My guest today is Michael Fritzell (@Fritz844), author and owner of Asian Century Stocks. In this conversation, we cover the differences between investing in Europe and in Asia, some pros and cons of founding family companies and SOE’s, and his process for writing his newsletter. I hope you enjoy my conversation with Michael Fritzell.
[00:00:38] – [First question] – Introduction
[00:02:54] – Why Michael moved to Asia, and studying Mandarin
[00:06:09] – Being an analyst in Asia vs Europe
[00:09:51] – Eastern and Western culture
[00:12:11] – Why Asia fascinates him
[00:14:13] – What to avoid as an investor in Asia
[00:16:45] – Founding Family companies and SOE’s
[00:20:45] – Potential war in the Asia-Pacific
[00:25:33] – Why Asian stocks tend to be cheaper
[00:27:36] – Why Michael started Asian Century Stocks
[00:31:55] – Advice on starting a newsletter
[00:36:27] – Most undervalued life experience?
[00:38:10] – What’s influential in shaping Michael’s worldview
[00:41:28] – What is Michael most curious about going forward?
Connect with Michael:
Listen to this episode on Apple Podcasts, Spotify, Stitcher, Castbox, Google Podcasts, or on your favourite podcast platform.
Kalani Scarrott: My guest today is Michael Fritzell. Michael is a Swedish investor based in Singapore and is the owner of the Asian Century Stocks newsletter, where he does deep dives into stocks throughout Asia, covering a range of countries and sectors. In this conversation, we cover the differences between investing in Europe and Asia, some pros and cons of founding family companies and state-owned enterprises and his process for writing his newsletter Asian Century Stocks. I love his story and background, and I hope you do too. So please enjoy my conversation with Michael Fritzell.
Michael, I really appreciate you being here because I’m a massive fan of your newsletter, Asian Century Stocks, as I find it super unique yet also incredibly useful. I think just to orientate the listeners who might not know your background, could you sort of give me a thumbnail sketch of your life and career up until today?
Michael Fritzell: Sure. My name is Michael Fritzell. I run a Substack called Asian Century Stocks, which features Asian investment ideas, and most of them are a bit on the value side, that’s kind of what I’m focused on as opposed to growth stocks. But in terms of myself, I’m a Swedish citizen. I actually grew up in Switzerland, but I spent most of my youth in Sweden and I somehow ended up in Asia about 12 years ago after a short banking career in the UK. And since then I’ve been in Asia for, I mean now in terms of my career, I’ve been working for about 11 years as a buy-side analyst and also portfolio manager for family office, a hedge fund and mutual funds. So that’s a little bit about my career.
And I’ve been in Singapore now for seven years. Before Singapore, I was an analyst down in China where we were traveling around doing company that’s generally just being like a ears on the ground portfolio manager that was based in Europe at the time. And recently in April, I set up this website called Asian Century Stocks, and this is a bit of a continuation of what I’ve been doing in the past. I’ve been working as an analyst for funds before doing research for them. And now I do it on a distributed basis, so that’s working really well. I have currently 60 paying subscribers that I work for and I have a closed contract with exchanging ideas and so on. So that’s a short introduction to me.
Kalani: Yeah. If I’ve got this right, your first sort of introduction to Asia was sort of Peking University studying Mandarin. So if I could just hear some of your thoughts on having done it and is it worth it and recommend it to others?
Michael Fritzell: Sure. I mean, I can give a little bit about the backstory, why did I move to Asia? I suppose lots of interests. First of all, I was studying in Stockholm, in my native Sweden, that’s where I started university. And for some reason I chose to do an exchange semester in India in Bangalore. I thought that was just fascinating. I spent most of that time traveling around India. To me it was just different, completely different world. And it gave me a sense of adventure that I felt was a bit lacking in Scandinavia. I suppose that was one of the key factors.
And then my first job was as an investment banking analyst for Macquarie Bank in London. I did that for about two years and a bit. I started working in 2007, which was pretty much the peak I would say of that cycle. Macquarie Bank, I still remember the bonus drinks of 2007. It was a fantastic time, but it didn’t last very long. In 2008, I became increasingly concerned about the health of the business. I was in the transport M&A team, and I knew that our revenues were dropping precipitously. So I was figuring out what to do.
