How to really cut your time to valuing US companies an interview with Jae Jun

//How to really cut your time to valuing US companies an interview with Jae Jun

How to really cut your time to valuing US companies an interview with Jae Jun

 

I have been an avid reader of Jae Jun’s blog Old School Value since at least 2009.

 

From a modest start, writing about his own value investing experiences, and companies he was investing in he has built his blog and website into real treasure trove of information you can use.

And best of all it’s nearly all free.

 

As you will see in the interview below Jae is a Benjamin Graham type of investor, preferring to invest when a company trades at less than net current assets or meets the classic Ben Graham checklist.

And to help you identify this type of companies he has a free screener on his website you can use.  

Here is the link: Old School Value: Stock Screener

On the above page you can also see just how well each investment strategy has done. Jae has back tested the screener strategies and shows their returns since 2001.

The market out performance has been substantial.

 

Jae also has something that is not free but will help you a lot if you invest in US companies.

Over the past few years he has developed a valuation spread sheet that not only does nearly any kind of company valuation you can think of but also saves you a lot of time.

Jae claims 30 seconds per company if you have a fast internet connection.

Here is the link: Old School Value – Valuation spread sheet

The spread sheet automatically pulls in up to 10 years of financial data and values the company, all you have to do is type in the company ticker.

Full disclosure – I really do like Jae and his spread sheets really are very good, but I will be paid a small commission if you decide to buy a valuation spread sheet. 

If you would like to do a different valuation you can quickly add it to the spread sheet and it will be done automatically every time you pull in the information for a new company.

Important – the spread sheet is designed to analyse only US companies. But even if you have only a few investments in the US it may be worthwhile for you to look at it.

Here is an example of what the spread sheet looks like: Old School Value Valuation sheet example

 

I wanted to find out more about Jae and he gratefully agreed to the following interview.

How did you get started in investing?

Jae Jun: My first investment, I lost over $3,000 which was a substantial amount compared to my net worth at the time. I had bought variable life insurance and the fee was around 5%. It did nothing and I was continually losing money, so I forfeited the insurance plan and took the loss.

That first painful experience worked wonders because it motivated me to manage my own money. Soon, I realized Wall Street wasn’t all that it was made out to be. The little guys could do what Wall Street does, but even better. After a while, I took the plunge and started investing with real money.

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Can you talk about your investment approach and how it has developed over time?

Jae Jun: I’m frugal by nature. I always try to buy quality items at a cheap price outside of investing. Value investing made perfect sense. As Buffett said, you either get it or you don’t.

In terms of investing approach, I’m still a Graham type of asset investor, as opposed to buying good companies at fair prices.

The only way that I have been able to hone my investing skills is simply by reading good books. You can find so many ideas and increase your circle of competence all through books. Nowadays, books are one of the least used resources in my opinion.

 

How did you weather 2008 and the first part of 2009?

Jae Jun: I got married during the financial meltdown so that helped.

But it’s not about weathering bad years, it’s more about whether I took advantage of cheap companies and yes I did. I bought them in truckloads and I was lucky to have gotten excellent breaks from them.

 

How do you typically find ideas and what is your selection process before an idea gets added to your portfolio?

Jae Jun: Finding good ideas is hard work.

One example is every year I go through Forbes Best Small Companies. A couple of years back, the list comprised 200 companies. Now it is down to 100, but I will go through each one in my financial spread sheets and look at the valuation.

If it passes, then I can move it to a study list where I would read an annual and quarterly report to get familiar with the business. Here is a process that I posted on my website: Investment Checklist for Stock Selection

 

How many positions do you typically have in your portfolio?

Jae Jun: Usually 10 or so. I think the max was 15 at one point.

 

Describe some of your most notable investment mistakes and what did you learn from them?

Jae Jun: Patience and being a bad seller.

Investments don’t work out overnight so don’t expect it to. I’m also a bad seller. It’s either too early or too late so I have to have a checklist for selling.

 

What are your ideas concerning portfolio composition and the value of individual holdings in relation to the portfolio?

Jae Jun: There is no one answer. I know Buffett, Munger and other gurus say concentration is best, but whatever allows you to sleep at night is the correct portfolio composition.

I have no problems with having 20% in one position. Most people can’t tolerate that. It doesn’t mean that it is wrong.

 

Do you follow any key risk-management guidelines in managing your portfolio?

Jae Jun: The main one is to buy cheap.

The second one is to buy quality if it isn’t cheap.

By buying cheap, you are ensuring that your downside is protected. Short term, there could be wild fluctuations, but I’m talking about beta here.

That’s why I like net net stocks. The downside is tangible. If a solid net net is trading below NCAV, then you immediately know what the minimum the company should sell for is.

 

What is the current geographic mix of your portfolio?

Jae Jun: Quite diversified. They all trade on the US stock exchanges, but I don’t mind buying ADR’s.

I have stocks based in USA, Canada, Korea and a company called Retail Holdings which operates mainly across South and Southeast Asia. They all trade on the US exchange though.

 

How did you get involved in writing an investment blog?

Jae Jun: It was just a way to document my learning process and to keep a log of my analysis. Then it slowly got bigger which I am thankful for.

 

Your analysis spread sheets are outstanding. How did the idea develop?

Jae Jun: Learning to invest is hard enough, but trying to remember everything and then perform everything I had read and studied by hand every single time was a nightmare.

That’s how the spread sheet started and then it kept on growing as I learnt new valuation methods, models and financial calculations.

I’m also not good at remembering equations and numbers, so the spread sheets make it convenient for me to restudy how and why I modelled it a particular way.

Here is the link again: Old School value Valuation spread sheet

 

What has been your most notable success while blogging and why?

Jae Jun: Most definitely the readers and the connections you gain.

I don’t know many of my website followers in person, but I communicate via email with people like myself, fund managers, CEO’s, students, people overseas and a diverse group of people I would likely never have encountered.

 

What has been your most read blog post?

Jae Jun: The How to Invest in the Stock Market series continuously gets a lot of visits.

There is vast group of people who want to learn investing, but the most difficult aspect is getting started.

The How to Invest series, takes you through the steps of what you need to know to get started and to improve.

 

Jae, thanks for your insights.

 

Profitable investing