An Interview with Saj Karsan

At Vuru, we're heavily focused on empowering individual investors and thought it would be a great idea to talk to experienced investors about they got started. This is the first in a series that we'll be doing around this topic.

Today, we're interviewing Saj Karsan (@SajKarsan). He's the founder of Karsan Value Funds and blogs about his thoughts on value-focused approaches and ideas at barelkarsan.com.

I've actually always been passionate about businesses. But the reason I went into engineering instead of business was because I was caught in the hoopla that was the tech bubble in the late 90′s. As a teenager I bought into the notion that anything and everything to do with computers was going to take-off forever, and so I enrolled as a computer engineer with the expectation that companies in that industry would always have money/funding.

If not for Warren Buffett, I probably wouldn't be in this field. I had studied market returns and came to the conclusion that it's a waste of time to try to beat the market, until I came across the writings of the Oracle of Omaha. I immediately took to his common sense (which is not so common after all) approach as well as that of his teacher, Ben Graham. I was fortunate enough to meet Buffett a few years ago, wherein I got to hear his investing principles in person.

There are a few successes listed here. If I had to pick one, it would probably be Quest Capital, which no longer exists. Basically, it fell to panic levels in 2009, it traded well below the value of its assets, and management was buying back shares with all of its cash flow until the company was sold. When you buy a company cheaply that is run by good stewards of capital, you will probably do very well.

There are a few that haven't worked out, as per my Value Fail page. A common theme has been that I misread management's intentions and/or abilities. In many cases, the signs were there, but I missed them in my excitement for other features that made the investment attractive. For example, Blonder-Tongue Labs was extraordinarily cheap, but it's run by a guy who went bankrupt himself a few years ago. Is this really the kind of guy you want running a business you own? Probably not! For some reason, I had to learn that the hard way, and I have no one to blame but myself.

Definitely. There's no sense buying a company cheap if the assets are just going to be whittled away by a manager that cares nothing for shareholder value. As such, I'm much more cognizant now than I was a few years ago of the importance of good capital allocators at the helm of the companies I own.

I don't think the biggest pitfalls have changed in many decades. Retail investors still think very short-term, buying when the market is expensive and panicking when the market gets cheap. Instead, they should be doing the exact opposite. Focus on safely-capitalized companies that trade cheaply relative to predictable earnings, and you will do quite well over the long-term.

When I realized how the investment management industry works – that these firms are mostly marketing machines, with a short-term emphasis and little interest in truly delivering value to investors – I knew that there was an opportunity to do better. I don't like to put all my eggs in one basket, but if I'm forced to pick one stock right now, it would be SuperValu, a company that is improving its operations while trading at a price to free cash flow of just 2. There are certainly some risks, but some potential rewards as well. I've written more about it here.

The Intelligent Investor by Graham

Irrational Exuberance by Shiller

The Little Book That Builds Wealth by Dorsey

The Aggressive Conservative Investor by Whitman

Contrarian Investment Strategy by Dreman