Dev Kantesaria, what is your formula for quality investing?

Dev Kantesaria is one of the two decision-makers at Valley Forge Capital Management. In his portfolio, he is focusing on high-quality stocks. In our interview, you can get to know his high-quality approach in detail.

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We have discussed the following topics:

Who is Dev Kantesaria?

[00:00:37] Tilman Versch: Hello audience of Good Investing Talks, it’s great to have you back and today I’m welcoming Dev Kantesaria and managing partner of Valley Forge Capital and he’s here from Miami. Great to have you here.

[00:00:53] Dev Kantesaria: Thank you for having me.

[00:00:55] Tilman Versch: It’s a pleasure having you and at the beginning, I wanted to ask you if you can show your hands to us.

[00:01:06] Dev Kantesaria: There you go.

Resisting short-term trading

[00:01:06] Tilman Versch: Okay. Surprise, surprise for me. Because they aren’t tied to the desk because as I was going through your holding list, I was a bit surprised that you had so less sell activities in your portfolio. What is your secret source that your hands stay away from the sell button as an investor?

[00:01:28] Dev Kantesaria: Really, I’ve studied a lot of playbooks over the years starting at age eight, and the one that resonated with me that the strongest was the Buffett Munger playbook which is to focus on business quality.

I’ve studied a lot of playbooks over the years starting at age eight and the one that resonated with me that the strongest was the Buffett Munger playbook which is to focus on business quality.

So, to stay away from short-term trading which is a type of speculation, and really focus on companies that can compound intrinsic value year after year for many years. It’s a much easier way to make money. It’s more tax efficient and it’s a more predictable way to make money.

So the lack of turnover is really nothing other than a natural outcome of how we think about the business quality and want to own a business that has great quality in sustainability for the next 10 years, 20 years, and 30 years.

Dev Kantesaria’s competitive advantage

[00:02:17] Tilman Versch: So after my bit of the cringey entrance into the conversation, we are already fully on the topic of the competitive advantage you’ve built with your investing business. And if you think about the investing industry as an industry, you need a certain competitive advantage or a style you can follow to outperform over the long term because otherwise. You already said this in another interview, you could go with ETS, you don’t need to manage a fund or partnership. So how would you describe the competitive advantage of Valley Forge Capital besides keeping your hands away from the sell button?

[00:02:56] Dev Kantesaria: It’s true that 99.9% of the active management industry adds no value. They’re separated on a statistical distribution and in certain years some investors may look good just based on a statistical phenomenon. So if you look at investors that can add value in alpha reliably, we view our advantage first in the form of temperament. We don’t get happy when the market goes up, we don’t get sad when it goes down. We’re not about what we’re going to make this quarter, this year, or even next year.

We are very much long-term focused. So our time horizon is very important. The fact that we’re unemotional, the fact that we’re disciplined, that we have this excruciating patience. It’s very hard for people like investors to watch their portfolios play out over 10-plus years.

We are very much long-term focused. So our time horizon is very important. The fact that we’re unemotional, the fact that we’re disciplined, that we have this excruciating patience. It’s very hard for people like investors to watch their portfolios play out over 10-plus years.

You may know about the Oreo test or the marshmallow test that they give young children and are they patient enough to wait five or 10 minutes for the second marshmallow or the second cookie? Most of us aren’t that patient, but you need the right temperament in order to be successful at investing.

You need a certain level of intelligence as well as focus. It is an all-consuming business. You have to think about your portfolio. At least I think about it every minute of the day. It’s something that I enjoy and it’s all-consuming. It’s not something that you can stop thinking about at 5:00 PM. But if you look at my background coming from venture capital. We were dealing with pre-revenue, pre-cash flow companies. So these companies had a large set of risk factors. In some cases, 20 different risk factors you had to distil into a single pre-money evaluation. So it could be patent, it could be management, it could be clinical trial data. It could be a competitive landscape, an addressable market, et cetera.

So I would describe our edge as the ability to assess future risk better than others, and really it’s a form of determining the discount rate that you want to apply to future free cash flow. The business school model is you have to use the volatility of the stock as a major input as risk. Now volatility is not always a great measure of risk on a going-forward basis, so the fact that Coca-Cola has done well for the last 50 years doesn’t necessarily mean that Coca-Cola is going to do well for the next 10 years.

So I think it’s our ability to look at the entire playing field looking at the risk factors that will develop in the future and from there predicting a course for these companies that we think have a high probability of playing out. So it’s taking some risk, but in a very measured way, and we’re never willing to trade reliability. We want very predictable companies that have strong organic growth and the ability to compound for many years. But to do it in a very reliable way.

Managing emotions

[00:06:15] Tilman Versch: Maybe let me ask a follow-up question on the unemotional you said in your non-prepared answer. So I think the more and more I get into investing. It’s more about like managing your emotions than being unemotional and being more emotionally conscious because it’s the superhuman game investing. What does it take from this?

[00:06:37] Dev Kantesaria: A lot of this temperament, I think is genetic and can’t be taught. Now you can suppress it, but you need to have a good, I think, starting point to have the right approach to investing. And not everyone has it and it’s good to recognise if you don’t have it because then you can go out and buy an S&P 500 index fund and that will be a better outcome for you than trying your hand at active investing.

So I think there is a genetic component of just how someone is built from day one. I also have noticed a pattern that some of the great investors throughout history come from very frugal environments. Seeing your parents be careful, buying groceries, buying a car, or buying a house brings a certain caution and carefulness to investing in terms of your personality. So there’s no easy way to teach temperament, patience, discipline, or the right emotional state.

You can provide young people in the industry with learning lessons, but you could bring in a thousand of the smartest MBA students in the world, have them spend the whole summer with Warren Buffett, learning everything he asked and all of his wisdom and 995 of them would go back the next month to trading biotech stock. So it is a rare personality type and it’s really tough to engineer.

So I think there is a genetic component of just how someone is built from day one. I also have noticed a pattern that some of the great investors throughout history come from very frugal environments. seeing your parents be careful buying groceries or buying a car or buying a house brings a certain caution and carefulness to investing in terms of your personality. So there’s no easy way to teach temperament, patience, discipline, the right emotional state.

You can provide young people in in the industry with learning lessons, but you could bring in a thousand of the smartest MBA students in the world, have them spend the whole summer with Warren Buffett, learning everything he asked and all of his wisdom and 995 of them would go back the next month to trading biotech stock. So it is a rare personality type and it’s really tough to engineer.

