Interview with Leandro from Best Anchor Stocks
Perceptions of stock investing in Europe, his personal investment philosophy, and an unusual industry to consider adding to your watchlist
Welcome to the hundreds of new subscribers who have joined since the viral Adyen N.V. Investment Thesis
Evolution AB (Ticker: EVO.ST, EVVTY) will be the focus of the next deep dive which will be released in October.
Today, I'm excited to have a special guest interview with Leandro, who you might know as @invesquotes on Twitter.
Back in 2020, when I joined the FinTwit community, Leandro was one of the very first folks I connected with. We hit it off right away because we both share a passion for stocks. We even teamed up to talk stocks in a Twitter Spaces event.
Wolf of Harcourt Street
Hey Leandro, thanks for joining me today. Before we dive in, it'd be great if you could tell our readers a bit about yourself. Maybe share some background info, how you got interested in investing, and what you're up to these days.
Leandro
Thanks for having me on Wolf, and I appreciate what you shared at the beginning because I do remember that we got along quite well since day 1. I guess saying my name is not really necessary, haha.
I’m 28 years old and was born and live in Spain. My passion for investing really started to show up when I was in my first year as a University student. I studied economics, and even though there were not a lot of investment-related courses, I occasionally came across one that made me interested, so I started reading about the topic.
Before going to university, I was somewhat interested in owning a business, I still am to this day, but I never viewed myself pursuing a career related to the stock market. Of course, the negative connotation stock investing has in Spain played a role in my future ambitions…The stock market is not really a big thing here. It’s somewhat understandable, though. Spain went into the 2008 crisis with an index heavily exposed to real estate and banks, so it didn’t play out great, and it took much longer to recover than other markets. Lots of people lost a good chunk of their money and started viewing the stock market as extremely risky, which it obviously can be.
Anyway, I started writing about investing some years back and finally decided to make this my full-time job at Best Anchor Stocks. It has been fun but also a great learning experience. Having 8 hours to read, research, and write about companies really compounds over the long term, just like returns.
Wolf of Harcourt Street
The negative connotation to stock investing in Spain is something that resonates with me as an Irish investor. Individual stocks are viewed as speculative or risky causing property to be seen as the safest investment in this country. I feel like this is ingrained in European’s and manifests itself in the Stock Based Compensation (SBC) policies of European companies. Adyen, as an example, has much lower SBC than its U.S. peers. Do you have any thoughts on this?
Leandro
I mean I completely agree. People in Europe generally prefer to be paid in cash rather than stock for the reason you discussed above. I think this constitutes a competitive advantage for companies that have most costs in Europe but sell worldwide. I mean Adyen is a good example. The company has a single-code platform which is most likely developed in Amsterdam by probably much cheaper developers than those than U.S. companies have access to.
Wolf of Harcourt Street
Could you explain how “Best Anchor Stocks” all came about?
Leandro
Yep, of course. I had been writing on my own for some time because I thought it really helped my learning curve become exponential. When you write down your thesis, you become aware of potential flaws during your research process, and it also helps you think better, if that makes sense.
I also think that sharing it publicly is beneficial as you can get pushback or other viewpoints that help you improve or refine your process. Of course, there will always be two types of pushback. Those that are well-reasoned and where you can clearly tell that the other investor has done their work, and those that are simply people parroting some sort of valuation ratio or bear case with no context whatsoever. Most will be of the second kind, but getting only 5% of the first type is already extremely valuable, in my opinion.
Anyway, going back to the topic, Kris, the founder of Potential Multibaggers, asked me if I’d like to write some articles occasionally for his service, and I agreed. Long story short, that eventually evolved toward the launch of Best Anchor Stocks, which I now do full-time. Being able to work on your passion is not an opportunity many people have, and I thought this was a good opportunity for me. Obviously, it’s a risky move. I left the comfort of a full-time job at a consulting company where I was valued, but sometimes you just have to take the risk and see how it plays out.
Wolf of Harcourt Street
It is pretty amazing to see the opportunities like this that can arise simply from putting yourself out there and sharing your ideas publicly on a platform. Do you have any advice to offer for individuals who may aspire to pursue a similar journey the unconventional way?
