My Worst Investment Ever Podcast Shreekkanth Viswanathan – Qualitative Strengths of a Company Matter Too
BIO: Shreekkanth (“Shree”) Viswanathan is the founder and portfolio manager of SVN Capital, a Chicago-based, concentrated, long-only, global equity-focused fund.
STORY: Shree’s biggest mistake is an error of omission. That is, after studying a particular business, he decided not to invest in it for various reasons. The stock turned out to be a multi-bagger a couple of years later.
LEARNING: The qualitative strengths of a company are not always readily apparent in the financials. Get out and work in business; it will make you a better analyst and investor.
“If you don’t know who you are, the market is an expensive place to find out.”
Shreekkanth Viswanathan
Guest profile
Shreekkanth (“Shree”) Viswanathan is the founder and portfolio manager of SVN Capital, a Chicago-based, concentrated, long-only, global equity-focused fund.
After graduating from the University of Chicago, Shree worked as an investment banker for a few years before moving over to the buy side. Shree describes his investment style as Value investing with a Quality overlay.
Worst investment ever
Back in 2009, Shree was working as an analyst in Chicago. As the economy struggled to come out of the real estate-centered malaise, Shree studied a company called Copart Inc. Copart is the largest salvage yard company in the US. Its business model is pretty simple. When a vehicle on the road gets into an accident, it’s hauled to a salvage yard. The insurance company covering that vehicle will quickly decide if they will pay the policyholder for repairs or total the vehicle and send it to the salvage yard. For various reasons, more and more insurance companies send damaged cars to the salvage yard.
At the salvage yard, these vehicles are auctioned, and buyers will buy them to get parts, fix up their cars, or pull the parts and sell them. So, in any case, Copart is the middleman and gets paid from both sides.
From its early days, the founder, Willis Johnson, had decided to own the land on which the salvage yards operate instead of leasing it. Given that real estate was the epicenter of the 2008/9 financial crisis, many businesses were cheap. Shree had been studying Copart and was impressed by the price. The market cap was about US$350 million. At that price, Shree would be paying for just the land in all the salvage yards that the company owns (about 140 yards around the country). He’d be getting the operations for free. That was the hypothesis Shree was working off. He did more research and then concluded that he wasn’t only paying for the land at that price.
After reaching that conclusion, Shree decided to move on. There were lots of other options. Over time as the economy improved and Copart’s earnings and cash flow improved, the stock price reflected that improvement. Shree was just on the sidelines, watching the stock go up. By 2020, the stock was up 10x from 2009.
Lessons learned
- The qualitative strengths of a company are not always readily apparent in the financials.
- Try understanding the strengths of the management teams of the companies you intend to invest in.
Andrew’s takeaways
- Get out and work in business. It will make you a better analyst and investor.
Actionable advice
Investing is an individual sport, and we each have to play to our strengths.
Shree’s recommendations
Shree recommends finding ways that help you get the vision, courage, and patience to invest.
No.1 goal for the next 12 months
Shree’s number one goal for the next 12 months is to find at least one new stock that can be a multi-bagger.
Parting words
“Better late than never. I sincerely appreciate you, Andrew, for taking the time and having me on your wonderful podcast.”
Shreekkanth Viswanathan
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Connect with Shreekkanth Viswanathan
Andrew’s books
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr.Deming’s 14 Points
Andrew’s online programs
- Valuation Master Class
- The Become a Better Investor Community
- How to Start Building Your Wealth Investing in the Stock Market
- Finance Made Ridiculously Simple
- FVMR Investing: Quantamental Investing Across the World
- Become a Great Presenter and Increase Your Influence
- Transform Your Business with Dr. Deming’s 14 Points
- Achieve Your Goals
Connect with Andrew Stotz:
Further reading mentioned
- Peter Thiel (September 2014), Zero to One: Notes on Startups, or How to Build the Future
- Thomas William Phelps (August 2021), 100 to 1 in the Stock Market: A Distinguished Security Analyst Tells How to Make More of Your Investment Opportunities