[00:08:11] Tilman Versch: Yeah, I think it’s also investments where I started to become more and more comfortable owning them. I have this data flow, but I also think, okay, there’s something bad happening. I know what this means, I know how could interpret it. It is also a factor of work if you’re like satisfied with the investment you have.

[00:08:36] Dev Kantesaria: So as you look at our portfolio today, our fishing pond for business quality is only 50 or so companies in the entire world. And there are thousands and thousands of publicly traded companies to choose from. And then from that grouping, we’re picking eight to 12 of the best companies for the next 10 or 20 years. So our bar for business quality is exceedingly high, and there is very little turnover to that fishing pond. We may add a couple of names a year. We may take a couple of names off based on a change in business quality. But with these companies were great historians of what they’ve done. We are not trying to predict step changes to their business quality.

We want a company that’s already had great business quality for the last 10, 20, 30, 50 years and still seeing that they can be on the right path on a going-forward basis and so that really removes a lot of the risk that many investors take with a company when they’re trying to find the next Microsoft or the next Google. we want to look at companies that have already shown excellence for many, many years and we are just extrapolating that on and going on a going-forward basis.

The business mindset

[00:09:58] Tilman Versch: Let me come back to the point of the competitive advantage. And yeah, there, your hands also play a role again, and we’ve been a surgeon before. You already mentioned this. I think you also worked at McKinsey, and venture capitalist, and then you move to public equities. What experience did you get from this that helped you to build a certain competitive advantage with Valley Forge Capital?

[00:10:25] Dev Kantesaria: From a young age I loved thinking about businesses. So everywhere I go, restaurant when I’m going out to buy an ice cream cone, the grocery store. I’ve just always loved thinking about businesses. I would say the biggest advantage coming from venture capital in transitioning to public equities, in the investment world people want to compartmentalise skill sets, venture capital is different than private equity, private equity is different than public equities, mezzanine investors and we have all of these buckets. I view all of it as a continuum. They’re all forms of assessing, assessing business quality.

And I would say the most important thing I learned in venture capital as a venture capitalist for almost 18 years is studying operational risks in seeing what works and what doesn’t work there. So I’ve been on many boards of directors, seeing how group decisions are made, seeing the weaknesses of those group decisions, I’ve been involved in hiring and firing many CEOs. I’ve been chair chairman of companies. So a lot of that operational knowledge which allows me to assess an important risk factor for the public equities we’re investing in today. Just by the history of other peers, they just don’t have that background in operational work.

And I think that is an important component. When you try to assess the quality of a business on a going-forward basis so that carry over in seeing just about everything you can imagine on the operational side has been exceedingly helpful in my work today.

Venture investing vs public equities

[00:12:00] Tilman Versch: So if you think about venture investing compared to public equities, how much of a marketing game or what could you learn about marketing and marketing to investors from this game compared to the public equity scheme?

[00:12:19] Dev Kantesaria: Venture capital is a game of hope. You might invest in 12 companies, and seven or eight of them may go out of business. You might get a few with a double or triple and then you’re hoping for a home run. And so in speaking with investors and venture capital, they are in many cases buying a lottery ticket. One of the reasons that I moved from venture capital to public equities is I wanted to have a more reliable way of making money and not leaving so much to hope and chance. With public equity investors, the most important thing, if I were on the other side of the table that would be important to me, is to assess the predictability of the behaviour of how we’re going to act during different scenarios and the predictability of the return stream going forward.

And so, you could have situations where and you see this quite often in the hedge fund world where someone does really well for three or five or seven years, and then they do something very silly or they overextend the risk and then they’re down 80 or 90%. That one year of being down 60, 70, 80,5 90% can ruin 10 years of quality performance. So I love public equities for a few reasons: one, it’s a meritocracy, and the playing field every morning is open to every single person, you can buy any company in the world. And in venture capital, it was very clubby, whether you were allowed to get into Google as an early investor in the Series A or Series B round was a function of who you knew. So I love the fairness of the public equity markets, but I also like the challenge of generating returns reliably compounding over time and not relying so much on luck or chance.

[00:14:17] Tilman Versch: But there are also some advantages you can get in the public equity spaces by maybe access, like having also good network, being able to talk to the right people, or is this not the case for you?

[00:14:35] Dev Kantesaria: my pedigree I’ve not been fortunate enough to roll out of Goldman Sachs or another famous fund, so everything that we have built. We’ve had to work very hard for and claw our way forward, so we’ve had no lucky breaks in our 15 years and so we love talking to investors, and we love building our network, but I can’t say that the networking effect has kicked in for us yet.

Starting over in a new field

[00:15:05] Tilman Versch: Then coming back to your career, you made this big transition from a surgeon to Mackenzie, then to venture capital, then to public equities investors. And you were really good in the roles you had before as a surgeon. I think you graduated with the highest level from your school. How do you manage to keep like the shift for you personally, like with a certain age starting again as a newbie in a certain industry? Where did you take the courage from to start new in many different fields?

[00:15:38] Dev Kantesaria: Yeah, I’ve had a few different careers along the way. I attended Harvard Medical School, which was my dream since I was 16 years old. I had a plan on being a surgeon and I stepped away from that because I didn’t enjoy it as much as I had thought. So I was at Mackenzie for a couple of years, then made the jump to venture capital. Our last fund in venture capital was actually quite successful. And that would have been quite easy for me to continue on that path, but I’m someone that is not afraid of new challenges and change. I need to do something that I believe in, and public equities, especially when practised in the right way, just has always resonated with me on a risk-reward basis as the most productive way, inefficient way to grow capital over time versus private investing.

So looking back, I’m actually more scared of it than when I was in it at the moment but I’m doing what I love. We started 15 years ago at Valley Forge Capital with only $300,000 without a specific plan of where it was going to go. So we’ve been fortunate in very ways to grow it significantly, develop a very strong track record, and again do what we love. I would say that my personality is to be driven by excellence. So going back to when I was in the 6th grade, I was the number one student in my elementary school, and I still have that book here in my office that they gave me as an award. So at every level, I don’t rest until I can achieve that number one position. And it’s hard to measure in public equities, of course, but I go in every day feeling like I’ve not accomplished enough. I have a chip on my shoulder feeling that there is more to do. And really striving for that level of excellence and that really has been a strong motivator and it keeps me quite energised going to work every day.

[00:17:53] Tilman Versch: So is there any risk for investors of you that you might do another career shift at a certain point in time? Or do you like the infinite game of public equity investing?