I was inspired by girlfriend at the time to make the move to Hong Kong or try to make the move to Hong Kong or move to Asia. So that was kind of what inspired me. And then finally I was let go in March of 2009, pretty much the bottom of the stock market cycle. But anyway, I thought it was a good idea to take a break and study Chinese. I thought that was something that could give me a bit of a niche. And also I could write out the financial crisis. Because at the time it was difficult to get a job. I was speaking to companies, but they said the job market was dead. So that was why I made the move. I just bought a one way ticket to Hong Kong, find my way to Beijing. And I studied Chinese eventually at Peking University in Beijing.
To your question, I mean, you asked about what I thought about it and it was just amazing. I absolutely love both the university and the whole studying experience. It’s such a good university and the people there as well, both students and teachers are just outstanding. I can highly recommend it, if you’re interested in Chinese, perhaps things have changed since then, but I thought what they offered in terms of language education was outstanding.
I had classmates who had studied Chinese elsewhere, let’s say in Europe or United States. And what they learned in several years of education, you could learn in let’s say one semester, so in Peking University just because you’re immersed in the language. So it was a great experience actually.
Kalani: Yeah, just a little bit background about me. But yeah, I did my minor in Mandarin at university. And when I travelled to China, I only did I think two weeks there, but those two weeks are probably better than the three years on and off I did at university. There’s just no replacement for that immersion.
Michael Fritzell: Yeah, immersion is key, right?
Kalani: So after London with Macquarie, your next role was an analyst in Shanghai, if I’ve got that right. So what did you find that change like and what was it like being an analyst in Asia or China specifically compared to Europe?
Michael Fritzell: I moved over to the buy side when I started working in Shanghai. So at the time I was looking for an emerging market fund that was acquired by a European asset management company. I was on the ground and it also felt that way just because mainland China is a really … it’s a Chinese environment in many ways compared to Hong Kong, and that’s definitely the case. So I was living in Shanghai for a few years then. I was also traveling a lot, meeting companies, it felt like almost constantly.
I got exposure to meeting many companies across a variety of sectors and something that’s I think a little bit different is at least for me at the time, I think I got a very different perspective than you get from a financial centre. If you’re travelling to these factories in Zhejiang or Fujian, you are seeing something quite different than just sitting in an office. And I think I was also naive, to begin with, especially as Western investors, you’re not used to dishonesty. Things work pretty well in Scandinavia. There’s not much fraud going on.
Coming to China, I think it gave me a perspective of the companies that I’ve seen before that I wouldn’t have without spending time on the ground. I think that was a key difference. And also what was like being an analyst, I think the fraud aspect is one of the things. I was working in China from 2010 to 2013, and 2011 was really the first wave or maybe the second wave of frauds being exposed by Carson Block and others. So that was instrumental experience, living through the financial crisis and later that cycle, which made you really think about, okay, what do we own? Are they telling the truth or not. I got really into forensic analysis and became a little bit more cynical perhaps or realistic you can say. So yeah, it was of course in emerging market investing I suppose.
Kalani: Yeah. Do you have any favorite stories or experiences that you really look back on either fondly or smack in the face really taught you something new or?
Michael Fritzell: Well, I’ve definitely had a few experiences of… I’m not going to name names, but I definitely had a few experiences of companies that I remember one time walking, going to this factory floor, this assembly line, and having people kind of look at you. You could almost tell that they weren’t really working, they were more observing us than we were observing them. It didn’t happen all the time, but I mean, it has happened on a few occasions that something feels off. And other instances, you discover things when you visit them, visit companies.
One time I remember visiting this factory in Fujian. I was asking the relationship representative, “so what is this building across the road from here? You have the same logo type almost, just looked a little bit different.” And the guy said, “Oh, that belongs to the parent company.” So they had separate operations belonging to the parents. And of course, I didn’t know about this whole corporate structure, but it was quite complex. And this company was later exposed to us as a fraud. They were pushing costs onto the parent company. I mean these stories, I think back, and it just reminds me that you’re going to check these things when you invest in Chinese stocks.
