Leandro (invesquotes) is someone I had the pleasure of meeting in early 2021 (on the bluebird machine) based on a mutual interest in Match Group. We exchanged some notes, some pleasantries, and have since become friends. Both being in our mid-20s, the paths that I and Leandro followed have been eerily similar to date.
I figured it would be an opportune moment to share a discussion I had with Leandro as he recently took an additional step on said path to pursue a new career opportunity. In this conversation, we will obtain more insight into what the new venture is, and hear about Leandro’s investment process.
The Interview
Conor
First off, thanks for taking the time to chat with me today, Leandro. I would also like to say I have enjoyed reading your work over the past year and watching you grow as an analyst. It has been a joy to connect with you on several occasions.
Before we get started it would be great if you could give the readers a brief introduction to yourself; perhaps a little background, how you discovered a passion for investing, and what you are currently working on.
Leandro
First of all, thank you very much for having me on this segment of your newsletter, Conor. I can say confidently that you are one of the best connections I have made during the past year, so it’s an honour for me to collaborate with you.
I’ll give a brief introduction of myself, of course. My name is Leandro, I’m 26 years old, and I was born and currently live in Spain. I have worked as a Business Consultant for 4 years now, although this will change soon as I will be able to work in what I love, which is investing. Even though I have only been active on Twitter for about a year, my passion for investing goes a while back.
When I was 12 years old or so, I knew I wanted to do something related to business as I liked the feeling of owning a company and seeing it grow and add value along the way. This was probably due to having some entrepreneurs in my family. During this time, I had no idea what the stock market was, as stocks never had a good reputation in Spain due to society seeing them as “very risky.”
Trying to feed my entrepreneurial spirit, when I turned 18, I decided to study Economics. I thought that this degree would give me a 360 vision that would help me start my own company. However, my ambitions changed as soon as I took a course related to the stock market. This course helped me discover a way of owning companies worldwide without needing to start them myself, and I basically fell in love with this idea. Some Americans might be surprised that someone can be 18 years of age and not know how the stock market works, but this is usual in Spain. I have many friends who have no clue what the stock market is and are 26. There’s simply no investing culture here.
From then onwards, I started digging into investing, reading books about Warren Buffett, and reading books written by Peter Lynch. The more I read, the more I fell in love with investing, which still happens today.
I made my first investment two years after discovering the stock market when I started dollar cost averaging an index fund. I didn’t feel prepared to invest in individual companies, so I went for the easy route while I continued learning. Once I felt I was somewhat prepared, I jumped into the ownership of individual stocks, which I had always wanted to do as it gave me direct ownership in companies.
Hopefully, this is just the start of a very very long journey!
Conor
That’s awesome, thanks. It seems like we had similar paths as I can relate to a lot of what you just said from my own experiences.
You started out writing the ‘Deep Dive Newsletter’ in April 2021 which later changed to the ‘Global Investor Newsletter’ in August after you paired up with another analyst to expand the reach to Asia and South America. Then, in November, you announced to readers that you would be leaving, citing that you had been offered a professional opportunity that was untenable to reject.
Before we touch on that opportunity, what was the catalyst to starting the original newsletter? I would love to hear a spiel about what you went through during the rise, merger and departure. Then lastly, what did the experience teach you, what were the core takeaways from having done that?
Leandro
I think you made a great recap of my 2021, haha. I don’t know if you remember, but my Twitter account started as an account to upload famous (and not so famous) investment quotes. This is the reason why my handle is @Invesquotes. After two or three months of relentlessly uploading quotes, I started to upload “At a glance” threads, where I tried to summarize what a company did in 10 slides. I began with Cloudflare and continued with DocuSign, Teladoc, and Match Group. I think I even asked you to give me feedback on Match Group! These threads worked pretty well engagement-wise, which was great, of course.
However, the inflection point came when I was preparing an At a glance thread on Pinterest. I had spent so much time on it doing research that I couldn’t (or wasn’t willing) to condense all the information in 10 slides. This was precisely when I decided to start “The Deep Dive Newsletter,” which began with a “deep dive” on Pinterest. When I now look back at this article, I can see that I have improved, which is something that you always like to see.
Several months into “The Deep Dive Newsletter,” I saw that there was a surge in Substacks that analyzed companies in the US, which was also the focus of my newsletter. This made me look for alternatives to differentiate the newsletter from the pack. Don’t get me wrong, there is nothing wrong with being entirely US-focused, but I wanted the newsletter to have sort of a discovery touch to it. The same week I started having these thoughts, Henry (@BuyandHoldd on Twitter) told me he was going to start a Substack to write about Asian and Latin American companies. I don’t know if it was a coincidence, but I thought the timing was a sign, so I offered him to merge our substacks. Both of us could benefit this way, as he would instantly have access to the 3,000 readers I had at the time, and I would be able to fulfil my vision of offering a global investment newsletter. We changed the name to “The Global Investor” (for obvious reasons) and started working together. I enjoyed every minute I worked with Henry, and I learned a lot.
