This article is authored by MOI Global instructor Bogumil Baranowski, founding partner at Sicart Associates, based in New York.
Bogumil is an instructor at Best Ideas 2023.
Now, that’s an idea!
I was sipping my coffee one morning, and I got a phone call from my partner, François Sicart. He likes to surprise me with interesting questions, and that day was no different. He said: “if you were to pick one stock to recommend to a client as a gift to a grandchild, what would it be?” I gave him an answer immediately, and we had a long conversation about it, which planted a seed for this article.
The client’s request was not the only source of inspiration, though! Once a year, I get asked by a dear friend, John Mihaljevic, to share one stock with the MOI Global community of investors. It’s an invitation-only global group of thoughtful lifelong investors of which I’m privileged to be a member.
It’s a challenge I take on every winter, and I pick one out of all the stocks we bought in the recent year. I take it very seriously, I usually immediately write down a handful of tickers, and then I boil it down to one idea over the next few weeks. I always remind my MOI listeners that it’s just one stock out of 30-50 that we might be holding at any given time. We will hold it for a while, maybe forever, but it can play its own unique role in the portfolio. One might pay a healthy dividend and offer a limited downside; another can still grow fast and potentially have a much bigger upside.
The third source of inspiration was my conversation with another dear friend Christopher Tsai, a fellow MOI Global member. He was a recent guest on my podcast Talking Billions, where I have intimate conversations about money, investing, and more with friends and friends of friends. He brought up the idea of aiming for a big, huge upside in investments. We concluded how chasing a 10-20% gain is not worthwhile, but making our money 20-50-100 times over in a particular stock (likely over many years!) is something we aspire to!
Picking one stock for a larger audience reminds me of yet another good friend Antony Deden. Whenever he is asked to recommend one stock, he feels like a doctor asked to recommend a good medication without knowing the patient or ailment. Hence, I always recommend my MOI Global listeners to research the idea and see if it may belong in their portfolios.
Here, picking one single investment, I was influenced by my partner Francois Sicart’s question: I had the stock for a grandchild in mind. One of our clients became a grandparent and wanted to gift a single stock. I like that idea a lot – as I do any idea that can turn someone into a lifelong stock investor.
Since I already had a great chat with Christopher Tsai, and I had John’s request on my mind, I had an idea ready to share!
I immediately knew it had to be an investment that would not only be around for the next two decades but has a chance to become a much bigger company. I thought of a relatively new company, yet established enough so it won’t go away and vanish before the grandkid goes to school!
Obviously, the company had to be already public, with a few years of financials and, ideally, a profit. I needed to have some reasons to believe it was already mature enough to defend itself against any competition.
Ideally, this company would operate in a fairly new industry or, if it’s in an old one, at least have a new way of doing things, a disruptor.
Equally important to me was the market potential. I preferred a company that could become global or, even better, already was global. I tend to find more of them in the US market than elsewhere, but it’s just my personal bias since it’s the market I’m the closest to and the most familiar with.
With a two-decade or longer investment horizon, the entry point, the price we pay, could be seemingly less important, but being a disciplined value contrarian investor at heart, I love a good deal. I’ll pay up for quality, but I still want to know that I got more than I paid. Hence, preferably, I’d like my investment candidate to be down, cheap, and out of favor with the market at the time of purchase.
I know it’s still a relatively young company in a promising industry with a big wide long runway ahead, but if I can buy it half off or even cheaper, my odds of turning it into a successful investment immediately rise.
When my partner called, he was a little surprised by how quickly I gave him the answer. What he didn’t know was that, unknowingly to both of us, I had been preparing for this question for a few weeks now. Between John’s request and Christopher’s wise words, I knew exactly what kind of stock a grandparent could gift to a newborn grandchild.
This made me think, why wouldn’t we buy more stocks with that mindset? We’d trade even less, keep the long-term horizon in mind, and possibly even do just fine with very respectable returns in the process!
Next time you think of buying a stock, pause for a minute, and ask yourself, would it be a good stock for a grandchild?
I can think of at least one (if not more) that could!
About The Author: Bogumil Baranowski
Bogumil Baranowski has a Master’s degree in Finance and Strategy from Institut d’Etudes Politiques de Paris (Sciences Po), and a Master’s in Finance and Banking from Warsaw School of Economics. He has over 12 years of investment experience. Before joining Sicart Associates, LLC, he worked at Tocqueville Asset Management L.P. as a portfolio manager and senior equity analyst. With a European background, his special focus is on consumer sectors, and the broadly defined New Economy. He is the author of Outsmarting the Crowd – A Value Investor’s Guide to Starting, Building and Keeping a Family Fortune (2015). His articles are frequently published on Seeking Alpha. He is an active member of Toastmasters International.
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