Quick interview with Evan about how your investment style changes as you invest other people´s money.
Evan Bleker on managing other people’s money
Transcription by: Arianne Elnar
Ney Torres: [00:00:00] Welcome to the show. Today, talking again with Evan Bleker. Welcome to the show, Evan.
Evan Bleker: [00:00:08] Hey, great to talk to you again.
Ney Torres: [00:00:10] I know you just published a book by the way. Congratulations.
Evan Bleker: [00:00:13] Yeah, thank you. It’s my first and hopefully my last book. It was a real slog to get it published. Get the whole book completed.
Ney Torres: [00:00:23] Today, I wanted to talk to you about managing other people’s money. So, because I’m finding that a very interesting subject especially because people well, if they start doing things right start making some money then they probably want to start helping friends and family and that’s not as easy as it sounds. Does it?
Evan Bleker: [00:00:48] No, it’s not. It’s a whole different ball game to manage other people’s money. I mean, you could be really good at managing your own money and have a lot of good experience and good returns and think you have your head on your shoulders pretty well in terms of value investing and picking investments. But as soon as he starts managing other people’s money, it’s a whole new world of problems that you don’t necessarily foresee. Hello?
Ney Torres: [00:01:32] Hello. You went out for a second.
Evan Bleker: [00:01:35] Oh, sorry.
Ney Torres: [00:01:37] No problem, my bad or you’re bad?
Evan Bleker: [00:01:39] I don’t know. It could be either.
Ney Torres: [00:01:42] So, you were saying there’s a whole bunch of problems we don’t foresee.
Evan Bleker: [00:01:47] Yeah. There’s a whole world of problems that you don’t foresee and it really comes down to psychological problems that would maybe the most accurate way to put it. But there’s a whole mad list of them, but I guess the first one would be like the pressure that you put on yourself actually changes your investment behavior and that’s always a big one. And then there’s the pressure that the people who you’re managing money for put on you even if they’re totally fine and accommodating just the fact that you’re responsible for their money and you know that that money means a lot to them and they put their trust in you. That’s a lot of pressure on you and ultimately changes your behavior.
Ney Torres: [00:02:46] For sure. Can you describe for a second what’s the perfect investor like?
Evan Bleker: [00:02:53] The perfect investor?
Ney Torres: [00:02:54] Versus reality.
Evan Bleker: [00:02:56] Oh, well I would say, I know this guy named Ney. He would be a perfect investor.
Ney Torres: [00:03:01] Yeah. Here’s your money doesn’t call me.
Evan Bleker: [00:03:08] Well, I think the perfect investor is probably a machine. I mean, you have to be pretty emotionless and you have to be pretty cold and calculating when you’re making these investment decisions. Just in terms of not being influenced by whatever’s going on in the markets and focusing on the data not letting certain industrial biases or psychological biases where that would be pretty ideal. So, if you’re a humanity major, you could probably think of the Stoics, ancient Greeks back 2,400 years ago. They always preached having strong control over your emotions and following the right path. And that’s basically how you have to be as an investor. So, I would say that’s probably key traits and then there’s all the knowledge and there’s all the knowledge and work ethic that that one requires to invest well as well.
Ney Torres: [00:04:14] That is so funny that you mentioned that because next to my mouth, I have three books of the Stoics. I’m actually writing a book in Spanish of Stoics.
Evan Bleker: [00:04:25] Oh, are you really? That’s really interesting.
Ney Torres: [00:04:29] Letter from Seneca.
Evan Bleker: [00:04:31] Oh really?
Ney Torres: [00:04:32] But I’m going to invite everybody listening. You have to read that. It’s amazing how problems that we have today were relevant 2000 years ago.
Evan Bleker: [00:04:40] I know it’s crazy. I downloaded an app can’t remember exactly what the app is but it’s for Android and it gives a quote every single day. And I’m reading that I’m like, “Oh yeah, that happened yesterday.”
Ney Torres: [00:04:52] Me too, I have two. The Stoic is one of them.
Evan Bleker: [00:05:01] That actually might be the app that I’m using. It’s crazy how such a old philosophy can be so practical for modern life.
Ney Torres: [00:05:13] So, how to treat friends, what subjects come out. I mean, you will think 2000 years ago it was like very dark ages but it’s actually, they were probably smarter than we are in many ways.
Evan Bleker: [00:05:28] That’s definitely true. And one thing that a lot of people don’t know about philosophy generally is that the ancient philosophies was all geared towards how to best live life. So, nowadays we have the Tim Ferriss show. We have other sorts of personal development shows. Back in the day, 2000 years ago it was all focused-on philosophy and talking about how to live properly but definitely if you want to be an investor how to live property properly is like the Stoic. Control that emotion focus on the data, focus on the relevant facts. Don’t let irrelevant stuff or investor psychology influence you that much.
Ney Torres: [00:06:16] Easier said than done, right?
Evan Bleker: [00:06:19] Yeah.