Kalani: Yeah, definitely something to be aware of. I think overall it’s pretty clear that there’s merits and limitations to both Western and Eastern cultures, but from your own perspective of having lived and worked in various parts of Europe and Asia, what parts of each culture have you embodied and what advice would you give to those with a similar background to yourself?
Michael Fritzell: Well, I always find it difficult to generalize, especially when you meet people in China, they will talk about West versus East. And so sometimes I often tell them, “Okay, I’m Swedish and I think we have our culture, which is a little bit different from, let’s say, Southern Europeans.” But in terms of Swedish culture at least I think we are a little bit more reserved and polite, I suppose polite is the right word. And we care about privacy a lot. Whereas Chinese they tend to be a little bit more 热情. How do you translate that?
Michael Fritzell: Warm. Yeah, exactly. They really are upfront, so I think that’s a key difference. Another thing is in Christian cultures, there’s this is concept of guilt, which drives people to do the right thing or what they believe is the right thing. And perhaps it is, China is a communist country, at least an ex-communist country. I mean, I wouldn’t say less scruples, but there’s less of a hurdle to do things. And in many cases I would call this a social analyst talking about a company called Qihoo, which was high flying at the time in 2013.
I remember him saying that, “We know that they’re defrauding their users or they’re lying about what they’re doing, but it doesn’t matter.” People just don’t care because as long as they’re successful, that’s fine. And I think that’s an attitude that I’ve seen over, over again in mainland China specifically. I think those are a few things. As well as also, I think hierarchy matters a lot in Chinese companies and Korean for that matter. People listen to their superiors and they don’t necessarily question all that much. Whereas at least in Swedish companies, decisions are taken in consensus and there’s not much difference between the top person and employees. So people are a lot more opinionated and willing to challenge their bosses.
Kalani: Yeah. So you spoke about when you first studied in India and then traveled to Asia and how it was so fascinating for you. Anything in particular that fascinates you the most about Asia or China specifically?
Michael Fritzell: Fascinates me. Something that I love is the fact that there is so much activity in many of these cities. It’s just exciting to go to Ho Chi Minh City or Bangkok or elsewhere. I don’t know what it is, I suppose it gives you a sense of adventure, something that you don’t really get in many cities in Europe. But also I love the food. I mean, Asian food is excellent and it’s a great variety as well. There’s a service culture that I think is just amazing in most Asian cities. So living here in Singapore, I’m amazed how easy it is to get things.
I can go downstairs in two minutes, there’s a 24-hour store. Everything that I could possibly want and it’s a bit of a contrast. I know, my brother lives in Germany. And I think on Sundays the stores are closed. You just to have to stay home. So that’s something I really appreciate the fact that life is really simple in many ways here in Asia. Your question was what fascinates me. And I think I love the language, the Chinese language. I’ve always been that way, liking languages. I grew up speaking French and Swedish and perhaps that’s why I also studied other languages, so that’s something that I love. I think if I was not being in this industry, I would probably like to do something related to research in languages or something like that.
Kalani: That’s interesting to hear because yeah, like your experience growing up and your mate’s experience in Germany, it sounds so similar to Perth sometimes. And that’s the biggest thing when I go to Asia, it’s the sights, the smells, there’s so much going on. It’s a bit of chaos, but it’s so good.
Michael Fritzell: Yeah, exactly.
Kalani: Just sort of switch gears and move into sort of investing. Is there any certain or specific situations that you really avoid as an investor in Asia? Do you think you have to be aware of something here where you wouldn’t normally in Europe?
Michael Fritzell: Absolutely. I mean, the key thing is corporate governance. It varies a lot throughout the region. That’s something that has to be part of the analysis. And ideally you would have some kind of advisor who can, or you can do the research for yourself and just check on those things. Because I think in Europe and possibly also Australia, you can look at a company and you can discount the cash flows because you know that those cash flows will actually come to you. They will eventually end up your way. Whereas that may not be the case with a stock Indonesia or India or China.
