Brazil Value Talks: Diego Lucindo
Multiplied Invested Capital by 2x in 2 Years
Today I have the pleasure of interviewing Brazilian investor Diego Lucindo.
From December 2022 to December 2024 his historic performance will be the envy of anyone.
His portfolio returned more than 130.00% in the period, versus 14.71% for Ibovespa.
He multiplied the invested capital by 2x!
This guy knows how to generate real value.
Shall we meet him?
BS: Diego, could you tell us a little about yourself?
DL: I am 31 years old, a production engineer graduated from the University of Brasília, single and have no children. I was born in Brasília and I am very proud of my city. The quality of life here is really above average in the rest of the Brazilian capitals. My father has 40 years of experience in the financial market and brought the investment culture to my entire family (uncles, cousins, grandparents), so talking about stocks has always been something that has been common since my childhood.
BS: What is your strategy for making money on the stock market?
DL: The strategy I use is "focused investing", that is, concentration. For those who are more curious to learn more, I recommend the book: "The Warren Buffett Way of Investing". Basically, the strategy advocates that you need to get it right a few times to make a lot of money and, when you develop an investment thesis with a very good margin of safety, you should invest heavily.
There are several investors who have used this approach. One of my inspirations is John Maynard Keynes, who said: "Our knowledge and experience are definitely limited, and there are usually no more than two or three companies, in any given period, in which I feel personally authorized to place my entire confidence."
BS: What is your process for finding a new buy opportunity? What filters do you use?
DL: I follow some companies on my radar. They have been filtered by governance, growth, debt, etc. In short, they are quality companies that have the potential to generate value for shareholders. The opportunity will arise when the price provides a greater margin of safety than the others I am buying.
This margin of safety is defined by determining a fair value for the company. So, a new opportunity arises when a very good company is priced incorrectly, but I will only buy if this is the best opportunity I have (the one with the greatest margin of safety).
I am not the type of investor who is constantly looking for new opportunities to invest. As long as the options I have chosen are extremely cheap, I will continue to invest.
BS: How do you value a share: DCF, Multiples, implied IRR, a mix of the previous ones, …?
DL: I like to do the beans and rice, I project the multiples forward and see if it makes sense to invest in that company. In fact, what I spend most of my time on is analyzing the sector, corporate management, company strategy, growth potential. I have some companies that pass this filter and I continue to follow them.
BS: How do you like to build your stock portfolio, considering the number of companies, sectors and concentration?
DL: Three companies represent 95% of my net worth. Therefore, number of companies, sectors and concentration do not influence the way I invest.
BS: How often do you like to rebalance your portfolio?
DL: I don't do portfolio rebalancing.
BS: How long on average do you hold a position in your portfolio?
DL: As long as it is cheap, I only make changes to the portfolio in two situations. The first is if the asset price is overvalued and I see that the price is far from the company's fundamentals. The second is if an opportunity arises that is MUCH BETTER than the companies I have in the portfolio (this is extremely rare).
BS: Do you believe that graphical analysis, together with fundamental analysis, can help with the buying and selling points of stocks?
DL: I don't believe in graphical analysis, I've never opened a chart in my life and I don't see any point in it.
BS: What are your favorite sectors on the Stock Exchange? And the ones you avoid? Why?
DL: I really like the healthcare sector. It's a sector that has suffered a lot in recent years. It's defensive, inelastic and benefits from the aging population, so you can buy companies that are growing a lot and will continue to grow over the next 20 years at attractive valuations.
There are two sectors that I don't look at on the stock exchange: aviation and construction. Both have a history of companies going bankrupt or entering Rio de Janeiro. They are complex sectors that are difficult to analyze.
BS: Do you use derivatives? What is your strategy?
DL: I don't use derivatives.
BS: What is the cheapest company on the stock market today?