Ney Torres: [00:06:20] Who’s the perfect investor. I mean, what is the profile? Somebody giving you money will be perfect for you like, “okay, this is the perfect investor.”
Evan Bleker: [00:06:31] So, perfect. The perfect customer or the perfect client. So, I guess the perfect client would first and foremost, they would have to have a long-term investment horizon. So, they’d have to be looking at a 10 year time horizon, five to 10 year time horizon on top of that they have to know you had the strategy that you’re using and they have to be fully on board before you convince them that it’s a good strategy so those two characteristics would be perfect. And then they’d have to give you the money and just let you do your thing with it without interfering or wanting to question too much your picks and decisions and all that because investing is kind of one of those games where it’s best played if you lock yourself in an empty room and just sit there with some financial statements and just read and think and read and think, and then finally come to a decision. But as soon as other people are peppering you with questions or pressuring you to earn a certain return or a certain time period game over. It’s a great way to upset the Apple cart so I think those characteristics are really ideal in a potential client if you’re planning on managing money.
Ney Torres: [00:08:00] So, for these strategies that we use timeframe 10 years and that’s money you don’t need. Right?
Evan Bleker: [00:08:10] Yeah. So, I mean, I’m assuming that the person is giving you a small chunk of their overall life savings. So, you’re not you’re not responsible for their entire future. I’ll put it that way because I can put a lot of pressure on you.
Ney Torres: [00:08:34] Understood. Can you talk to me about your book?
Evan Bleker: [00:08:38] Yeah, sure. So, I just published a book through Herrmann House called Benjamin Graham’s Net-Debts and it was a book that I originally started about two years ago and Herrmann House who turned out to be a great publisher. They came up to me they approached me after finding my website and they said we hear you have a manuscript and I kind of put something together at that point. It was a collection of articles that are curated and I sent it in. They’re like, “well, we really like this. So, we’d like to offer you a book deal.” So, I thought about it and I figured. Okay, well I know that people don’t make any money off of books. It’s not why you write a book. So, I figured, okay, well, this is a big personal challenge and maybe I can accomplish something big and so decides to take them up on it. And I ended up outlining a book that is pretty much a comprehensive overview of everything that I’ve learned about Net-Debts or 75% of what I’ve learned about Net-Debts since I started about 10 years ago. So, it’s all packaged in a nice condensed how-to practical guide and it was just released on the 14th. It was only a year late.
Ney Torres: [00:10:03] By the way, for people listening in, Net-Debts is a stock that are selling and their liquidation value. They’re worth more dead than alive as of right now. Right? In the future.
Evan Bleker: [00:10:21] Yeah, exactly. So, I mean, what you’re doing is you’re assessing the liquidation value based on the net current asset value. So, you’re taking, if most of your listeners will probably know what book value is, right? So, book value and accounting on a company’s financial statements. What we’re doing is we’re taking book value and then we’re stripping all long-term assets out of that and what you’re left with is net current asset value. So, that’s what we’re using to assess the approximate liquidation value of these companies and so the book is all about that and how to identify a good picks and case studies and all that.
Ney Torres: [00:11:04] I also heard that you got a five bagger recently.
Evan Bleker: [00:11:08] It was a four bagger. I was quite happy to see that come in. Value investing has not been going through a good period over the last few years and then that’s included but this one came out nicely it was a company called Polar Power and I bought it at about a $1.30 right near the bottom of the market. It was just off the bottom and this something happened. I can’t remember exactly what happened, but they came out with some corporate event and the stock surged all the way up to about 5.30 and I managed to sell the morning before the stock took a big dump back down 40%. So, just in the pre-market trading, I put in an order for 508, I think it was trading at the time and managed to sell the entire position. So, it was just a bit of luck because I wasn’t really checking the stock and I wasn’t really checking the Net-Debt Hunter forum. And then I just I stumbled on to a post on the Net-Debt Hunter forum saying, “Oh, the stock’s gone crazy.” And I’m like, “Oh, okay. I better take a look.” And I’m like, “wow, look at that. Okay. Now I got to make a decision. What am I going to do before the market opens?” And I decided that it was probably the best time to sell. Locked on a pretty nice profit.
Ney Torres: [00:12:50] Well, congratulations on that one and four baggers for people that are listening for the first time, it means 400% up and you they’ll have orders or take profit orders and stuff like that?
Evan Bleker: [00:13:06] No, I don’t have anything like that.
Ney Torres: [00:13:08] For these reasons.