So yeah, just check what the CEO or the founding family, what they’ve done in the past. Typically, if they’ve treated minority investors well in the past, if they bought back stock for example, if they’re buying shares themselves, if there hasn’t been any private placements to the family or things like that, that’s obviously a good sign, so that’s one thing. I mean, you asked about what I would avoid. I suppose, those situations where a company constantly issues new stock, you can see dilution constantly happening. That’s something that I would definitely avoid. If a family has a bad reputation or a bad track record, there are some families in Indonesia, for example, that you definitely want to avoid. Most of the listed companies are kind of, they’re not really vehicles for minority shareholders. That’s something I would avoid.
Another thing is corporate structure. If you just put up a chart of a company’s corporate structure, and if you see that a parent company or a sister company is involved in the business as well. And there’s a large amount of related transactions back and forth on either the distribution side or the purchase side, I would get a little bit nervous because that’s an easy way to either increase the profitability or decrease it, both of which can be problematic. So it’s nice to have a simple corporate structure with a listco that’s owned, where you are a shareholder just like the founding family is a shareholder or whoever is the owner. So that’s simple corporate structure is also something I would look for. And I would avoid companies with, let’s say a subsidiary that’s listco and on the parent company is much greater and more powerful than what it shows.
Kalani: Yeah. In regards, to sort of you spoke about sort of the family companies defined the insider ownership among Asia as a lot higher in terms of like founding families still owning parts of the company. And is that a positive or a negative in your eyes?
Michael Fritzell: It’s a double-edged sword. I think just the variability or the range of outcomes in family companies is a lot greater because there’s research about this, like in Europe and elsewhere that family companies tend to do better. They have an interested party that really pushes the company forward, especially the first generation. And in China, especially in Vietnam, many of these companies are really young, they were formed after 1988 in China. That means that many of these entrepreneurs, they are first-generation entrepreneurs, which makes them usually hardworking, usually intelligent as well. They’ve survived throughout the environment. And in many cases that’s a good thing.
On the other hand, family companies can be totally complete frauds. So you got to be more careful about corporate governance in them. Whereas with an SOE, you can probably not going to be amazing growth story probably, but then again, the accounts would probably be reasonably accurate, so is a double-edged sword. And also another thing is with the second generation, Asian family companies tend to become less focused with the next generation. They tend to give different parts of the family business to different children or cousins of their children and so on. I mean, it really depends. I think you would like to bet on a specific person rather than saying you should invest in family companies per se.
Kalani: That was a great answer. And yeah, highlighted a lot of things I hadn’t thought about. But you mentioned SOE, so state-owned enterprises. I’ve heard you in our previous podcast speak about China Unicom. What are your thoughts on SOEs? Is it same sort of thing?
Michael Fritzell: I mean, I don’t love them to be honest. Okay. So this is the reality, China is becoming a little bit more authoritarian. You can call it socialist. It’s unclear how far the process will go. But at the moment, since 2013, the share of bank loans going to state-owned enterprises has gone from about 30% to 80% plus. That means that there’s just, I think … I mean, this data series has been discontinued in 2017, so we don’t know how much is going to SOEs at the moment. But just judging from what I’m seeing, it seems like SOEs are taking market share. Private sector is being squeezed out of resources, that is capital. So that makes me think that certain SOEs will gain market share at the expense of private companies.
At the same time, there is a situation at the moment with Trump introducing an executive order called 13959, in November, 2020. That cost a great number of these SOEs, especially military linked companies to drop in stock prices. Many of them have fallen 40% plus for the simple reason that you as investors are unable to own them and they’re in the process of selling them. So that’s been going on now for almost a year. The stock prices of many of these stocks have become quite attractive. So China Unicom itself, depending on what you think about margins, is trading at somewhere about seven to eight times earnings. So you can probably buy the stock and hope that it goes to 12 or 11. So that’s a trade that I think makes sense. But then again, it’s that what you want to own long-term? It’s just a cigar-butt.
Kalani: Great analysis, love it. If I can sort of, similar related, but you’ve spoken in AMA on your newsletter about the risk of war in Asia Pacific, specifically between Taiwan and China. Could you highlight some of the potential catalysts you think might be and to follow on thinking like an investor, how would you sort of trade this or go about it?
