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PJ Pahygiannis
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24 Questions With Australian Value Investor Adam Parris

Parris shares advice for beginning investors

January 01, 2017 | About: AMZN +0%

GuruFocus has detected 3 Warning
1. How and why did you get started investing? What is your background? Signs with Amazon.com Inc $AMZN.

I got a taste for business and investing from both grandparents. They both ran successful More than 500,000 people have already
businesses and owned real estate investments. One grandfather in particular encouraged me to
joined GuruFocus to track the stocks
pursue learning how to invest in the share-market at age 16 and he mentioned reading about
Charlie Munger (Trades, Portfolio). But unfortunately, I didnt at the time seek out information about they follow and exchange investment
Charlie Munger (Trades, Portfolio) and it wasnt until I was in my mid-twenties that I got hooked ideas.
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 Graham, Dodd, Buffett and Munger.
Email Address
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AMZN 30-Year Financial Data

The intrinsic value of AMZN

Peter Lynch Chart of AMZN

Performances of the stocks mentioned by PJ
Pahygiannis

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AMZN Price Chart

1D 5D 3M YTD 1Y 5Y 10Y

$1007.97 (1y: +35%)

1000
2. Describe your investing strategy and portfolio organization. What valuation methods

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 do you use? Where do you get your investing ideas from? 750

500
My investing strategy is to simply purchase shares in businesses that I understand, which are
Oct '16 Jan '17 Apr '17 Jul '17
undervalued based on my evaluation of the businesses fundamental aspects and its earning
power.

Valuation is in two steps, the first is determining the true value of the business based on the Guru News
balance sheet. Looking for hidden red flags and also for hidden assets, for example if a business
has subsidiaries, is there value and/or is their earning power reflected in the share price? Canada's Mawer Funds: Investment Newsletter 2nd
Quarter 2017 by Holly LaFon

The first step is to determine whether there is real value in company, making sure the assets could David Herro and Bill Nygren's Oakmark Global Select Fund
Commentary for 2nd Quarter 2017 by Holly LaFon
be sold off in case of liquidation, but if the industry is in decline, the prospect of asset sales will be
Technology Leads Gains on Tuesday by Julie Young
low and generally they will be sold for cents on the dollar.
NVIDIAs Promising Future Growth by Omar Venerio

The second step is determining the earnings power of the business. This is where all three financial
statements help you determine the profitability of the business, and you want to analyse the
Value Ideas
business over a 10-year period. I cant go into detail as this process is a propriety system I have
developed. Cobiz Investment Management, Llc Buys SPDR S&P
Dividend, Stanley Black & Decker Inc, Oracle Corp, Sells F5
3. What drew you to that specific strategy? If you only had three valuation metrics what Networks Inc, NXP Semiconductors NV, Gilead Sciences
Inc by insider
would they be?
Mawer Funds Comments on Halma by Holly LaFon

The Graham and Dodd value investing strategy made a lot of sense to me. I believe in the Mawer Funds Comments on Tsuruha by Holly LaFon

recommendation that you should buy shares as if you are buying the whole business. Mawer Funds Comments on Home Capital by Holly LaFon

Three valuation metrics would be: The reproduction value of the business, return on investment
and free cash flow. More By PJ Pahygiannis

4. What books or other investors changed the way you think, inspired you, or mentored 19 Questions With Gautam Baid, Portfolio Manager, Global
Equities - Mar 27, 2017
you? What is the most important lesson learned from them? What investors do you follow
9 Questions With Value Investor Joseph Calandro Jr. - Mar
today? 27, 2017

23 Questions With the Founder of WayUndervalued.com -

The main books that helped shape my investment strategy were: Mar 24, 2017

15 Questions With Sid Lembirik, Managing Partner at

"Value Investing: From Graham to Buffett and Beyond" by Bruce Greenwald, Judd Kahn, Paul D. Lembirik Group Investments - Mar 25, 2017

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 Sonkin and Michael van Biema.

"Value-Able" by Roger Montgomery Guru Interviews

"The Essays of Warren Buffett (Trades, Portfolio): Lessons for Corporate America" by Lawrence A. Podcast Episode 3: Healthcare Investing Pro Mindy Perry by
Holly LaFon
Cunningham
Podcast Episode 4: Interview With Legendary Investor
"Poor Charlies Almanack" by Charles T. Munger Jean-Marie Eveillard by Holly LaFon
23 Questions With the Founder of WayUndervalued.com by
"Mediations" by Marcus Aurelius PJ Pahygiannis

GuruFocus Interview: Orbimed Guru Sam Isaly on Investing

"The Discourses of Epictetus" by Arrian. in New Era of Healthcare by Holly LaFon

The important lessons are many, but the main few would be: Be independent in all your thinking, be
prepared, be patient and be in control of your emotions. Top Ranked Articles

I dont follow any investors, Im on my own path. The Best Ideas Are Obvious From the Start by Rupert
Hargreav es

5. How long will you hold a stock and why? How long does it take to know if you are right Wedgewood Partners - Humility and Rationality in Practice
by Grahamites
or wrong on a stock?
The Future of Value Investing by Thomas Macpherson

Depends on the characteristics of the business. If I believe it has long term prospects, I will hold What Can We Learn From the Energy Market? by
Grahamites
until the business cant maintain its favourable operating metrics against its competitors. But if I
think it has value and its not reflected in the market without any long term prospects, I will sell once
its share price has risen to my required return, for example, if the share prices rises 30% within six
months, Ill sell. You May Also Like

6. How has your investing approach changed over the years? Heres Why Warren Buffett Bought Oncor
What Doesnt Kill You Makes You Stronger
Very little
Traits of the Best Business Managers

7. Name some of the things that you believe that other investors do not. 5 Strategies for Business Success
Warren Buffett Strikes Deal With Oncor
Read the notes of the annual report, or reading the annual report at all. Someone once said the
first half of the annual report is just marketing material, I think that is broadly right.