Evan Bleker: [00:13:10] Yeah, exactly. If I sell at a hundred percent or a double then I would have lost out on 300%, but selling is one of the hardest parts about investing. I’ve read countless professionals, gifted investors like Buffett, Lynch and Seth Carmen and all these people. And they all say the same thing, selling is very difficult. There’s no clear cut way to know when to sell and one of the things I like to do is when I’m looking at a company I will try to think about what the company has in the pipeline that could develop over the next four or five years or two to five years let’s say. It could be new products; it could be that they’re growing their current customer base. It could be anything like that. And I’ll think about what this potential product could mean for the company, what it could do for the stock for the value of the company and I’ll kind of use that as an indication of when I should sell. Sometimes there’ll be nothing much going on with new products and there doesn’t seem to be much hope that the company is going to be much more profitable in the future but it’ll be a decent company. Maybe there’s a bit of a catalyst that could lead to double and then if the stock rises close to a double or more than a hundred percent or something like that. I’ll end up selling but if I think that there’s really good chance that the company is going to hit on a successful product and that could really send the company’s operating results skyward then it’s worth holding on and waiting for those multi baggers. In the case of Polar Power, I saw that the company had some interesting products that were coming out. They are involved in backup generators and it seemed like a fairly fruitful place to be and they were going internationally. So, I figured, “okay, well maybe this company has a bit of room to run.” I’ve quad it below net current asset value and the balance sheet seems okay. And doesn’t look like it’s going to go under, so it’s fairly steady stable as a company so I know that my margin of safety is locked in. So, we’ll just see what happens, how the company develops going forward and I was prepared to hold the company for a number of years but as it turns out, I held it for a number of weeks and things worked out fairly well. Another reason I sold it at that point has because there is something in the financial statements about the company, I think my memory is a little bit foggy on this, but I think there’s something in the financial statements about it not being able to continue as a going concern and that worried me. So, I don’t want to hold a company that they think is not going to be able to survive due to a cash crunch or illiquidity or something like that. So, I ended up exiting for all those reasons.
Ney Torres: [00:16:31] You’re still holding 10 positions on your portfolio.
Evan Bleker: [00:16:36] I’ve actually sized them a little bit smaller because with the market did buy, I was able to find a number of companies that that were fairly attractive. So, right now I have, I believe 12 to 13 positions and I think I’ll be somewhere between 12 and 15 by the time and fully invested again.
Ney Torres: [00:17:04] Very good. How do you check investors? Like when the times you kind of attract the investors. They always ask how much are you going to make me? How do you answer that question?
Evan Bleker: [00:17:15] Yeah. I mean, promising investment returns is something that you definitely don’t want to do because you never know what the market is going to do, what the economy’s going to do and ultimately your portfolio is impacted a large amount by events that you can’t control. What I would do if I was taking on money is I would tell them what the strategy has been able to do going forward or in the past, I would say that this is what I’m aiming for and if the market does decently, like it has in the past or maybe an average of nine or 10%, then then I should be able to hit those targets. And I think that’s really the best that you can do for a client. I don’t think it does anybody any favors, if you tell them that you’re going to hit certain numbers because you just don’t know.
Ney Torres: [00:18:18] Yup. Definitely. What’s the name of the book by the way? You did mention it.
Evan Bleker: [00:18:23] Yeah. Benjamin Graham’s Net-Debts. It’s about the most practical title that you could think of.
Ney Torres: [00:18:34] So, some people don’t know much about stocks seeing this podcast they come from other circles of life and they’re learning from scratch. Who’s Benjamin Graham?
Evan Bleker: [00:18:44] Benjamin Graham is Warren Buffett’s teacher. So, you probably know who Warren Buffett is. He was I think briefly the world’s richest man. I think he’s the second or third richest man now but he learned everything he knew about investments basically from Benjamin Graham then he took pieces from other people as well. Benjamin Graham yeah, into prominence in the 1930s during the great depression. He actually started his career before the great depression, he was hit pretty hard and he developed a lot of his strategies because of the experience that he had in 1929 through I guess, 35. And one of them was the net-debt strategy. That’s where it came from and he’s kind of the patron saint of value investing. And so I think a lot of your listeners will probably be aware of value investing, but for those who aren’t, it’s basically trying to find a piece of value, that’s say worth a dollar and buying it for 50 cents. So, it seems to be what a lot of value investors sa they’re trying to do.
Ney Torres: [00:20:06] Cool. So, before we take off, I do want to tell everybody, go to Amazon. Get the book a Benjamin Graham’s Net-Debt Strategy.It’s a book I wish I would have had when I started out. I thought for the longest time then that didn’t work. I thought that was a really of the past.And it turns out it’s not. It’s actually a very interesting strategy that has worked over a hundred years and and here it is. Everything is right here.
Evan Bleker: [00:20:38] Yeah, thanks a lot. Thanks for the book recommendation. I appreciate that. If you’re interested in Net-Debt stocks or deep value investing or value investing generally, then feel free to pick it up on Amazon.
Ney Torres: [00:20:55] Yeah, definitely do. And congratulations again, my friend.
Evan Bleker: [00:20:59] All right. Thank you very much.
Ney Torres: [00:21:00] What we do here is to guide people who are listening, mostly friends and family, and a lot of people have financed somewhere else to the best resources I have seen in all these years and this is definitely it. Thank you very much. Se you in the next occasion.
Evan Bleker: [00:21:16] Thank you.