[00:18:04] Dev Kantesaria: No, I’m really doing what I love and again, it’s something that I really believe in as well. And so, as I think of whether it’s a mom-and-pop investor or even an endowment or pension fund, the advantages of public equities if practise in the right way are so significant relative to every other asset class: cash bonds, gold, cryptocurrencies, private equity, venture capital. I know that there are fads where some of those other assets are. Classes come into favour, but the liquidity advantage of equities, the ability to switch out of names into better, better options is a real plus for public equities relative to these other asset classes, and I believe that you can end up at the same endpoint in a more steady fashion and so you don’t need to be out there buying lottery tickets.

Compounding machines

[00:19:00] Tilman Versch: Coming back to your approach, you laugh, or you like to invest in compounding machines? So what are your compounding machines in your terms?

[00:19:10] Dev Kantesaria: So some of the characteristics that we look for, we’re focused on companies that are monopolies or oligopolies in their respective industries. And these are industries that have strong secular trends in their favour and strong volume growth. Pricing power is the hallmark of a great business. If you can raise your prices above the rate of inflation consistently, you have a phenomenal business model. We like companies that have operating leverage whose margins go up over time, so we own companies that have significant market caps. Fifty billion, a hundred billion, and they still have the potential to grow margins significantly. We like businesses that are capital-light, so we don’t like businesses where you have to invest a lot in fixed costs. We avoid companies that have high R&D risk, so if you have to invest a billion dollars to find the next blockbuster drug. That’s not the type of return on investment that’s predictable for us, so there is no right way to screen for these types of companies.

Ninety-five percent of the time we are intensely reading about industries, about companies, and we find these advantages sometimes they’re nuanced, and sometimes are obvious, but the market is not paying attention. There could be a bear case for the company at any given moment because of a regulatory issue, legal threat, or some short-term competitive threat of bad earnings release that gives us an opportunity to invest in a great business for the long term. There are no particular shapes or sizes that these companies come in, but those are some of the characteristics that we like to see in a great business and the final piece is capital allocation.

So once you have earned your money as a company, are you going to use it wisely? Whether it’s raising your dividend, or buying back stock. We like offensive acquisitions. Many companies are prone to making defensive acquisitions and so we penalise the companies for those acquisitions. We also run our free cash flow models, netting out the cost of compensation. So many companies give out excessive amounts of restrict restricted stock and options and we have to factor that into that compensation into what is ultimately returned to the shareholders.

[00:21:43] Tilman Versch: You haven’t always been an investor who vests in compounding machines. What kind of mistakes or learning lessons did you lead to investing in compounding machines and how of them have they been helpful for you?

[00:21:59] Dev Kantesaria: Well, you always grow wiser with age. It was very helpful for the fund to be running during 2008, 2009. It puts the current downdraft into perspective. The philosophy and the approach that we have been running at Valley Forge Capital have remained largely consistent. We probably have become more conservative in our old age. I would say the biggest learning lesson from managing the portfolio over the last 15 years has been foreign investments, and even when we bind to our foreign investments at a very reasonable valuation, we’re always surprised by a risk that we knew was possible, but it was so outrageous we put a low probability on it, but it could be a governance risk where a CEO may self-deal to some family entity or it could be the government passing new legislation on foreign ownership or suddenly changing the taxes on a company or an industry.

These are the types of risk factors that we don’t like that are very difficult to predict, and so our foreign investments have been the most work with the least amount of gain. Most of them have still been decent returns for us, but they have really been a hassle. And so as you look at the highest quality business models in the world, fortunately, most of them are here in the US, and so we’ve always been very US-centric. And we remain very US-centric today and we invest outside the USA only opportunistically, but I would say the biggest learning lesson for us has been the ability to really factor in all the possibilities when investing in foreign markets.

[00:23:52] Tilman Versch: Are there any other lessons you could share with us?

[00:23:55] Dev Kantesaria: So I would say that you’re always as an investor kicking yourself when there are errors of omission. So you have cash, you see an opportunity and you miss it. And that could be for a number of reasons. It could be, maybe you incorrectly assessed a risk factor. Maybe you talked yourself out of an investment or based on share price, you wanted to buy it at $40 a share and it never fell below $45 a share, so there are a lot of errors of omission that you have regrets about, but those are always in retrospect. Should you have bought Google 10 years ago or should you have bought Apple 10 years ago? When you’re a disciplined investor, you have to have a specific line in the sand for buying and selling and that may sometimes cause you to miss something. And I would much rather have the discipline around those decisions than to have it in free form. I think there is much more downside to being casual about those than having some quantitative parameters that line that you’re not going to cross.

 When you’re a disciplined investor, you have to have a specific line in the sand for buying and selling and that may sometimes cause you to miss something. And I would much rather have the discipline around those decisions than to have it free form. I think there is much more downside to being casual about those than having some quantitative parameters that line that you’re not going to cross.

[00:25:14] Tilman Versch: Maybe you have an answer on this, or maybe you don’t because there was in the last two or three years there was general hot debate about compounders in investing scene and everyone was investing in compounders. As you followed this discourse, maybe what you have sometimes felt like other investors miss on the concept of compounders or when using the idea of compounders? And where was the blind spot of this discourse? If you have an answer to this.

[00:25:50] Dev Kantesaria: Sure, yeah, so a couple of comments I would have on that. I think it’s from a marketing perspective, everyone in our industry wants to claim that they are investing in the highest quality companies. I can see the ownership positions of our peers through the regulatory filings and I have a lot of disagreement on whether those are in fact high-quality businesses. As I’ve mentioned earlier our fishing pond for high business qualities with about 50 companies in the world and it’s not hundreds of companies.

And at our firm we are even reluctant to invest in our 17th best idea, that’s not a risk-reward that we find attractive. So the error that I see many people make is to sacrifice business quality for valuation.

So the error that I see many people make is to sacrifice business quality for valuation.

So if a company is making washing machines and it ends up trading down and trading at a PE of eight. Somehow that’s viewed as a quality situation because you’re buying it into it so cheaply and I think that is the wrong approach to quality investing. You should never sacrifice business quality. So I think there is always this idea of value versus growth and so a quality business should be able to have strong organic growth on a going-forward basis. They should have strong volume growth and they should also have strong pricing growth. And if they lack either one, they can still be okay investments, but they won’t be great investments.

Over the last couple of years, high-quality growth names have been out of favour. With the coming out of COVID, the strong economic rebound that we had. Really, it was the tide that raised all boats. You had many low-quality businesses, and post phenomenal earnings and growth, and that catches the attention of speculators and short-term investors. And so the compounders have in their quality that has been shadowed, overshadowed by many other industries and companies that have looked phenomenal coming as part of the COVID rebound. There will be a judgement day, soon, I don’t know if it’s three months or 12 months. But GDP growth will revert back to zero to 2% around the world.