The departure was pretty hard. Henry and I had already been talking about monetizing the newsletter, as this was the necessary first step to live off it. It would be an important step for us, and I was very excited to see “my baby” go live and generate some revenue after a one-year journey. However, I got this new professional venture and decided to go for it as it would allow me to directly make investing my 9/5, something that I had always wanted.
To be honest, when I started the Twitter account, I never thought that I would end up writing articles for a living. However, writing articles and sharing them publicly has helped me improve my research skills greatly.
Conor
So, this new venture. I understand that you will be working with Kris, the founder of ‘Potential Multibaggers’, on a new project. I am aware that you have worked with Kris in the past so it would be great to learn how this opportunity came to pass, and what exactly it is you will be doing with Kris in 2022.
Leandro
You understand correctly, Kris will be launching a new marketplace on Seeking Alpha under his brand, and he has asked me to be the main contributor. I’m very excited about the opportunity, and even though Best Anchor Stocks recently launched, I have been putting in a lot of work already. I’m enjoying the ride thus far.
The opportunity was utterly unexpected from my side, to be honest. I subscribed to Kris’ Potential Multibaggers marketplace around January 2020, although I had already been in contact with Kris several times through Twitter, especially when I started doing some threads that he very nicely retweeted to help me grow. Then, around summer, Kris offered me the opportunity to contribute to his service with some articles. This was a great deal because I could decide when and what to write about, and it would also help me grow the newsletter and expand the reach of my writing. It was completely flexible, something that I needed back then as I had to work on my 9/5.
We worked this way for several months, and I was learning quite a bit from Kris, as he always shared constructive criticism, which was clearly improving my writing. Then, 5 months later or so, Kris thought about finding a better way of serving the Multis (this is how Kris calls his subscribers). Many Multis had trouble facing the increased market volatility we have been seeing over the last months and this is precisely how Best Anchor Stocks came to life. We’ll be looking for companies that have the potential to beat the market but with lower volatility. These companies basically help investors Anchor their portfolio to facilitate long-term investing.
As every investor is different, they will decide how much weight they give to Best Anchor Stocks in their portfolio. Some may choose to be more conservative and give a 100% weight to Best Anchor Stocks, while others might do 70% growth and 30% anchors. The idea is to help investors take control of the volatility they want to pay to achieve returns and facilitate long-term holding. Even if many don’t want to admit it, volatility affects everyone to a greater or lesser extent.
The marketplace has already launched, and it’s accessible from the Seeking Alpha marketplace tab. The idea is to build a community and help investors develop their own convictions, two things that are crucial for long-term holding.
Conor
I am perpetually amazed at the opportunities that are afforded to those willing to embrace the new digital work culture, get their name out there, and stand in front of opportunities. So, well done for that.
Before I prod you for insight into more investment-related matters, I would love to hear if your career ambitions or your perception of how your own path might unravel has changed in the last few years?
I ask because I know a lot of younger investors read Investment Talk. When I was in my early 20s, I had this vision of completing the CFA and navigating my way into a fund. The last two years have changed that for me, and I am curious if you have had a similar shift in perspective.
Leandro
Absolutely! I would say that our paths are pretty similar, to be honest. I prepared for the CFA exam during 2019-2020 intending to work in something investment-related. However, I ended up not taking the exam for two reasons.
One was that I had two exam cancellations due to COVID, and I had already been studying for almost one year and a half. I was tired of studying the same topics over and over again just to see how it got cancelled again and again. Funnily enough, the exam suffered one more cancellation after I decided to ask for a refund.
Secondly, during this time, I had been quite active on Twitter and Substack, which helped me see all the opportunities that came from social media and the investing community in general. Times have changed, and professional opportunities in the “digital world” are abundant. These two things combined made me change my initial strategy. I then started working towards another goal: making investing my 9/5 without working for a company. I still don’t know if I will be able to achieve my goal, but it’s definitely getting closer.
Conor
Okay, now something a little meatier. How would you describe yourself as an investor, what are you looking for?
Would love to hear some insight into what your process looks like from discovery to assessing the qualitative and quantitative factors.
Leandro
Maybe it appears to be a bit vague and typical, but I consider myself a long-term investor trying to look for quality companies that I would like to hold forever. Of course, this “forever” is conditional on management’s execution.
I do have to admit that my investing style has changed a bit throughout the last year. I had always been focused 100% on growth, as I have little trouble dealing with volatility. I held a pretty diversified portfolio of around 15-20 companies, primarily disruptive tech and some anchors such as Amazon, Facebook, or Brookfield Asset Management. However, I am now shifting to; (1) Holding a more concentrated growth portfolio and; (2) Holding a higher percentage of Anchor Stocks.