Leandro
I’d say the most relevant advice I can give anyone is to only do it if they truly enjoy it. Writing can be horrible if one doesn’t enjoy both writing and the topic. I also think one should not force the switch, it will probably come natural. One year before starting Best Anchor Stocks I honestly didn’t think I’d work in what I do now, but that’s how life works, right? Totally unpredictable sometimes!
Wolf of Harcourt Street
Can you tell me about your investment philosophy and strategy as it pertains to “Best Anchor Stocks”?
Leandro
Yep, so it’s pretty straightforward. At Best Anchor Stocks, I analyze companies and build a portfolio with my own money based on the findings of my research. Subscribers have access to this portfolio and all the research but are ultimately responsible for building their conviction. I have subscribers that have invested in only in 2 or 3 companies in my portfolio, others more. What’s important is that what you are investing behind is something you truly believe in, and that’s something impossible to build through direct recommendations.
I think this is a very important topic and I know it’s tougher to sell a service where one does not get direct ideas to take action because many people want others to tell them what to do, but that’s how I view it.
I’d say my investment philosophy has shifted a fair bit over the years, but I don’t think I have followed an unusual path. At first, I tried to make money fast, failed, and then I started to appreciate the steady but safer compounding of capital. I’m 28 years old, and as you’d imagine, I am in no rush to build my capital, so I prefer to take a more measured approach. And that’s precisely what you can see at Best Anchor Stocks.
The goal is to build a portfolio of high-quality companies with long runways ahead that are easy to hold. I am a firm believer that people tend to underappreciate that one of the most difficult tasks in investing is not finding a winner, but being able to hold it through a long period. One can make this task easier by owning strong companies and building conviction around them. Of course, conviction will be tested, and not all will prove to be winners, but that’s precisely where diversification comes into play.
I think a great starting point to make this task easy is to search for companies with strong moats and led by strong management teams. I know it sounds like a cliché, but there’s not much more to it. I also tend to favor industries that are not entirely cyclical but that might have some element of cyclicality that benefits the incumbents. That way, you’ll most likely get opportunities to add to your positions periodically.
Wolf of Harcourt Street
That is the beauty of investing, it is a continual learning process. For me, the personal development gained through the journey far outweighs the final destination. Recently you shared a post on Twitter showing the performance of “Best Anchor Stocks” which has outperformed major indexes since inception in January 2022. Without giving too much away, can you highlight one or two of your most successful portfolio picks and the factors that contributed to their success?
Leandro
The performance of the portfolio has been good, but it has obviously been a short period to judge performance. I mean, it has been a bit more than a year and a half, and honestly, in that timeframe, it’s difficult to separate luck from skill. There will probably always be a component of luck in investing, but it becomes less relevant over time, in my opinion.
The companies with the best return in the portfolio are currently Adobe and Copart, both over 50% since I added them to my portfolio. I must say, though, that before Adobe’s huge run this year, I slightly trimmed my position as I built conviction in the company’s competitive position. This, of course, was precipitated by the Figma acquisition. I think it’s still early for me to make a judgement of how that will go considering that we don’t even know if the acquisition will close.
Wolf of Harcourt Street
I would tend to agree that there is always an element of luck in investing, especially in a bull market, but this fades over the long-run. In the age of information overload, there can be a lot of noise when it comes to investing. How do you stay updated on market trends and news relevant to your investment process? Can you describe your research process and sources of information?
Leandro
I actually have a pretty standard research process, nothing too crazy, but I am happy with it thus far. I can tell you that, as one would expect, it involves quite a bit of reading.
I always start reading the Annual Report of a company that I might potentially be interested in. I then continue with the Investor Day, if there is one, conference calls, earnings calls, expert calls…I think a great source and often underappreciated is regulatory documents. These only apply to companies that have done large M&A and have gone under antitrust scrutiny, but the EU has some great papers on many industries that help one get a grasp of the competitive environment.
I also tend to conduct several expert calls myself. This source has gotten negative publicity lately, I don’t really know why, but I think they are pretty useful at two stages:
When you are starting your research on an industry and want an overview
When you have done all of your research and have very specific questions
I find they might not be as useful when you are in the middle of those two. I also look at the history of the company because I think it can tell investors more about the future than they might think.