Inflation will adjust downward, and we’ll go back to an environment where predictability and strong organic growth will be prized again. We don’t worry about these short-term movements in share prices. We remain completely focused on the earnings power of these businesses five years out from now, in 10 years out from now. So the fact that our quality businesses have been out of favour that that’s great for us and for our investors. It allows us to bind to these companies at phenomenal prices for the long term, and it allows our companies, many of which have strong buyback programmes, allows them to significantly reduce their outstanding shares when the companies are out of favour as well.

So this has been a highly unusual environment for cyclical companies and the cyclical companies have looked great and they still look great, but we know how the story ends it will end badly and the question is, can the speculators market time their entries and exits from these businesses? History has shown that is an impossible task.

Networking in investing

[00:29:40] Tilman Versch: Moving away a bit from the company level. In your analytical process, what role does politics play in your assessment? Because if you have some financials in your portfolio, Visa and MasterCard, I think the regulation of credit cards in the USA and in Europe is a totally different game, especially if you think about the long-term risks and best for the long-term. The political topics might play a role if they change the playing field through regulation and also what role does the general financial conditions like interest rates and other stuff play in your analytical process?

[00:30:21] Dev Kantesaria: One of the learning lessons that you have, if you’re a student of the stock market going back a couple of hundred years is that compounding machines ultimately take care of themselves. The share prices of these companies ultimately converge with their earnings power and trying to predict short-term macroeconomic events or geopolitical events. in one of my letters I talked about buying Coca-Cola before the start of World War II and why that might have been a bad idea, but actually it wasn’t a bad idea at all. So there is almost never a bad time to buy a compounding machine. And there are just a lot of conversations and press coverage around who’s going to be president, who’s going to be Prime Minister?

Where interest rates are going to be at the next Fed meeting? What GDP growth is going to be next quarter? What is the inflation report going to look like? they are important factors and you can have significant regulatory changes or legislative changes. the Durbin Amendment that was passed to control debit card transaction pricing in the US caused the shares of Visa and MasterCard to tank and that was our entry point into those amazing businesses. So the businesses that we buy are so dominant. They are natural monopolies or oligopolies. What I mean by that is that they’re not forcing the end customers to use their products through twisting arms or contractual arrangements.

It’s to the net benefit of the end users to use our products and services. So there can be some speed bumps along the way for any of our businesses, but we like businesses that have many different leverages to pull to achieve their financial targets. And so we don’t spend a lot of time worrying about matters that are unpredictable and that we can’t control. we may have a Democrat president for eight years, and then we may have a Republican president for eight years. But if you look back throughout history, it doesn’t ultimately matter if you own a very high-quality business.

Staying away from healthcare stock

[00:32:43] Tilman Versch: Why do healthcare companies not really fit into your framework of compounding machines away? I could see some of the compounding machines going through your filing, but there’s no big healthcare exposure.

[00:32:56] Dev Kantesaria: Yes, so even though I have a background in healthcare in biotech, there are no pharmaceuticals, biotech, or medical devices in the portfolio and the reason for that is that they are not predictable enough for our standards. For those companies, you are marketing a product that can be pulled from the marketplace because of side effect issues. It’s very tough to assess new competitors because a lot of the clinical trial data is private. So they obviously have been significant businesses that have been built in those industries, but they just lack the reliability and predictability that we need in terms of earnings power over 5 or 10 years. So although I have a lot of knowledge in this space, it’s not something that we have invested in Valley Forge.

Research

[00:33:50] Tilman Versch: How much time do you usually spend to get to know a company before doing an investment?

[00:33:57] Dev Kantesaria: It can be on the order of months if we think that there is a short-term opportunity, but in many cases, we followed companies for seven years, 10 years before we bought Fair Isaac, FICO, which is the monopoly business in consumer credit scores here in the US.

It can be on the order of months, if we think that there is a short-term opportunity, but in many cases, we followed companies for seven years, 10 years before we bought Fair Isaac, FICO, which is the monopoly business in consumer credit scores here in the US.

We had followed that company for seven years before deciding to invest. So we read and our historians of many industries and businesses, but we may follow them for a decade before we feel like there is a perfect entry point for a business.

[00:34:38] Tilman Versch: How does this following look like? Is it, maybe if you do a graph of work intensity is a huge spike where you learn a lot and then you let it drop, and then maybe after two years, you learn a lot more and come back to revisit it. How does it look like the following you do?

[00:34:56] Dev Kantesaria: Yeah, it is. There is obviously when you’re getting to know a company or an industry in depth. Initially, there is definitely more work and then there is a monitoring phase where you’re tracking earnings releases, regulatory filings, analyst days, and so there is a monitoring phase that goes on possibly for many, many years before we pull the trigger. If there are any catalysts, as you say, it could be a regulatory issue, it could be a competitive issue, a legislative issue, or something where there is volatility in the stock. We certainly are doing more intensive work during those periods to see if there is a miss pricing of the security that we can take advantage of but when you follow these businesses, they don’t change a lot and that’s a plus for us, we don’t like change.

And so, as you get to know them and follow them over five or 10 years. There isn’t a lot of new, a lot of new business they’ve entered into our industries. The core businesses generally look very similar to what they looked like five or 10 years ago, and that’s a good thing.

Being a “historian” of a company

[00:36:10] Tilman Versch: You use this role or the matter of the historian already, the historian of the company. So what do you do to become a good historian of a company? What is your playbook here or your tool set?

[00:36:25] Dev Kantesaria: So it involves intensive reading. There is just a lot of reading. You have to constantly debate these ideas with yourself and with your colleagues in terms of risk factors and what is stopping you from investing at this moment versus waiting for a future entry point. But what I would say is that very much like temperament you could have 100 investors sit through the same Analyst Day or listen to an earnings call and not all of us will walk away with the same points that are meaningful to each of us. I might read a 50 or 100-page document and only gather one or two very interesting points that many others may not focus on. And so it’s a form of intensive reading but also getting the right signals that are important to you, and that’s an important differentiator between a great investor, good investor in a mediocre investor is finding those patterns, finding those new answers that are not obvious to everybody

[00:37:45] Tilman Versch: You then also go out and discuss the observations with the other investors outside of Valley Forge Capital or do you keep this in the firm, mostly the debates?

[00:37:57] Dev Kantesaria: During the early days of the fund, we used to have more outside conversations. We found them ultimately to be non-productive. And so, the debates that we have are really within our firm, with the management of the company itself. We may reach out to experts to address areas of an industry or company that we can’t figure out ourselves through regulatory findings, but this is a nice carryover from venture capital where you had to look at a lot of data and later on your own interpretation.

