balance sheet zero The value of the building on the market is 100 million dollars. Yeah. Yeah Yeah, so when somebody tells me look at the numbers No, I have to look at beyond the numbers because there is where I can find the advantage So it's very dangerous to just look at the numbers without looking at the business And even if there are just three years of numbers we are in a world that changes fast It's enough if you can understand what's going on with the business. Yeah, I think that's a really good answer We'll just quickly get into the second one. So the second question we've got here from a viewer was What are some personal finance and investing tips that you could give my 16 year old son? So he has a part-time job they added So what are some personal finance and investing tips for someone who's say in their teens? I would say start investing no matter what happens because now you have little money And if you lose everything you will lose little money the biggest mistake people are doing They wait to be 30 45 get the first real good paycheck get the first real good bonus And then they start investing and then they do the beginner's mistakes They invest in a high market in the hot stocks Don't get me started on weed stocks bitcoins or things like that And then they lose a lot of money. Why there is nobody talking about bitcoin now because 90% of people lost money on that Yeah, and so I would say start investing now Just as an educational experience start understanding the businesses the cash flows What happened go back and be give yourself a commitment that you will invest. I don't know 20 50 100 bucks per month Doesn't matter what happens just see see it as an educational Perspective and it will the difference will be measured in millions Over your lifetime because you will be 30 you will have more money your wife will say Oh, we should invest in this apartment on this luxurious boat to travel across the world in a timeshare And you will say I love you my darling, but let's invest somewhere else And it will save you it will save you millions. So That's it just focus on building experience and that's it Yeah, I think that's what I would say as well build experience and try and get into Investing when you don't have much to lose especially 16 year old. I mean you've got obviously this is written in by By the either mother or father. So it's just like you know, you've got that that backing of your parents You know, you know if if things go wrong, you're still going to be okay So take that opportunity to not be not be silly about things but to have those educational experiences So I think exactly the most important thing is to structure that education. Okay Now you want to invest let's say in cryptocurrencies. What is your strategy when it comes to that? What happens if cryptocurrencies fall around another 50 percent? Why did they fall? What's the value and when you start understanding the background of that Simply your investing life that will last another probably 70 80 years The way healthcare is going will be much much easier. So it's just about education when it comes to anybody below 70 that's everybody's still young below 70 Yeah, very true And the last question that I had for you Sven The last question we've got for today is from your experience. Are there any must read books that you've encountered? That you would recommend to maybe new investors or even more experienced investors What are some books or some resources that have really helped you kind of throughout your journey? If I would say you have to read One up on wall street by peter lynch and read it 10 times. Yeah 10 times over. Yeah, that's it next 10 weeks Read it 10 times over and that's it because it's so simple. It's so well So focused on really the core when it comes to investing Mistakes making mistakes He says simply if I'm right four out of 10 times, I'll make a lot of money So people have to accept failure accept losing money Accept how the learn how the investing game works And he explains it so perfectly well in the book that I would say that that's that's the book you should read He's a little bit more Let's say aggressive than Buffett, but that's okay. I think for most of the population Yeah, I just ordered that book actually it uh, it came just a couple of weeks ago So I've got a I need to get into that what your books fen you can feel free to plug your own book as well I'm sure it's a great book. Where is it modern? Value investing is that modern value investing? It's available on amazon. So, uh, it's really I tried to Because the last value investing books were written. I don't know the intelligent investor in 1972 margin of safety from set klarman in 1991 and the modern books were more about Okay, let me find an easy formula that I can sell Like green blood or something like that. So I decided, okay, let's summarize the core value investing Messages from the past and then apply also everything that changed over the last 50 years from behavioral finance that came in From George Soros from a little bit of daily or Gold investing and things like that and try to give a message try to educate people And then I also went and gave 25 tools that go from management from accounting from earnings from intrinsic values And everything to really for those that really want to dig into the research part how to invest in stocks So that's that was my message with the book. It's doing well on amazon I think i'm the ebook is selling like peter lynch one up on wall street. So we are the same amazon Best selling list. So i'm proud of that fantastic five stars reviews. So very very good feedback. So Yeah, well, yeah, make sure you guys make sure you go check that out I mean it sounds like it's uh, i'm gonna have to order myself a copy because it sounds like it's an absolutely fantastic resource So, yeah, we'll make sure that that link is left in the description of the youtube video When we put it up So, yeah, check that out and and where else can people find you online? You're running a youtube channel Where can they find you? So if you just type invest with svenkarlin on youtube Or you can find I have a website I'm now also what I write what I do on youtube. I try to write on articles So if you go to svenkarlin.com there is my blog and all the other resources That I have fantastic awesome. Well, that kind of brings us to the end of the podcast Huge thank you to you sven for coming on and having a chat to us. Thank you guys for having me. I really enjoyed it Yeah, that's okay. And uh, yeah, thanks for giving up. What is it? Is it your friday night? Is that right? Yeah friday night now. Yeah. Yeah. Yeah. Well, thank you very much And i'm sure like the listeners got an absolute they would have gotten an absolute ton of value I know I certainly got a ton of value out of being able to have a chat. So thank you very much for coming on Thank you guys for having me. That's all right. Thanks. Hey mitch for coming on and talking all things stocks as per usual And make sure guys if you have any q&a questions for the next podcast Leave them down in the youtube comments section down below And make sure you go over and subscribe to to sven on youtube as well He's got some just as we were saying before some absolutely amazing Very well researched stock market videos. So make sure you check that out. But thanks guys Thanks very much for listening as always and that brings us to the end So we'll see you guys in the next episode. See you later guys