Investor Round-Up With Stock Talk
Retired investor, Phil Pinelli, shares his journey from tech industry to stock research publishing, focusing on value investing and company fundamentals.
I am interviewing Phil Pinelli from Stock Talk.
Every investor has their own way to build their wealth by investing.
The goal for this interview series is to share lessons from investors so you can build an investment style that works best for you.
We are going to learn from Phil’s journey.
Let’s get started.
Phil, can you tell us a little about yourself?
Moved to the beach town of Surfside, South Carolina, two years ago to retire. Married with two grown boys. One of our boys is engaged to be married and lives in Philadelphia; the other is in Denver, Colorado. We are immensely proud of the men they are today.
My father, although not a wealthy man, taught me how he was building his next entrepreneurial effort. He had many businesses when I was between 10 and 22 years old. Dad explained carefully his starting point, why he chose this particular business to buy on the cheap or start from scratch, his marketing, the reasoning why he thought it was a good business, and the execution of his vision of that business. I think he did this with me because he knew in his heart I was not the doctor or the lawyer he really wanted me to become. I was too much like he was.
Later, in 1981, after college, I worked at the lowest possible entry-level job at a data and telecommunications company that was always fighting as if their lives were depending on it. I received many promotions as it was a very fast-paced environment - we used that speed to beat our arch enemy AT&T because they were slow and plodding. Unfortunately, that same high speed left a lot of collateral damage as many employees could not keep up. It was like a professional speed racing boat running circles around a very large shipping boat. Eventually, I took over the commercial business sales, service, and technology support of the Bay Area of San Francisco and the Central Valley of California. This was during the heyday of the emerging internet, and I was in charge of the territory that included virtually all of Silicon Valley. I had offices in Sacramento and San Jose working with 5 managers and a 120-person team. Our company ran three of the four international gateways (now there are many more) that transmitted the backbone of all internet traffic domestically and internationally. We also had data products for the internet. Needless to say, what we saw and what we got sold was crazy at times. I have enough stories to write a book, but I prefer teaching my investing ideas.
Tell us about your publication?
I am a big game hunter, and I am tracking, walking, and finding clues to the stocks of truly great companies.
Not big on financial advisors, if someone wants to learn what they will need to be confident in themselves, I will be there to help. Over 80% of all people don't want to learn about making their money work for them, and that is okay. They don't mind paying the fees for someone managing their money. I want the other 20% of people that want to challenge that advisor or ask better questions of them or go out on their own and invest.
“Stock Talk” the newsletter or the podcast “$tock Talk from Studio 59” is a series of small research steps on how to successfully invest using the fundamentals of that company's earnings to show what truly makes a great company. My passion is finding those great businesses whether they be large or small caps. It can be a mix of making money slowly over time as an investor or fast like a trader. I also enjoy occasional fun with political satire. I am a storyteller, they are all (mostly) true, I just have been blessed with living an adventurous lifetime.
Can you describe your investment style?
I put to use the 7 fundamentals:
P/E under 25 is preferable.
CAGR over and over again.
Earnings Per Share (EPS) growth.
Margins = Gross /Operating/ Net.
Free Cash Flow.
MOAT around the castle (Best of Breed is the Best Indeed).
Management Expertise and CEO Leadership.
If these all flash green, then I am likely buying when the price of those shares says VALUE. When they slow or wilt, I sell. Generally, if there are two straight lousy quarters in a row, I am selling out, especially if the management misses their guidance two quarters in a row, not okay.
When I was a Government Banker, I could be fired for investing in single stocks; only ETFs were allowed. That drove me crazy because my passion is in finding great individual businesses.
How do you find the investments you want to invest in?
I find the names of the different companies in many ways, mostly through reading a lot of articles every day and through publications and the press. Once I see something interesting, I am pressing the 7 fundamentals of earnings research into each possibility.
I do favor three apps:
Simply Wall Street
Dividend Tracker
Quartr
Simply Wall Street gives me 30 stock symbols per month to do a very deep dive into their fundamentals.
Dividend Tracker gives me a resting place and a quick portfolio check during a given day. It does more than just dividends.
Quartr is for conference earnings calls and convention /conference-style presentations. I learn a lot from all these and spend a lot of time on them. I get to more than 75 calls per quarter, with each averaging about 45 minutes long except when a long-winded CEO like Larry Ellison or Elon Musk is on the microphone… then all bets are off lol.
How do you reduce your risk?
I create my position in a company by buying shares in smaller chunks of, say, 10 to 25 shares. Many of these are of valuable companies as they fall from their peak price points. I stay away from certain industries and sectors. I am not big on cyclicals like autos, banks, housing, transportation, and I am not a fan of essential staples stocks like soap, cereal, and cigarettes.
I do like subscription businesses like Spotify, Netflix, Costco, and even Walmart.
I hedge with gold and silver.
When do you sell?
Two answers:
When the fundamentals no longer support my conviction for the company.
When I take profits.
It is rare that I have to take losses by selling - if I do my research correctly, it should not happen.
I am more likely to sell too soon with 25% to 35% profits and miss out on another run-up of 35% profit.
Two poor quarters of earnings in a row combined with some bad guidance, and you are likely gone from my portfolio.
What is your most memorable investment whether good or bad?
I bought an airline in South America after exhaustive research at $90 and sold it at $129 three months later. They had a large MOAT in a growing sector of consumer and business flights in South America. I think the reason why is because no one had ever heard of the airline here in America.
What advice would you give your younger self?
Son, be more humble. Write it all down; you have a best-seller story in your life.
Before You Go
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Disclaimer: The views of the guest do not represent the views of The PIMM Trader or its affiliates. The author of this post is not a financial advisor. The information provided herein is not financial advice and should not be construed as such. This content is intended solely for educational purposes and should not be used as a basis for any financial decision-making. Investing involves risk, including the potential loss of your invested capital. Only invest what you are willing and able to lose.