It wasn’t as simple as asking somebody whether you thought a drug was going to be approved or not by the FDA. Because almost always that was a twin coin toss. So it’s really gathering the information and it’s making your own decisions, independent and being outside of the noise of New York or some of these other markets where fellow investors are talking about how to make the most money this year. We like being away from that noise. So we actually are very insular, but we go to the outside world when we really want to assess something that we’re not knowledgeable about or we need to learn more about.

Managing groupthink

[00:39:23] Tilman Versch: How do you then control a certain groupthink with this setup?

[00:39:30] Dev Kantesaria: Yep, I’ve tried to create a culture of intellectual honesty and we’re not emotionally attached to any of our investments. We are very cold and calculated as it relates to what we need to do with the portfolio on a going-forward basis, but that is always a concern. And I’ve always believed in a small investment team because I’ve seen the demerits of having an investment team of 10 people or 15 people. There is a lot of politicking. There is a lot of trading of favours. There is a lot of intellectual dishonesty, not in a purposeful way, but if somebody has been working three months on a deal. And it’s about to be rejected, your comments may be altered by your own biases. So today we have a two-person investment team. It’s me and Ben. We are looking to add an analyst or two in the next couple of years, but it really is modelled off of Buffett and Munger. And we, Ben and I, debate these ideas in a very open way, and we hold ourselves to high standards.

And I’ve always believed in a small investment team because I’ve seen the demerits of having an investment team of 10 people or 15 people. There is a lot of politicking. There is a lot of trading of favours. There is a lot of intellectual dishonesty, not in a purposeful way, but if somebody has been working three months on a deal. And it’s about to be rejected, your comments may be altered by your own biases. So today we have a two-person investment team. It’s me and Ben. We are looking to add an analyst or two in the next couple of years, but it really is modelled off of Buffett and Munger. And we, Ben and I, debate these ideas in a very open way, and we hold ourselves to high standards.

So it’s hard to know because we’d be assessing ourselves, but I think we’ve been pretty good about being disciplined and not being emotionally attached to our ideas.

Pricing power

[00:41:04] Tilman Versch: In your due diligence process, are there any parts where you put an extreme or strong focus on?

[00:41:15] Dev Kantesaria: I would say pricing power is really a strong focus for us and all of the parameters that feed into organic growth. We need to see a very strong top-line and bottom-line organic growth profile and so we spend a lot of time assessing pricing power and what this looks like in the past and how that might develop in the future. But even a company that has all of the right boxes checked around pricing power, volume growth, capital intensity, and margin expansion there could be one parameter that is negative that makes the company uninvestable. So capital allocation, we just like businesses that grow by acquisition. So we saw how that negatively played out at valiant in the past, but so we could have a business that has a lot of great qualities. But then they’ve chosen to buy five companies every year, and that’s how they’re going to grow for the next 10 or 15 years. That’s not a playbook that we think ultimately ends well. So there could be only one or two factors that make a company uninvestable even though we like many other things about it.

[00:42:34] Tilman Versch: How do you study pricing power and do you also like this idea of scale economies shared? If you like companies with pricing power, maybe let’s stay with the first question.

[00:42:49] Dev Kantesaria: Most companies that have strong pricing power don’t like to publicly disclose that pricing power, so you have to find it in with indirect information. And sometimes it may be published somewhere. Sometimes it may be referred to indirectly at a conference, but you really have to dig and find that type of information. Again, we’re looking for patterns that have played out over a long period of time; we’re not looking for situations where suddenly there’s a change to pricing power.

We’re looking for patterns that have played out over a long period of time, we’re not looking for situations where suddenly there’s a change to pricing power.

So we need a lot of indirect observations and data to often come to the conclusion about how strong that pricing power is. Usually, it’s obvious that a product or service that they’re supplying doesn’t have competitors, and therefore if we like services that are cheap and essential. And so, even if prices go up 10% when inflation is 2%. We want a product or service that is a must-have for the end customer and although they may gripe about it and complain about it they ultimately will end up continue using the product because it is so important to them.

[00:44:03] Tilman Versch: And now coming back to the idea of scale economy shared is where you lower the price and use it to get more volume and then still have a good profit margin. Maybe Amazon might be one of the companies that place this playbook. Is it something you also look for or is it more like you want to have the classical pricing power that you can increase prices year over year?

[00:44:27] Dev Kantesaria: The 50 or so companies that we put in our fishing pond. We don’t have any in there that are winning the game through size advantage or volume advantage. Amazon has a great core business, but that’s part of a networking effect for other businesses like advertising, AWS, and prime services video, so the core e-commerce business at Amazon has very low margins today. It’s highly competitive as other businesses in the industry are facing death, like Bed Bath & Beyond. And a lot ultimately come to companies like Best Buy and maybe even Target. When those companies get desperate, and it takes a long long time for companies like Sears or Kmart to go under, that’s the e-commerce business Amazon although it continues to gain scale and market share, that would not be a business that we would be excited about owning as a standalone business. We like some of the other components of Amazon but the core business in Walmart was a similar story for many years, that just would not be what we think is the straightest path to compound intrinsic value.

Management

[00:46:05] Tilman Versch: What role does management play in your due diligence process?

[00:46:12] Dev Kantesaria: We want to own businesses as Warren Buffett says that your idiot nephew could run. I mean, you want competent management, and you want thoughtful management, but we don’t want to own businesses that require a Steve Jobs or a Warren Buffett to run, who’s a great capital allocator. So, because that’s a business risk that is difficult to account for.

We want to own businesses as Warren Buffett says that your idiot nephew could run. I mean you want competent management, and you want thoughtful management, but we don’t want to own businesses that requires Steve Jobs to run or a Warren Buffett, who’s a great capital allocator, to run. So, because that’s a business risk that is difficult to account for.

So management in terms of execution, we want businesses that are easier to execute on. Where management becomes quite important is in capital allocation, so it could be related to compensation issues where they’re issuing too much compensation. It could be issues of are they using free cash flow in a poor way to make defensive acquisitions or overpay for acquisitions. So management is an important component, I think management is more important with younger companies, so when you’re looking at the start-up companies that I used to invest in management was exceedingly important. I think they’re less important for the mature businesses that we like to invest in.

[00:47:31] Tilman Versch: So how do you go about building a relationship with management in the companies that are in your circle? Of the 50 companies in your portfolio where your own less because it’s like you’re one of us. You’re not a small fund, but you’re a smaller fund and it’s usually a big ship you’re investing into. So how do you go about this relationship building?

