Today is an interesting talk by José María Díaz Vallejo. For me he was an absolute reference when I was starting in the world of value investing thanks to his blog Benjamin Graham the average earnings per share of the last 10 years or the last economic cycle and compare it with the current price. " (See my article on PER10)
“We can see what the value is, for example, in companies like Barón de Ley, we think that the assets have a higher value than what is shown on their balance sheet. So we adjust the valuation of Barón de Ley's assets and make a book value price ratio, but with this new book value, adjusting the value of the assets. " (See my article on the Adjusted PVC ratio).
On the maximum debt ratio
“We do not use ratios just because. It is not the same debt that a company like Red Eléctrica can assume as a company like Arcelor Mittal. The nature of the business and the reinvestment needs are what determine the debt capacity of a company. So, each company is a world. "
About bank analysis
“We use common sense first, as in all of us. We try to see what the dynamics of the bank's real business are like, which is very easy to understand, raising money on the one hand and lending it on the other. And understand how the bank can earn money in this environment and how the bank can earn in successive environments and successive market conditions. "
“We use all the methods that do not imply future projections. In the case of banks we are also very careful when using past information because the sector has changed a lot. If I had to choose a method, it would be value creation methods, EVA, or reverse methods, that is, see how profitable the bank must have on its cost of capital to justify current prices. That is, instead of making projections into the future, we fix them at the current price and try to calculate the flows that would justify the current market price. "
Advice for those who start investing
“First of all, read everything that falls into your hands. Not only in the stock market, but also in psychology and also in economic history, and as they progress in their theoretical training, they should also look at the portfolios of investors that they like or that for whatever reason deserve respect and try to understand why they have the stocks they have in their portfolio. Try to apply what we are learning in this theoretical study to our practical study. It's what I would do. That, in fact, is what I did back in the day. "
Bibliography recommended by José María Díaz Vallejo in the talk
Books in Spanish:
- Howard Marks - The Most Important Thing for Investing with Common Sense
- Daniel Kahneman - Think Fast, Think Slow
Books in English:
- Tobias Carlisle – Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations
- Mark Spitznagel – The Dao of Capital: Austrian Investing in a Distorted World
- John Mihaljevic – The Manual of Ideas: The Proven Framework for Finding the Best Value Investments
- Joel Greenblatt – You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits
- Guy Spier – The Education of a Value Investor
- James Montier – The Little Book of Behavioral Investing
- Lawrence Freedman – Strategy: A History