Michael Fritzell: Sure. Okay. Well, I’m not an expert, I’m just an investor trying to figure out what’s going on. There are security experts like Peter Zeihan and Ian Easton, Michael Coleman and so on, who really know about this topic. But generally speaking, I mean, from my perspective, I think the risks have definitely gone up over the past few years. What’s the risk of all-out war? I can’t answer that, but I do think that eventually the communists want to take over Taiwan, the Taiwanese government.
They have enemies in Taiwan, both religious organizations, such as Falun Gong, but also the DPP. They’re the party that controls the Taiwan government and they are enemies to the communist party. So their goal was to eradicate those enemies and having Taiwan under their control is definitely their target, their goal, and it’s going to happen. Xi Jinping, he said that this is not something that can be passed on to the next generation. And most people believe that he will stay in power most likely until the mid-2030s, so that’s another 14 years. I think the risks are definitely higher than before.
Exactly how high is difficult, I’m previously talking about 10% risk per year. I mean, that’s just based on a variety of factors, variety of indicators that I look at, but it doesn’t have to be necessarily an invasion. The types of invasion that Ian Easton has talked about, like amphibious landing, just doesn’t seem very likely because that would lead to such a backlash from across the world. We’re more likely to see some type of sanctions, blockades, cutting off communications infrastructure to Taiwan or biological warfare, that kind of stuff. So yeah, I think something would happen, but it may happen in a way that we don’t expect perhaps using civilian vessels. We’ll see.
I think it’s almost inevitable, given the developments of Chinese military spending goes up 7% a year. Eventually the Navy will just completely overwhelm Taiwan, which is, it’s a pretty small island with only 20 million-plus people. But in terms of catalyst, if you’re talking about what are the catalyst for some kind of action over Taiwan, there are a few of these warning signs that I think are worth mentioning. Something that I’ve tracked a lot is the stockpiling that we’ve seen across a range of commodities over the past year. It’s really quite amazing that it’s not just in one commodity, it’s across grains, meats, metals and semiconductor chips. Anything that they can think of is being piled up, stockpiled. And there’s no good reason for this.
All of them in the beginning, in April, May, last year, analysts were talking about China taking advantage of low prices, but commodity prices, they’re not low anymore. So that is a little bit worrying because it’s one of those warning signs that we would see before some type of action, not necessarily Taiwan by the way, there could be an invasion of the Kinmen or Matsu Islands. So that is worrying. I mean, there’s been so many other things that are worrying to me. There’s a number of rumors of individuals talking about going over to Taiwan. There’s been a build-up in the marines, they’re tripling the number of marines in just two, three years, and also the number of ballistic missiles, intermediate-range ballistic missiles have gone up, tripled as well in just a few years. So they’re definitely preparing for something.
And I think the only thing that I can think of is to invest in defense companies. So if you think that something is going to happen, if some kind of clash is going to happen, you want to own defense stocks. And even if you don’t think that, Chinese military spending goes up 7% a year, so everyone else in the region has to match that. I see that as a growth sector long-term. So that’s definitely something. And also avoiding Taiwanese stocks, don’t own them.
Kalani: Yeah, nah that’s very good. But yeah, you made some great points and advice, because yeah, I’ve travelled to both and I always like to keep tabs on it because it’s a very interesting topic for me. But to switch sort of topics into evaluation, you’ve mentioned on a podcast previously that you think Asian equities are cheaper relative to their Western counterparts. Is there any reason why you think this is, is it attitudes towards investments?
Michael Fritzell: You mean why they’re cheaper?
Michael Fritzell: I think it’s just the focus of attention, people’s attention at the moment on growth stocks. And they performed really well. And that kind of reinforces the whole idea that they are good stocks. And also we’ve lived through a crisis and obviously earnings growth has been weak for many value stocks. So understandably people pile into stocks that do well, which is e-commerce and software and on. So that’s pretty understandable. I think the intention right now, even in Singapore, where I’m based, I see people around me investing in Tesla and Square, these types of hot compounders. So that explains, I think the higher valuation overall, at least on EV to sales basis.