8. What are some of your favourite companies, brands, or even CEOs? What do you think Could This $0.22
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 are some of the most well run companies? How do you judge the quality of the
management?
Penny Stock - Fund
I can only speak of businesses in Australia, but I do like Nestle and Amazon (NASDAQ:AMZN). In Your Retirement?
Australia I like Reece and Beacon Lighting.
Almost No One Else Is Eyeing
In assessing management there are two key measures I look for: consistency of ownership and This "Trump Penny Stock." But
allocation of capital. You Should Be.
You can read past annual reports and follow up to see if they are walking the talk. pro.truealpha.co
9. Do you use any stock screeners? What are some efficient methods to find
undervalued businesses apart from screeners?

Yes, use two simple measures: Low debt and fallen share price over 52 weeks.

10. Name some of the traits that a company must have for you to invest in, such as
dividends. What does a high quality company look like to you and what does a bad
investment look like? Talk about what the ideal company to invest in would look like,
even if it does not exist.

Buffett has laid out the common traits that a high quality company encompasses, and if you want to
know what a bad company looks like, just invert the qualities of a high quality business. I encourage
new investors and CEOs to read the book "The Outsiders: Eight Unconventional CEOs and Their
Radically Rational Blueprint for Success" by William N. Thorndike. That book should be mandatory
reading for new CEOs.

11. What kind of checklist or homework do you utilize when investing? Do you have a
specific approach, structure or process that you use? Or do you have any hard cut
rules?

If I find a compelling business in the screening process, it will then undergo a thorough evaluation
using my priority system, which does involve a checklist and I will write out my thoughts as to why I
brought or didnt, so I can review months later to help improve my investment experience.

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 12. Before making an investment, what kind of research do you do and where do you go
for the information? Do you talk to management?

My main source of information is a businesss annual report. Yes Im willing talk to management but
rarely do.

13. How do you go about valuing a stock and how do you decide how you are going to
value a specific stock? When is cheap not cheap? If you can, give some of examples.

I cant go into detail as I have a priority system. If you read the books Ive mentioned and follow their
process, you will do well.

14. What kind of bargains are you finding in this market? Do you have any favorite sector
or avoid certain areas, and why?

I havent found anything compelling at the moment. I dont have favourite sectors, Ill look any
business in all industries.

15. How do you feel about the market today? Do you see it as overvalued? What
concerns you the most?

Im neutral on the Australian share-market, but Im concerned about the Australian housing market
and the large amount of debt held by Australians.

16. What are some books that you are reading now? What is the most important lesson
learned from your favorite one?

The Discourses of Epictetus. The main lesson is that human nature doesnt change. Also, Epictetus
lays out a great framework to use when dealing with the vicissitudes of life.

17. Any advice to a new value investor? What should they know and what habits should
they develop before they start?

When starting out, it is easy to get overwhelmed very quickly by the vast amounts of information,
but start by chunking it down into bite size pieces. For example, just start by reading the most
recommended book on value investing by other investors (probably be The Intelligent Investor by
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 Ben Graham), and apply those principles. Then as you build confidence slowly, read more and
continually build upon and adjust your investment process. Also keep a diary, write what you buy
and why you brought a particular share, so in the future if that share tanks and you lose money,
you can go back and review what your thoughts were at the time. It will help you avoid dumb
mistakes in the future.

18. What are your some of your favorite value investing resources or tools? Are there
any investors that you piggyback or coattail?

GuruFocus, Google finance and books.

19. Describe some of the biggest mistakes you have made value investing. What are your
three worst investments that burned you? What did you learn and how do you avoid
those mistakes today?

I only have one really bad investment, and looking back it was an incredibly stupid (dis)investment.

A listed law firm called Slater and Gordon had overpaid for a U.K. law firm and a year or so later,
accounting anomalies arose in their financial statements. The share price fell 40% and it caught my
interest, and it continued to fall a further 20%. I think due to overconfidence, I thought it had been
oversold, and based on the false assumption that it was just oversold and would rebound soon, I
bought it. Well that was pretty dumb idea, as I failed to even study the financials and study the U.K.
purchase. I lost close to 85% of the investment, which I deserved to lose. It was an easy lesson to
learn from.

20. How do you manage the mental aspect of investing when it comes to the ups, downs,
crashes, corrections and fluctuations?

By applying a stoic mindset.

21. How does one avoid blowups in value investing?

Take your time analysing a business, and make it thorough, plus avoid debt laden companies. I try
to learn from other investors' mistakes. It is also important to be self-aware of what mood you are
in. If you are excited about a stock, you will overlook red flags, but whereas if you are pessimistic

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 you may discount the positives aspects in favour of the negatives aspects. Sleep on it before
making a buy or sell decision.

22. If you are willing to share, what companies do you currently own and why? How have
the last five to 10 years been for you investing wise compared to the indexes?

I can only speak about the Australian market. Since 2009 theres been plenty of opportunities to
invest in and its been relatively easy to beat the indexes since then.

23. Here's a fun one - What stock would Warren Buffett (Trades, Portfolio) or Benjamin
Graham buy today if he were you?

I would guess that Buffett would be interested in one Australian company, that being Reece. Reece
is a major public company and Australia's most successful supplier of plumbing and bathroom
products.

24. What is the most contrarian investment you've ever made? Why did you make it and
how did it turn out?

I dont know, I feel like Im always making a contrarian investment.

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 Stocks that Charlie Munger keeps buying

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