[00:47:55] Dev Kantesaria: So at our size now we are able to have conversations with the CFO and the CEOs of most of these large companies.When we were smaller that access was difficult. And ultimately, I didn’t think it was necessary. Meeting management is a double-edged sword. It can have an effect on you consciously or subconsciously. If they are sweet talkers, if you get a nice glossy presentation, you might leave that meeting biased on the positive side and counteracting the cold and rational view that you need to have at all times to assess a business. So although you can go there for fact gathering and that can sometimes be helpful, especially if there is a part of the business that you need to learn more about, you can also be, I think influenced incorrectly to think that a business is doing better than it actually is, or that the future is brighter than it actually is. If you like the management on a personal level and by the time you were the CEO or CFO of one of these major companies, by definition, you are well-spoken and you’re charming. And so when you meet them, you always walk away impressed and that is not always productive when you’re trying to assess these companies.

[00:49:22] Tilman Versch: So how do you ban and then go about controlling this sweet talk and bring it back to the facts?

[00:49:32] Dev Kantesaria: It really is just always being disciplined and I’ve heard everything that’s possible. when companies have tried to market me when I was a venture capitalist even in public equities, so you have to be sceptical. You have to be quantitative. You have to be logical. There’s no perfect way, I think, to prevent some of those biases. But you have to do the best you can, and I think where I’d like to think that we’ve been very, very disciplined about not letting those things influence us.

“Too good to be true” examples

[00:50:14] Tilman Versch: Any too-good-to-be-true stories you want to share you’ve heard from companies?

[00:50:22] Dev Kantesaria: nothing that we have invested in, but certainly with the IPO in SPAC. companies that have gone public in the last couple of years. Especially SPAC which had lower regulatory standards in terms of what they could promise investors in the future. There were just so many exaggerated on and unrealistic expectations that these companies gave to investors. And investors they’re big boys and girls. They happily, listen to the stories and the too-good-to-be-true as you would say. And they bought into it, and whether they really believed it or not, or they wanted to make a quick gain. there’s a price to that speculation, and so you have many of these IPO in SPAC companies down 60 to 80%, some even more, and those companies are not coming back. I think there is this idea that if a company goes down 80% it has to bounce back, and that’s not the case. You’ll see most of those businesses stay where they are in trend even lower from here. So as I mentioned, being a good historian of companies you also have to be a good historian of the stock market. You’ve seen these periods of time repeat themselves over and over and over again.

And it’s very easy to see to learn from these past lessons in the stock market. And there are many documentaries and many books that you can read to gather these lessons. You don’t need to make these mistakes for the first time, but this sort of cryptocurrency, SPAC, IPO period over the last couple of years was just another speculative bubble. And cryptocurrencies have gone down, but that hasn’t fully burst yet, but it goes to the idea that you need to buy assets that have some sort of intrinsic value, inherent intrinsic value.

We know that gold bars can’t produce free cash flow and the same thing to cryptocurrencies. And when you have money-losing SPACs and IPOs that are, they’ll claim that they’ll become profitable in two or three years, but many of them will never be profitable. Or they might be profitable seven years out from now. When you run your discounted cash flow model with that many years of losses you’re not getting good value for what you’re buying into these companies at. There are so many better options. I’ll be less exciting. So, that’s one of the learning lessons is, to be a great investor, you have to like boring things. If you’re someone that likes excitement, you like to play blackjack, you like to go to the casino, or you like fast cars that are generally not the right personality type for being a great investor.

So that that’s one of the learning lessons is, to be a great investor, you have to like boring things. If you’re someone that likes excitement, you like to play blackjack, you like to go to the casino, you like fast cars that’s generally not the right personality type for being a great investor.

Historic lessons

[00:53:28] Tilman Versch: Which historical lessons are interesting for you now to look into again in this current market phase? Is it ‘08 or ‘9 or are you going back deeper in history?

[00:53:41] Dev Kantesaria: No, ’08, ’09 was just an amazing period to learn from the people that made the right decisions during that period. It was an opportunity that comes across maybe once every 30, 40, or 50 years. There were many people that had step changes to their net worth in a good way. And we may be in that period now. This is not as grim as in 2008, and 2009. Many of the risk factors today are more understandable, but could they devolve into 2008, or 2009?

The probability of that is growing, it’s still low but how do you react to that? Do you speculate more? Do you get out of the market? Do you market time or do you use it as an opportunity to buy phenomenal businesses at generationally low prices so? But I love watching documentaries of the stock market or even of individual individuals that build great businesses, so it could be Carnegie or Ford.

There is for me, so many good learning lessons in there, but there is a documentary that I watch with my two boys which have been fun to watch. I believe it’s called Titans of Wall Street on Curiosity Stream and it goes back to it really starts with the House of Morgan, JP Morgan. So you’re starting the stock market history in the late 1800s, and there’s a great discussion about consolidation within the railroads. Most railroads went bankrupt, but if you’re thoughtful about the industry and consolidation, fortunes were made or when the car industry first started and began or aviation, those are boring industries today, but back then those were the Googles and the Microsoft and the Apples of that generation. So I’d love watching that and there are always exciting learning lessons that you gather from those stories.

[00:55:57] Tilman Versch: You are usually fully invested with the fund or…?

[00:56:01] Dev Kantesaria: We have in our history been at much higher cash positions. Today, we’re less than 1% cash. And that is a reflection of the opportunity that we see today on a risk-reward basis. You are catching a falling knife, and you don’t need to catch the knife perfectly at the bottom because when the market turns, it is a vicious turn. If you’re out of the market for those few days or those few weeks, it could lead to significant underperformance on a going-forward basis. So we think prices today and a risk-reward basis for equities are amazing. And although interest rates are putting downward pressure on equity multiples, the real focus needs to be on where long-term interest rates are going to be and not where interest rates are going to be for the next year or two.

So if you do believe that the 10-year U.S. Treasury will be at five to 7% for the next 10 years, then that’s a pretty bearish view for equities. I don’t think that that is close to the likely scenario, but we do need to make some general assessment of our interest rates will be, I believe, that the secular trends really argue for a low-interest rates and GDP growth to remain in a low range, and I think that’s an amazing backdrop for equities. So, you don’t need to market time at your entry into equities, but if you have cash today, it’s a phenomenal time to put money to work.

[00:57:36] Tilman Versch: If we might see in ‘08 or ‘09 scenario with this fully invested portfolio, what, without promising that you will do it, what might you do then rotate into even higher quality if you could this or do you think your portfolio already has such great quality?