But Asia is a pretty diverse continent and each country I would say it’s a little bit different. Tech stocks here are also quite highly valued, especially software stocks and EV stocks. I think we kind of reach a point where East Asia, tech-heavy East Asia, Taiwan, Korea, and also China are actually reasonably highly valued, at least in the tech sector, like tech, EVs, software. On the emerging markets of Southeast Asia, these stocks are quite inexpensive in many cases. I think there’s a big difference there, for good reason I should say as well, because they don’t have access to vaccines. Their economic recovery isn’t as strong as it has been in say the US, so I suppose that’s understandable. But if you’re looking for cheap stocks for the long-term, I think in Southeast Asia there’s many opportunities at the moment.
Kalani: To make the transition to your newsletter Asian Century Stocks, what was your decision-making behind starting that up? And what were your plans for it going into it?
Michael Fritzell: That’s an interesting question. I mean, I’m hoping that this will work out. I started this on April and the idea was that … By the way, I’ve been working as a contract researcher for the past three or four years or so, working for a fund manager. But at the moment I thought this will actually work as well for retail investors and retail investors could be interested in this, and I can distribute this across the world. And if I can find a few hundred subscribers that will actually make this viable, so I’m hoping it will be.
And it also allows me to focus on what I love doing, which is finding new ideas, unconstrained by let’s say investment committees or stuff like that. I just focused on what makes sense, where I find value and good catalysts. So that was the idea, it really came from what I wanted to do in terms of the business. Would it make sense? I hope so. We’ll see. I do think that Substack really has potential. It’s just a matter of finding people out there. But I think there’s a huge market. I was just looking at the numbers for Seeking Alpha, like how many subscribers they have, or users. We’re talking about 10 million or 20 million people each month. That’s crazy. There’s a huge market out there, and I’m hoping that retail investors will be better served by some of these Substacks coming. What was your question again?
Kalani: Yeah. Just like why make the transition or, yeah, probably any plans I guess, in the future as well. Like how do you see this?
Michael Fritzell: Okay. I’m doing this because I have a passion and I’m hoping to do this for the long-term. Hopefully I’ll do this even in 10 years, because I love doing it. That was why I made the transition. It’s a bit of a gamble, but I think it will work out. In terms of Substacks, yeah, that was really the business idea. There’s no one else doing it. Also worth mentioning is that these Substacks, they are global in nature. Via Twitter I’m able to find people across the world who share the same interests. So I’ve been talking about Taiwan conflict, defense stocks and so on. And there are people who are interested in that stuff.
It’s kind of, you’re finding this global niche, which is very deep given the amount of people globally. So as long as you could find this global niche, you can make a business that’s viable. I’m hoping that Asian Century Stocks will be niche enough to stand on its own.
Kalani: Yeah. You just spoke about, that’s basically why I love the research and work you put out because yeah, it’s so niche and no one else is doing it at the moment. So I think, yeah, probably the more niche, the better, you get wonky and that’s where all the value is and that’s what people enjoy.
Michael Fritzell: Exactly. Yeah.
Kalani Scarrott: If I could, just a quick follow on, is this your first like foray into online writing and sharing your thoughts online, or you post on Twitter a bit before this?
Michael Fritzell: Actually I had a blog a few number of years ago, which was investment-related. I didn’t talk too much, I didn’t mention a few Asian stocks, but I talked more about value investing theory and so on. It was really broad and a little bit less serious, so I have written that. I also wrote a book or a template let’s say on investing, which I later just pulled off the internet because I felt it was kind of hindering my career. But I have been writing a little bit before.
And in fact, my first job at age 15 was as a journalist. I was writing for a newspaper in Sweden. And I was kind of like a journalist supposed to represent younger generation. Still pretty serious topics, but yeah. So I did that for, I don’t know how long, a year or two. Anyway, I’ve always loved writing, so I’m kind of coming back to my roots in that sense.
Kalani: Nah, I think it’s a good baseline to have. So many good investors have a background in writing or enjoy writing, but yeah, you’re only a bit of a Cheah Cheng Hye. He started his career as a journalist back in Malaysia.
Michael Fritzell: True.
Kalani: That would only make sense where you’re sharing it, but yeah. I guess you have been writing well, but any sort of advice for those thinking of going down a similar path or starting a newsletter?