Number 1 is something entirely personal. With all the drawdowns, I found out that I held true conviction in about 10 of my holdings, not my entire portfolio. Funnily enough, two companies in which I hold a high conviction are two of my biggest losers of 2021, Pinterest and Teladoc. I also found out that I don’t have enough time to track all of these holdings quarterly, so 8-10 holdings seem like a better number to concentrate in.
Number 2 is a direct consequence of managing my parents’ and my girlfriend’s portfolios. I know I can take volatility, but when you invest other people’s money, you start to see things differently. My parents don’t want to get rich quickly, they prefer to preserve capital and make a bit on it every year. This for them is a win, as a bank account in Spain returns 0%. In the case of my girlfriend, she is very long-term oriented, I would say that maybe even more than me, haha. This led me to think that, being 26, I still have a huge runway ahead so I could settle for lower returns but less volatility. What matters for me and my family is sleeping better, even if this means sacrificing some potential returns. If I had not had the chance to invest other people’s money, I would probably still follow the same 100% growth stocks strategy.
As I am now working in Best Anchor Stocks, this strategy aligns perfectly with my full-time job, which I find ideal. After this long monologue about my newly-defined strategy, I still have one more question to answer.
When it comes to my process, I try to keep it simple. What I find most challenging is the discovery and the first filter that comes before deep research. For discovery, I read plenty of articles and listen to podcasts, mainly when I’m travelling. Talking to other investors which I value is also a great source of ideas. I also occasionally use some screeners. Once I have built my initial watchlist, I look for good past performance, improving financials, and some hint of a moat or competitive advantage (even if I don’t go deep in this initial research).
After having pre-filtered this watchlist, I start digging deeper into the remaining companies, putting a lot of focus on management. If I don’t like management, I never continue researching the company as management is probably the number 1 reason for outperformance, which is the primary driver of long-term returns. This is the most important qualitative factor for me.
I look for potential long-term margin expansion and healthy balance sheets on the quantitative side. Most people focus directly on revenue, but I try to look for the metric that explains most of the past shareholder value creation to analyze how it’s evolving. Many times this metric is cash flow but others it might be something specific to that company.
Conor
Most conversation on Twitter is limited in that it’s often the case where multiple parties are discussing a theme, a stock, or some other matter, but coming from different points of view. Whether it be investment style, time horizon, or any number of reasons, informed and objective discussion is the exception, not the norm.
Consequently, there is a lot of noise on the bluebird machine. How do you combat becoming influenced by noise?
Leandro
I believe that there are only two possibilities to combat noise. One is developing the ability to be immune to noise, and the other one is directly blocking the noise by not opening the app. The second option looks great on the surface but can make you lose potential signals too. The first option is impossible for me, and I think this is also the case for many people. Noise is like volatility, you can believe that you are immune to it, but when it lasts very long, you start changing your strategy without realizing it.
I typically close the portfolio and all information sources when noise is just unbearable. This has been the case for the past month or so which is why I have been less active. When you see investors shifting strategies from one day to another, it’s a warning sign that noise is becoming too much. More so when more than 50k accounts follow these investors. During these periods, I focus on studying companies through company filings and past earnings transcripts, two sources that are pretty neutral. Of course, you could also read articles on these companies, but these articles tend to be biased depending on the market phase.
I don’t know if that answers the question, but just to summarize: I am influenced by noise the same way everyone is, but I try to develop tactics to avoid acting on it. Focusing on fundamentals during these periods helps a lot.
Conor
I am assuming that, given your age and stage in your career, you are not working from a fixed base of capital. I would imagine that you regularly add new influxes of capital into your portfolio.
Firstly, with that in mind what is your process for weighting your positions and the general scope of your portfolio management outlook?
Secondly, do you believe your investment approach would change if you had to work with a fixed base of capital and, if so, how would that look?
Leandro
You are correct, I make monthly contributions to my portfolio. This doesn’t mean that I invest it directly. I simply transfer it directly as soon as I get my paycheck. This “strategy” helps me save more money too. My saving rates have improved significantly since I started investing.
When it comes to portfolio weight, I weigh my positions based on conviction, although I do it in a somewhat special way. Most investors weigh positions based on the actual value of their portfolio, but I take a different approach and weigh them based on the cost basis. I have always thought I should build my portfolio based on what I can control, which is how much money I can allocate to each position. I can’t control what the stocks do over the short term, so I avoid making decisions based on this performance. I know some people think this is stupid and dangerous, but it’s what I feel comfortable with.
