I asked Verner in the spring if I could start a new life in this blog area. I then decided to get straight to work and start the blog now in December.
I named my blog “The Focused Value Investor’s Diary”. I thought it was a perfectly suitable name, as focus is one of my biggest weaknesses. On the other hand, my portfolio is, according to general opinion, very concentrated and risky. So, a partially apt name with a double meaning?
I have kept a blog on a few different topics, where I have discussed long-term plans and then followed the implementation of those plans over time. Investing fits this perfectly, so I thought, why not? I haven’t been blessed with a sharp pen. Sometimes my messages lack a clear thread. Or it at least disappears as the paragraphs progress. What was I writing about again…?
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The purpose of the blog is, above all, to be a diary for myself. A place where I go to justify, at least in broad outline, the thesis of my investments. Why did I buy company X at price Y? Is the company high-quality, or do I hope for the fastest possible value correction and exit? I believe that when these reasons are recorded somewhere, they won’t be forgotten or altered over time. I can review my own thoughts retrospectively. Whether the expectations were right or wrong.
In the blog, I will also follow and comment on the business development of the companies I own and various interesting corporate events.
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As an investor, I consider myself a value investor. I research companies that are interesting to me and determine their value. If a company meets my criteria based on quality, financial health, and general gut feeling, I aim to buy the company when its market price is significantly lower than my own valuation. How significantly…?
I set a few different values for a company. First and foremost is the business value. Secondary is the company’s book value, more specifically a Graham-type liquidation value. I will not go into my valuation methods in more detail in this blog.
I aim to hold a high-quality company that itself generates a sufficient return on capital in my portfolio long-term. However, I may sell if the valuation becomes ridiculously high.
On the other hand, a company that I have bought based on its business value, but which I do not believe will generate a satisfactory return on capital in the long run, I aim to sell once the price has corrected close to my own valuation.
I sell a company bought based on liquidation value as soon as possible, even before the valuation has fully corrected.
I am stingy. I am stingy because I want the biggest possible return. I am also stingy because I want the largest possible margin of safety when I am wrong. I know I will be wrong often. To paraphrase Buffett (or Graham?); rule number one of investing is don’t lose much money. Rule number two is don’t forget rule number one.
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I am in the early stages of my investment journey. Accumulating wealth. I focus on investing part-time, in the time left after work and home life. I don’t want to own twenty stocks. There simply isn’t time to understand them comprehensively. I feel that I can follow about five companies at a detailed level. Thus, my investment portfolio consists of a maximum of five companies at a time. Of course, my watch list includes several tens of companies that I have researched quite well and set valuations for.
In addition to knowing the companies in my concentrated portfolio exceptionally well, it also provides an expected return advantage. If my analysis is correct on average, it is more profitable to invest a larger proportion of investment assets in my best ideas. To quote Buffett again – why would I invest in the tenth best idea if I can invest more in the first?
I immensely enjoy doing investment analyses. I feel it is my calling. However, I don’t want to do it for anyone else, and that’s why I have consciously pursued a career in another field. Quite successfully, at least by my own standards.
My investment goal is financial freedom. The freedom to manage my own portfolio full-time. The freedom to spend time with family. The freedom to take a vacation when needed. The freedom to do what I want.
Upon achieving financial freedom, I intend to diversify the portfolio into a full ten stocks. It is not optimal. But if I have already left working life, additional diversification is still good insurance. It can also be wise for tax reasons.
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My portfolio currently contains five stocks, one from China and four from Finland. I mainly follow Finnish companies, but I have no goal of keeping the portfolio Finland-weighted. It has been a natural place to start the analysis work. I add cash to the portfolio significantly once or twice a year.
I thought I would tell you about my holdings and their investment theses in the next posts, but since this message got quite long, and if you managed to read this far, you might be disappointed if the portfolio remained a secret. So here is a list. More on these later.
Viafin Service 34.95%
Alibaba Group 28.42%
SRV Group 12.54%
Inderes 11.52%
Saga Furs 10.72%
Cash 1.85%