[00:57:55] Dev Kantesaria: I think that when there is a lot of market volatility, there could be asymmetry in how the market is reacting to different stocks, so it can be an opportunity to trade out of a lower-quality name for a higher-quality name. The 10 businesses we own today are the same 10 businesses that we owned in January of 2020 which I think that’s a testament to our investment process that the 10 ideas that we thought were the best on a risk-reward basis two years ago are still what we think is the best today. That they can still compound intrinsic value and still have the growth that we like to see. But if you go through 2008 or 2009, the main learning lesson is that sometimes the best thing to do is to do nothing.

If you are invested in the right businesses you should do nothing, and if you have the opportunity to trade out of something for something better than that, that is that’s an opportunity to play offence, but for the vast majority of people, if you own an index fund, the best thing that you can do is simply just forget about it, come back a year or two later and look at it then. But the idea of looking at your portfolio day-to-day, week-to-week is a very silly notion. It’s something that unfortunately culture and just norms require us to report to investors. If you’re a mutual fund, it’s daily or ETF, it’s daily. Or if you refund like ours, it’s monthly. But most of those movements are up or down or meaningless. They don’t tell you much about the long-term business quality, or the ownership of the businesses that you own. So if there’s a 2008, 2009 and you’re a long-term investor, you should consider it quite a lucky event. The luckiest thing that happened to me in my investment career was actually 2008, 2009. And if I’m lucky enough to get another period like that within 10 years, I would consider that a quite fortunate circumstance. It would not be something that we lament or worry about, we would view it as a very positive development for the long-term investor.

The current market

[01:00:15] Tilman Versch: Are there any pockets where you especially see value in the current market?

[01:00:21] Dev Kantesaria: I think that with the COVID rebound that there has been too much enthusiasm for the cyclical companies out there, and many companies that do well during this part of the economic cycle. Quality growth has been largely ignored, and so that would be the place where we would be looking, and we think investors will see the best risk-reward ratio.

[01:00:47] Tilman Versch: Quality growth are then the names in your portfolio?

[01:00:50] Dev Kantesaria: Yes, if you sent me $50 million today, I’d be very happy because I know exactly where I’d be putting that money to work. I like to describe it as you’re walking along the sidewalk and there’s a $100 bill sitting on the ground. And it would be a shame if you can’t bend over and pick it up.

Reflections on Amazon

[01:01:11] Tilman Versch: You already discuss Amazon a bit. In your portfolio, it stood out a bit for me because it had this huge and capital intense. Did you see business of selling goods at a low margin? And you already explained what you like about it. How does Amazon then fit in your general framework of investing in more like capitalised high-quality businesses?

[01:01:40] Dev Kantesaria: Yeah, Amazon is an outlier for its capital intensity and that certainly has been an issue for its earnings for the last couple of years, where they were building out their warehouses, labour, wages, COVID costs, so the e-commerce business is capital intensive. But it is the platform by which it can add assets that we like far better. And so Amazon has been running at essentially break even for the last 10 years. But there is an inflexion point we think coming up very shortly and that’s been delayed. I would say about by about 18 months. But there is an inflexion point coming up in terms of operating earnings that will come from some of these other much higher quality businesses like KWS and advertising.

We think of all the large technology companies that Amazon has the most optionality to go from where it is today to being a $10 trillion company, we think it’s much harder to see a $10 trillion market cap for a Google or a Facebook or an Apple. So we’ve loved the option value that Amazon has. We like the networking effects that the e-commerce business provides. We love many of their younger businesses in terms of their business quality. But many of them they’re either dominant or will become ultimately dominant, and so it is an outlier from the capital intensity. But we are out-of-the-box thinkers. We have to look at each situation individually on its merits and we felt like the positives there outweighed the negatives.

[01:03:21] Tilman Versch: So what is then your five or 10-year vision for Amazon that drove you to underwrite it?

[01:03:27] Dev Kantesaria: I would say that we are very optimistic about Prime membership fees and the pricing power there. Quite optimistic about them continuing to gain advertising market share versus Google, Facebook, and TikTok. We think they’re AWS although they might be small market share shifts, we’re not underwriting market share shifts. We’re more underwriting strong continued volume growth for that entire industry, and thereby further dominant business in that marketplace. A third-party seller services and even the e-commerce business, once we get back to some rational costs, one-day delivery is an advantage that they have – maybe outside of Walmart. No one else in the US has the resources to replicate it. So as competitors continue to die in the retail business, on JCPenney, Kmart, and Sears. In the past, you’ll have maybe Best Buy or Bed Bath & Beyond, and other businesses like that going forward basis. All of that mindshare will shift almost entirely to Amazon. And so it’s, it’s just an amazing platform to then sell people insurance or prescriptions, or it’s really Amazon has more than any big technology company unlimited potential for how we could get involved in the customer’s life.

[01:05:04] Tilman Versch: In the case of Amazon you already mentioned optionalities the business has. What role do they play in your assessment of the business and also how much are you willing to pay for optionalities?

[01:05:19] Dev Kantesaria: Yeah, many of our companies have really interesting positive optionalities. We don’t underwrite that in our base case scenario. So as we model free cash flow very conservatively, any optionalities that come in the future, a new business line that’s successful, that is all upside that we have not planned for. So we like to see optionality on a subjective level, but we don’t add it to any of our modelling or expectations. It’s nice if it materializes but if it doesn’t, it’s not something that we factored in.

Margin of safety

[01:05:59] Tilman Versch: Margin of safety is also an important concept for you. In this quality space you’re investing in, businesses are usually never really, really cheap. So maybe you walk me a bit through how you’re building your margin or safety?

[01:06:22] Dev Kantesaria: Sure, so the win-loss ratio is very important to us. The typical active manager usually has 60% winners, 40% losers, and they net out to something that hopefully is better than the indices. We want to have a betting average much higher than that. We want 90% plus of our ideas to work out. So what that means is that we need to not only be very careful on the quality in understanding future risk factors but also to buy in at a price that compensates for things that could go wrong or parts of our thesis that may not play out as strongly as we had hoped. So we’re very cognizant of that.

In our win-loss ratio, over 15 years, is evidence of our ability to maintain a very large amount of margin of safety with our companies. But it’s exceedingly important as part of the investment process not to sacrifice or to put the portfolio at downside risk to achieve upside risk. So we want to have that strong upside return but to do it in a very calculated amount of risk that we can really have good insight into.

[01:07:42] Tilman Versch: Are there any metrics you take for the margin of safety? In a few of the other podcasts I’ve heard with you, it was like maybe a free cash flow yield of 8% for some of the businesses, which isn’t a good enough margin of safety.