Michael Fritzell: I’ve actually been thinking about this a lot, doing research before making a decision or starting the newsletter. One of the key things that you have to think about is finding your niche. People will pay for something that’s unique, but they will not pay for something that can be found elsewhere. I’ve done research of course on the other Substacks that have been successful, some of them are focusing on solving a problem, like perhaps giving people investment ideas. So that’s the kind of niche that I’m in I suppose.
Other Substacks are really trying to form like a personal connection and have been extremely successful in doing so. It’s kind of you feel like you have a friend almost, and people like to hang out on their Substack and just sharing ideas and so on. So that seems to work for some people. There’s one guy called … what’s his name? Scott Hines or something, Action Cookbook. He’s really good at that. Just forming a personal connection. That’s something that you could pursue. That’s something that I think resonates with people. So that’s another tip in terms of finding your niche or finding something that resonates with people.
But ultimately I suppose also you need to find something you’re passionate about because otherwise you won’t continue. And consistency is key. Once people realize that you keep writing every second day or every week or something with enough consistency, people will figure out, okay, this is what you offer. This is a valuable position. It takes a while before people take you seriously I think. So if you’re passionate about something to continue writing for many months, I think it will really take off.
Kalani: Yeah. I think that’s a good baseline for people thinking about it, to get stuck into. In terms of your writing and research process, what does that look like?
Michael Fritzell: I have a checklist of ideas that’s constantly changing. I read a lot, I have kind of insane … the way I source ideas is a little bit insane because I have overwhelmed with information. So I use an app called Feedly where I have a couple of hundred, maybe a thousand, like different RSS feeds. And then I use that in different ways to find the research and ideas that I’m looking for. And then it ends up in a to-do list with ideas. So yeah, right now here I’ll have it in front of me. So at the top, it’s kind of my favorite one. And what I’m trying to do is, when I look for ideas is I want to find like long-term value some kind of upside to what I think it’s worth to just cover the downside and also make sure that the company has no major debts, it has clean balance sheets as well. And also short-term catalyst.
So if I can find something at the top where there’s something that’s going to happen within the next six months or 12 months, that’s obviously positive. That kind of makes me really interested. And after just iterating back and forth between these ideas, I would just go ahead and spend three or four days and just dive into it. I do that pretty much every two weeks, come up with a new idea. I also do other types of articles and research just to … I’m kind of forced to do that because otherwise people don’t pay enough attention to be honest. I do write other stuff as well to get things shared and also provide more value. But that process is pretty simple.
I just think as an investor, that’s my perspective. What I like to see. What am I interested in? So at the moment I’m doing a deep dive on the Asian dairy industry, for example, just because I know that there are a few stocks in Southeast Asia in the industry that are quite interesting. Yeah, I just think people would like to read it, but that’s coming on some way.
Kalani: Yeah. Because I’ve seen a few of work in the Monday links and the post, so it was like two posts a week basically. So I’d say it’s a mountain of work, so I’m always interested to hear how you go about it.
Michael Fritzell: Yeah. Actually the Monday links, that’s right, those take about three or four hours. That’s basically, I’m copying links that I’m seeing. And there are different methods of doing that. I use different apps, there’s one called Muzzle, which at the moment is actually shutdown, but that’s one way of sorting through information. Yeah.
Kalani: Good. To move on, sort of like conclusion sort of questions. What is the most undervalued life experience that university aged students don’t give weight to? What is an underrated skill or experience that you think they should have?
Michael Fritzell: Something that I really kicked myself for not doing is taking a gap year. It was such a mistake because I came out of the university at, I think 22, I studied quicker than most. I studied at double speed for a while and it was completely unnecessary. I came out of university without much, I would say social skills. I was shy. I was kind of fearful of a lot of these situations that I was thrown into, so that was a big mistake. And I think having more life experience just doing something different would have given me confidence and being less fearful. So a gap year, I think is a great thing. Maybe go abroad, challenge yourself a little bit, that’s something.
