Part Time Investor & Author Paul Tschischik Finds Value in Special Situations Investing [GeoWire No 99] [Video]

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GeoInvesting’s Skull Sessions continue with Investor Insights featuring Paul Tschischik (Investmentideen at Twitter), a part time special situations investor/financial analyst. 

Paul is a former Constellation Software employee, a Joel Greenblatt Connoisseur, financial analyst, and contributor at the “Investmentideas” Substack, Value In Special Situations, for “Investors who want to invest against the crowd.” 

In the full video replay of the event, he and Maj Soueidan delve into investment strategies, exploring where they intersect. Paul highlights the importance of:

• Grasping a business’s operations.
• Properly valuing stocks.
• Understanding catalysts for growth, and the role these catalysts play in unlocking shareholder value.
• Expansion in valuation multiples.
• Effective capital allocation and share buyback programs.
• Dividends and EPS growth.

In the end, Paul is not trying to be too predictive in his analyses, but is instead attempting to identify bullish scenarios that are already present in the financials and in positive catalysts that have already materialized.

Paul also pitches a UK-based IT services and installations company valued at around £26-28 million with an enterprise value of approximately £32 million. Despite prior struggles and poor capital allocation that nearly drove it to bankruptcy, the company underwent a turnaround led by a new CEO which prioritizes profitability and valuation over sheer revenue growth.

There is also another quick pitch on a company that operates a cinema advertising network.

Enjoy!

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Paul Tschichik Discusses His Investing Journey With Maj

Maj Soueidan speaks with Paul, a former employee of Constellation Software and the creator of the “Investment Ideas” substack, which focuses on investing against the crowd and discovering undervalued small-cap businesses. Paul’s investment philosophy opposes the common “buy and hold forever” mentality and seeks new ideas with favorable risk-reward profiles. He emphasizes investing in lesser-known, small-capitalized companies undergoing changes or growth inflections.

Paul’s investment journey began in high school when he learned about fund management. He connected with a friend who became his mentor, teaching him about investing, financial analysis, and due diligence. Early on, Paul analyzed annual reports, created Excel models, and honed his investment style. His current strategy involves identifying smaller cap companies experiencing inflection points, such as ownership changes, capital allocation shifts, or new product introductions. He prioritizes valuation and looks for companies trading at normalized double-digit free cash flow yields, ensuring a safety margin while considering business growth potential.

Maj Soueidan and Paul Tschichik Discuss Inflection Points In Companies

Paul explains his approach to identifying inflection points in companies. Paul emphasizes that he seeks inflection points primarily through quantitative analysis, focusing on reading quarterly and annual reports to spot changes in financial metrics. He provides examples of companies he discovered by analyzing financial statements and looking for shifts in business strategies or operational changes.

Paul notes that he doesn’t keep watchlists and prefers to thoroughly understand a business before getting involved. However, he mentions cases where promising companies with unclear financial reporting might be tracked on a watchlist until he gains a better understanding of their operations.

Continue for the pitches…

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Subscribe Now Tweets From Maj’s Feed

I like this blueprint for getting a bunch of compounder candidates in my pipeline. Every correction or down cycle in the market/economy creates opportunities for companies to eliminate efficiencies that came about as a result of complacency that occurred in good times. Companies…

— Maj Soueidan (@majgeoinvesting) September 2, 2023

Some people have compared the AI hype to the blockchain and cannabis hype. I’m not sure the comparison is even close. Will there be pump and garbage? Yes, a ton.. But, a key difference here is that Blue Chip companies are leading the narrative, like Nvidia Corporation (NASDAQ:NVDA) Dell Technologies Inc. (NYSE:DELL).

— Maj Soueidan (@majgeoinvesting) August 31, 2023

When you tell someone about your next multibagger that you haven’t even bought yet… then after the stock goes up, you find out that he/she has shared the idea with others. pic.twitter.com/i8gPncBe59

— Maj Soueidan (@majgeoinvesting) August 29, 2023

Nolan Ryan once threw a 108.1 mph fast ball, holds many strikeout records & pitched 7 no hitters. He wasn’t afraid to take big risks to achieve great success…even if it resulted in experiencing mediocre moments. This has parallels to being an investor. https://t.co/LzVFWBwQcL

— Maj Soueidan (@majgeoinvesting) August 27, 2023

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