[01:07:57] Dev Kantesaria: Yeah, there isn’t a good way to quantify intrinsic value. Otherwise, computers would have beaten us a long time ago. You’re doing a discounted cash flow in that you’re making assumptions about future risk and what free cash flow yield a company deserves for its growth and predictability, and so there are many subjective components that come into it. It’s very hard to say out to one or two decimal points, what free cash flow yield the company should be trading at, but it is a rank ordering process. You want to take the hundreds and hundreds of companies that are available to you as an investor and rank order them based on business quality, which is, again, growth and predictability to determine what free cash flow yield they should deserve, and obviously, that’s also a factor of the risk-free rate at any given moment, so we use the 10-year U.S. Treasury as a proxy for that. But the opportunity really the margin of safety, is really the gap between what you think that intrinsic value is in relative to the price that it’s trading at and for the types of companies that we invest in because they have a lot of flexibility with pricing power. Also, they’re generally very nimble on costs that even when there is a downturn like COVID, many of the business segments that we own posted record margins. Or if there’s a recession, the companies that we own can still be highly cash flow generative and so that does place a natural floor on their prices.

Picking stock from a limited universe

[01:09:39] Tilman Versch: Where’s the line between like your own currently 10 stocks? Where is the line you draw between the 10th to 12th or the 11th stock you have on your list? Why do you put this list?

[01:09:54] Dev Kantesaria: Even our shortlist is tiered by their business quality. The eight to 12 companies we want to own are just a range. It’s not a magical number or a hard number. We have no problem owning 14 companies. If on a risk-reward basis were excited about those 14 companies. But by the time I think you’re in the high teen, by the time you’re looking at your 17th or 18th, best idea, there is a falloff in terms of the opportunity with those businesses, although it’s outrageous to think you’re saying, okay, the 17th best risk reward idea in the entire world that should be added to the portfolio. For us, it’s not good enough. So they’re mid-teens is probably as high as you’ll ever see the number of names in a portfolio, but when you are running a concentrated portfolio like us, as you pointed out the margin of safety or controlling downside risk or your win-loss ratio is exceedingly important. If you invest in companies that could go down 90% in value, you can’t run a concentrated portfolio with that lack of predictability. So I think very few managers run concentrated portfolios because they were unable to underwrite the level of predictability that you need to see in order to have such a small number of names.

[01:11:27] Tilman Versch: Coming back to your research process. When you’re working through these different phases of getting to know a company and following it. What makes you say no that you stop work at a certain point, or you put it on the shelf too hard or work on it later? What are the factors if you think about the research process you’ve gone through that make you say this is a too hot pile or work on it later pile?

[01:11:57] Dev Kantesaria: Sure, yeah. I mean, as Warren Buffett says, there are many, many pitches that you can swing at. And I think as an investor we’ve never had a dearth of opportunity across any market cycle. And so you have to go with the mentality that even if you’ve spent months and months intensely researching a company, the ability to walk away or to wait to get more data, you never have to swing at a pitch. And there are always more opportunities in the future. And so if you feel like guilty about wasted work or you feel guilty about missing the opportunity because all of your friends are jumping in or those sorts of that type of thinking are very dangerous.

So we are perfectly happy putting something on the side burner. We have some concerns or if it’s not easy. All of the great investments that we’ve made throughout our funds’ history have been really easy. I mean there’s a certain happiness that comes from making that by pressing that buy button when you’re buying into an amazing, amazing business at a good price. The other thing that we often think about is if you’re worried about what the next earnings release is going to be because of lack of predictability, then that’s probably not a company that you should be owning.

So if you own a beverage company, people pay attention to the Nielsen volume growth and market share reports and if you’re really worried about those sorts of numbers then you’re really not thinking about as a long-term investment in that company doesn’t have the level of predictability that you probably should require. Fortunately for us, very few people think the way we do. Tens of thousands of other active investors in the world don’t think like us, and that’s what makes a market, and that’s what gives us the opportunity.

Community Exclusive: Selling

[01:14:13] Tilman Versch: For the end of our interview, I want to come back to your hands and the sell button. What are the reasons that drive your hands to the sell button and then really let it click to sell a certain security?

Hey, Tilman here! I’m sure you’re curious about the answer to this question. But this answer is exclusive to the members of my community, Good Investing Plus.

Good Investing Plus is a place where we help each other day by day to get better as investors. If you are an ambitious, long-term-oriented investor that likes to share, please apply for Good Investing Plus. I’m waiting for your application.

Without further ado, let’s go back to the conversation.

Closing thoughts

[01:15:08] Tilman Versch: For the end of our interview, is there anything you would like to add any talking point that’s important to you or any message you want to send?

[01:15:16] Dev Kantesaria: No, I mean, I think this conversation is timely, and we can only look back at 2008, 2009 and what an opportunity that was to change people’s lives whether you’re a pension fund and you have pensioners lives that you’re thinking about or if your family for your kids, your grandkids. Today is an opportunity that rarely arises in the marketplace, and speculation is just not an effective way to grow wealth, and so a lot of the media a lot of investors have been focused on the wrong things for the last couple of years, and this is a phenomenal time to readjust that thinking and put money to work. So we’re playing offence right now when others are fearful.

And some people should not get caught up in where interest rates are going to be next month, what the Fed Is going to do, the inflation number tomorrow, and who the president is going to be. Those are meaningless in the long term. And so you will always have something to worry about. Whether it’s Greece leaving the EU or a war or an election, you have to get away from that thinking and think of yourself as an owner of a business. And if you own a private business in your hometown, you wouldn’t have people coming in every day and offering you quotes on your business. So it’s a silly idea to look at the price this morning and assess whether that’s the appropriate value for your business. Almost certainly, the price this morning that’s being quoted is not the right long-term discounted value for your business. So you got to look through all of the noise and play and play offence and take advantage when others are fearful. So that’s my message to all of the investors of the world. It can be a life-changing moment if you make the right decisions.

Thank you

[01:17:25] Tilman Versch: Thank you very much for this great closing word so to say. And now we can get our hands again on the search for great opportunities. Thank you very much for the audience and thank you very much for coming on. Thank you.

[01:17:37] Dev Kantesaria: Yeah, thank you for having me.

Disclaimer

[01:17:42] Tilman Versch: Bye-bye. As another video, also here is the disclaimer. You can find the link to the disclaimer below in the show notes. The disclaimer says, always do your own work. What we’re doing here is no recommendation and no advice, so please always do your own work. Thank you very much.