Last Tuesday afternoon I had the pleasure of attending a talk by Francisco García Paramés at the Faculty of Economics of the Univerdidade da Coruña. As I always say, it is important to learn from the best, and Francisco García Paramés is a legend within the world of investment in the stock market in general and value investing in particular.
It was quite shocking to me that it was his first talk in Galicia, due to his Galician origins. I hope that from now on you will be encouraged to come more frequently to spread wisdom throughout your homeland.
The talk focused on the presentation of his book "Another reason average of 34 after a rise in stocks of more than 200% in just 3 years.
About the Austrian School of Economics
Francisco considers that the Austrian school of economics is the one that offers a more reasonable mental scheme and is also the one that best explains the reality that we can observe on a daily basis.
This school does not study the equilibrium of the economy at a certain moment through different formulas, but rather studies the market processes that make the economy constantly readjust itself to tend towards equilibrium, its central axis being human action.
About investing in fixed income
In his opinion, the main danger of fixed income is that it is unable to protect investors from inflation.
His recommendation to preserve purchasing power is to invest in real assets, with stocks being the best option for their liquidity and profitability.
On the evolution of your investment style
Paramés commented that his investment style has evolved over time from looking for very cheap companies to looking for quality companies at a reasonable price.
It is something similar to what I commented in my article about la evolución del value investing.
On the right mindset to invest
He underscored the importance of having a strong personality that allows us investors to confront our primal instincts.
For example, to avoid herd effect(which causes us to feel physical pain when acting against the pack), short-termism and negativity.
On the advantages of small investors
Like Peter Lynch, Paramés commented that small investors have certain advantages over professional managers.
As a curiosity, he commented on the case of a university professor of sociology, of Marxist political ideas, who was able to beat the market and obtain a high profitability consistently through value investing.
About the current market valuation
Note that the bags are not especially expensive.
About its references in the investment world
He mentioned as referring to Warren Buffett ya Peter Lynch.
On how to face disruptive threats in a business
According to Paramés, the best way to deal with disruptive threats to a business is to stay out of these cases and focus on companies that are within its scope.circle of competition.
On the use of "stop loss"
It considers inappropriate the use of "stop loss", which are sell orders conditional on the price of a share falling from a certain price.
For Francisco, the best way to reduce the risk of an investment is to know well the company in which it is invested through in-depth analysis. In the event that the share price falls while maintaining its fundamentals, the correct decision would be to buy more shares.
On how to recognize quality companies
Quality companies are companies with a high return on capital employed.
In any case, it is necessary to analyze the reasons why these companies have this high profitability, since it will only be sustainable if they have competitive advantages that allow them to defend themselves against their competitors.
He gave the example of BMW, whose competitive brand advantage means that it can achieve higher margins than most companies in the automotive sector.
Thanks to Paramés
To finish, I would like to thank Francisco García Paramés for his conference in Coruña, since it was a common sense bath. I hope it will be the first of many for Galicia in the future. 🙂
I also want to thank you for signing a copy of "Investing in the Long Term”. This was his dedication.
Finally, I wish you the best of luck in your new project Cobas Asset Management, both him and Santiago Cortezo, Cobas Investor Relations Officer, with whom I had the pleasure of chatting briefly before the talk.