So yeah, that’s pretty much it. I do this for every company, and when researching an industry specifically, I do this for the main players in the industry. Always interesting to get different viewpoints.
Wolf of Harcourt Street
One of the challenges investment researchers face is finding the right balance between consuming content, such as reading, and generating content, like writing. How do you manage this delicate balance? Naturally, you have the opportunity to do this full-time, but I'd be curious to hear how you personally manage this.
Leandro
It’s a great question with no easy answer to be honest. It depends on the week. Sometimes during earnings season I will not have a lot of time to read about other companies in the watchlist, but I tend to reserve 3 or 4 hours a day to reading new things regardless of how much writing I have to do. I think it’s extremely complicated to balance both, but I would say one should never force things. For example, if I start writing an article but I am not feeling it, I’ll read about something, but I will not force myself to write it. Quality gets compromised when one forces himself.
Wolf of Harcourt Street
Position sizing and risk management is a huge component of investing. I personally feel it is often one of the most overlooked aspects. How do you handle position sizing and risk management in your investment process?
Leandro
I admire investors that can be extremely concentrated, but personally, I don’t think that’s something for me. I see myself owning somewhere between 15 and 20 companies because that’s a number where, one, I feel I am sufficiently diversified and, two, I can follow to the standards I think that investments should be followed. I would also note here that diversification is not entirely reduced by increasing the number of companies as one can be extremely exposed to a particular industry or trend even if they hold 30 companies. On the contrary, one can be quite diversified by holding just one company. Atlas Copco is pretty diversified, for example.
I size my portfolio based on conviction if the valuation is in a good spot. So, for example, if I have very high conviction in company “x” but I can’t get too comfortable adding at current prices, then it’ll have to wait. On the contrary, if I have less conviction on company “y” but the valuation is very appealing, then it might make up a larger portion of the portfolio at some point.
This comes from the fact that I add periodically to my investments, so my portfolio is not static. On an end state, I would like to see my portfolio being weighed by conviction, and that’s the goal, but with periodic adds and valuations not converging for every company, it’s a tad more complex.
Wolf of Harcourt Street
I think we share very similar thoughts when it comes to position sizing. To close out this interview, I would like to give the audience a watchlist idea. Could you give a short elevator pitch on one stock on your radar at the moment and why?
Leandro: Well, I have been currently looking at an industry more than at a company: industrial gases. Gases sound boring and they are, but the industry economics look very appealing and seems to have attractive growth opportunities and a low probability of disruption.
It’s not a stock pitch, but it’s definitely something I have been looking at lately.
Wolf of Harcourt Street
Thanks for taking the time to chat today. I’m sure there will be plenty of takeaways for the readers, including an industry to explore! Finally, where can readers find you, and are there any closing remarks you’d like to share?
Leandro
People can find me on Twitter @invesquotes and on Seeking Alpha at Best Anchor Stocks. If anyone is interested in knowing more about the service they can also send me an email to bestanchorstocks@gmail.com!
Thanks a lot for having me Wolf!
Leandro is offering an exclusive discount for Best Anchor Stocks to Wolf of Harcourt Street readers as part of this interview. The first 10 readers that click the button below will enjoy a 20% discount during their first year. There’s a 2-week free trial to check out all the content with no strings attached (easy to cancel in two clicks during the free-trial period).
Best Anchor Stocks is an investment research service that focuses on high-quality resilient companies with the potential to outperform the market over the long term. The strategy aims to maximize future potential returns without disregarding volatility as a risk that can impact the holding period. The goal is to build a high-quality portfolio that is easy to hold.
Leandro shares around 6 research articles per company (approximately +20k words in total), recurring follow-up articles (earnings, other topics…), and a weekly article with brief market commentary and company-specific news. He personally invests in the portfolio companies (so he cares deeply about the long-term performance of the portfolio), and there’s full transparency: subscribers get access to Leandro’s personal portfolio and all his transactions.
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Happy investing
Wolf of Harcourt Street
Contact me
Twitter: @wolfofharcourt
Email: wolfofharcourtstreet@gmail.com