Note: This is going to be a constant series as I embark on my journey in Value Investing Mentorship. If you want to find out more, please email me at team@lancequek.vc. The author does not take responsibility for any factual inaccuracies made. Any opinions, conclusions, or other information expressed here is not financial advice. They are given on a general basis and are subject to change without notice. Your personal investment decisions are ultimately based on your financial goals, investment time horizon, risk appetite, and portfolio needs – which we do not advise. All information, data, and analysis here are provided “AS IS” and without warranty of any kind, either expressed or implied. Past performance is no indication of future performance; you are recommended to verify all information and consult licensed, professional financial services. The author does not take any responsibility for any loss or damage of any kind made based on the opinions or facts published in this document.

A re-visit of value investing and its fundamental principles, with some interesting takeaways. The first session was more of a mindset lock in:

1. Having the emotional stability – don’t sell when everyone is selling, understand what is going on first and filter as necessary
2. Value investing: looking at mispriced stocks, aim for longer time horizon
3. Usage of options to generate cash flow while waiting
4. News will affect the price of the stocks – understand the value

I will share my own thoughts on these questions and how I feel one can look at this and apply principles as necessary.

What are the cons of value investing/business-like investing and options selling, and what can you foresee yourself doing wrong when you apply them based on your character (and how you can overcome them)? Think about what kind of character you have as a person and how it might affect your investment decision.

The likely cost of value investing and options selling would likely be the greed one may get into. A lot of times, we can be chasing short term gains such as the higher premiums, but it is always important to remind ourselves to keep a margin of safety. Are you truly willing to pay this price if there isn’t any option premiums involved? Also, many tend to over-leverage when playing with options, which can result in painful margin calls (just look at what happened to Archegos). Being an entrepreneur who has built businesses from ground zero through the power of scalability, I think I can be pretty aggressive at times. Probably a good business starter strategy, but will need to find a successor who is more “defensive”? I like to play offensive, which can be a good thing in business, but maybe I need to be a little… different (is that the right word?) when it comes to investing where I think about my own margin of safety.

What are the pros of value investing/business-like investing and options selling, and why or why not do you see your character being able to complement value investing and options selling methodology? What do you see yourself doing right and wrong when you apply them?

Business-like investing allows one to own a company as if it is a private market transaction. More importantly, we could sleep well at night, knowing that the business model and management is working for us to generate the necessary returns. While waiting, I could probably underwrite put options to generate some subsidies for the share price to increase my own margin of safety. I think as a private equity investor, we are used to holding assets for the long term. Imagine a day when the entire stock market collapses… We won’t be affected because nothing has changed fundamentally (unless you own shares of the stock market operator then that’s a different story). The key is for me to probably watch my cash flow while doing the options underwriting strategy to ensure we have enough capital to hold the shares indefinitely without having to enter margin territory.

Hopefully, this gives you a flavor of what is going through in my mind as I re-discover this skill…