I revisit this weight monthly, following a similar process. I order the companies according to cost basis and ask myself what I would cut if I needed the money today. If the answer is that I would start cutting from the bottom up, then I feel comfortable with that distribution. If, on the contrary, the answer is that I would cut some stocks that are at the top, then I have to do some rebalancing.
If I had to work with a fixed capital base I wouldn’t change my strategy. I invest periodically because I think it’s safer. I know that historical data is against me, and I sacrifice returns by deciding to DCA, but it helps me sleep better. When downturns come, cash is a great hedge. It helps me remain relaxed as I can capitalize on any opportunity.
Conor
A somewhat related question for you. How do you reconcile the trade-offs between concentration versus the potential for reducing the standard deviation of your portfolio by diversifying?
Leandro
I briefly touched on this topic earlier, but I didn’t exactly answer this question. I don’t consider myself an investor that suffers the effects of volatility, so I am shifting towards a concentrated strategy because I think it has three main advantages. Firstly, it facilitates tracking the holdings. Secondly, it helps you focus on your best ideas and focus your attention on what’s important, and, lastly, I think it makes outperformance easier.
If I manage to find great anchor stocks, I think that I will be able to reduce the volatility of my portfolio even if I decide to concentrate it. My objective is to end up with a mix of anchor stocks and growth stocks that allows me to concentrate my portfolio without significantly increasing standard deviation.
Conor
How do you weigh up the competing narratives of potentially being wrong on an investment versus giving it time to play out?
For instance, Pinterest has a stellar year in 2020 (+254%) and then gets cut in half during 2021. Whilst there is evidence for a bout of thesis creep (pivoting to video in mid-2021) in this case, how do you tangle with the outcomes here? Eg, is the market telling you something about your thesis that you might have missed.
Your response doesn’t have to be specific to Pinterest, merely an example, but I would love to know you think about reassessing your conviction and thesis during periods of unfavourable price action.
Leandro
It’s a great question, one that investors should always ask themselves. I will answer it both generally and specifically with Pinterest, as it’s currently one of my top 5 positions.
I always try to lay out what my bull thesis is clearly. The shorter, the better, as it will leave no room for interpretation when I try to reassess if it has been busted. Investors naturally tend to favour the “giving it time to play out” argument over being wrong, as everyone has a bit of ego deep down and nobody likes being wrong. I have no problem assessing if I was wrong, I have sold many stocks at a loss because I saw my mistakes. However, we can’t take people claiming that a thesis is wrong because the stock price is declining in the short term. This is not the way I view investing, and I never will.
In Pinterest’s case, the company reported bad MAU numbers and saw a sharp decline in stock price. I never bought Pinterest thinking that engagement was the strong part of it. I bought it because I thought it was the best social commerce platform, or at least the one with the brightest future. Pivoting to video was not in my research, of course, as it came later. However, this has not changed my thesis as the social commerce aspect of the platform is still intact. I am willing to allow management to show investors that they can pick up engagement while having great shopping metrics. If this is the case, Pinterest will be an even better platform than I had envisioned. On the other hand, if management struggles to skyrocket engagement, then monetization is still young enough to provide worthwhile returns for long-term shareholders. The company has come down too much, in my opinion. At these levels, I don’t even think that execution has to be perfect anymore.
Conor
You are a relatively young guy Leandro. What is on the cards for the next 5-years? Do you have any specific goals or desires in mind?
Leandro
After the two years of COVID that the world has suffered, I really only want to ask for health, for me and all those around me. After health, I would also ask for luck in my new venture. Starting something so different is both exciting and frightening, to be honest. I am leaving the comfort of a full-time job, where I always received the same paycheck at the end of the month, for something that I love but somewhat more volatile.
I can tell you that in 5 years, I will still be investing, but apart from that, I don’t like to make long-term goals as life has always shown me that it’s better to ride along without planning anything. I would’ve never imagined that I would be sitting where I am today but such is life. The only thing that I can control is working hard, and I can tell you that there will be a tonne of this in the next 5 years.
On the personal side of things, I do expect to be married and have a family in 5 years if everything plays out as I expect it to.
Conor
It has been a pleasure getting to know you this last year, and thanks again for taking the time to answer some of my questions. When I visit Madrid, I will be hitting you up for tour guide duties.
Lastly, where can readers find you and your work, and do you have any concluding items you’d like to say?
Leandro
Thanks, Conor. It’s been a pleasure to connect with you, no doubt. I have already prepared the tour, which involves sun and beer, a combination that never disappoints!
As The Global Investor is now paywalled, I guess that not many people will have access to my work there, so the easiest thing is to follow me on Twitter @Invesquotes, where I will start uploading threads regularly again.
People can also find me in Best Anchor Stocks in Seeking Alpha, where they will have access to a two-week free trial to check out all the work before deciding if they want to subscribe.
Conor,
Author of Investment Talk