Also in school I was studying pretty hard school. School doesn’t really provide you with a lot of preparation for real life. It’s kind of like a reward punishment indication, that’s what you were exposed to. I mean, it helps you pass the exam, but it doesn’t really prepare you for the types of failures that you meet as an entrepreneur. So getting comfortable with failure is something that you don’t get in academia. And I mean, I suppose you could even start a business during that gap year, that will probably give you good life experience as well.
Kalani: Yeah, I completely agree. Completely with your thoughts on both and agree with the other gap year and yeah, experiencing a bit failure. In terms of any like books, classes, ideas, or experiences, I suppose with the gap year, what’s been most influential in shaping your worldview do you think?
Michael Fritzell: I think in terms of investing, you can bring any of these popular value investing books and they are useful. In my life I’ve done a lot of speculation, options, shorting as well. It’s kind of unnecessary because you’re always running a risk of blowing up. I would just advise to read those basics. There’s one book that I really like called Money Masters of Our Time by John Train. It’s a little bit dated at this point, but it’s just fantastic. And that’s probably my favorite and it really had a big impact on me. So that book has maybe like 10 different interviews with the biggest or most famous investors at that time was I guess the 80s, 1990s. Julian Robertson, Warren Buffett, Peter Lynch, John Templeton, and so on.
The good thing about that book is it’s such a dense book. Each chapter is just a few pages. So you get a lot from it. If you just open it up, read a few pages, you get something back. And reading through the book as well, you see patterns between those different investors. They will have their own styles, but when you read that book, you will see patterns between them. For example, they don’t use sell-side research. They look in unusual places for ideas and solve. I found that was really helpful, made a big impact on me. That’s something I would emphasize.
Kalani: In terms of the youth of today, where do you think the biggest opportunities lie for them? So if you were 18, where and what would you be doing and spending your time?
Michael Fritzell: I don’t know, to be honest.
Kalani: Do you still think Southeast Asia is the place to be?
Michael Fritzell: I don’t know. It’s tricky to say. I think you can have a happy life in many places and typically you probably want to be somewhere where you find a job that makes life … where you can support yourself and your family. That’s probably number one. Many of these countries, I mean Southeast Asia is reasonably developed I suppose. But I suppose you could say that countries in Africa are really exciting, but you probably wouldn’t want to stay there because life can be quite tough. So the jobs are in places like Australia or Europe or United States, as opposed to best places to find jobs.
Otherwise in terms of like capturing growth and so on, it’s really difficult to say what country is going to do well. I know that in Brazil in 1970s, people thought that was going to be the country of the future. It didn’t really turn out that way. I know there were Scandinavians who moved to Soviet Union in the 1960s. They also had a positive view of the growth of that country. I wouldn’t pay much attention to any predictions of the future of particular countries or even sectors. But maybe if you’re really smart about that stuff, about tech or energy technology or healthcare technology, I’m sure there are many opportunities in them. So getting a good education I’m sure will help.
Kalani Scarrott: Yeah, nah fair call. Final question, what plans or vision do you see for yourself in the next five, 10 years? What are most curious about going forward or how do you see things play out or want things to play out?
Michael Fritzell: I’m going to continue writing, I hope. I’ll do this for a decade, maybe a few decades. This is what I hope to do. Basically just finding good ideas. And at the same time, I’m investing family money, so I’ll continue doing this. Perhaps I’ll add more features in the future. I might add like a portfolio, such things. But yeah, this is my focus at the moment. So always looking for good ideas and to exchange ideas with my readers. But yeah, this is my focus.
Kalani: Yeah, Michael Fritzell, it’s been a pleasure. Thank you so much for being on today.
Michael Fritzell: Thank you so much. Thank you.
Kalani: If you enjoyed this podcast episode, be sure to check the website, compoundingpodcast.com. On the website, you’ll find every episode complete with transcripts, show notes and other related resources. Also be sure to sign up to my weekly newsletter, Curated by Kalani, where I share what I’ve been reading, learning, and watching for that week. Same as the podcast, it’s compress to impress and I aim for maximal return on your time invested. So sign up at kalanis.substack.com. You can also connect with me on Twitter @ScarrottKalani. Once again, links to all content mentioned will be in the description. But until next time, have a good one.