I’m very excited to be sharing this interview with Jason Rivera, a man who in his first five years achieved better returns than Warren Buffet did in his first five years. Who is Jason Rivera? Let’s get into the interview and you’ll find out!
John: Can you provide some background on yourself and Rivera Holdings for those who aren’t familiar with you or your company?
Jason: Yes. I’m a self taught value investor who focuses on small and obscure public companies to buy for my investors. And I’m now also looking for private businesses and cash flow producing real estate to buy as well.
I’m the author of the acclaimed value investing education book How To Value Invest. Have run the blog Value Investing Journey for more than five years now. Wrote a 60-page booklet detailing the immense power of investment float that I released for free to readers of my blog and followers – on Twitter and Facebook – titled All About Float. Have written for several publications and investment newsletters including: Seeking Alpha, Guru Focus, Insider Monkey, and Palm Beach Research Group among others.
I mentor others on how to become great value investors, consult on projects requiring business analysis and valuation skills, and run my investment holding company Rivera Holdings LLC. out of the Tampa Florida area.
John: When you were a kid did you know you wanted to grow up to be a value investor?
Jason: Ha 🙂 no. I don’t have any stories like Warren Buffett where he was buying things at wholesale prices – gum if I remember right – and then selling them at a higher price to his classmates as a kid.
Unfortunately, I was far more interested in playing sports, chasing girls, and playing video games than investing when I was a kid.
I always knew I wanted to make money, start businesses, and help people but the value investing part and putting effort into making those things happen only began happening in my late teens and early twenties.
John: Why do you favor value investing as opposed to momentum investing, a passive asset allocation approach or another strategy?
Jason: I don’t remember what first drew me to value investing but once I read about it I knew it was the strategy for me because it made total sense immediately.
I agree with value investing greats like Seth Klarman and Warren Buffett that to some degree having an affinity for value investing has to be genetic.
I never wanted to get into momentum trading because I have a long term mindset – decades not days, weeks, or even years – so that or any other kind of trading never made sense to me.
I’m terrible at predicting things into the future so macro investing was out. And I like the challenge of finding great companies so I would have gotten bored with passive investing and never done it for a long time.
John: I’ve written about the value investing metrics I use. Some of metrics I look at are the result of what I’ve learned from you. I’d be interested in getting your feedback on my approach.
Jason: First of all thanks so much for letting me know some of the content I’ve written helped.
Sitting alone in front of my computer all day reading filings and asset information, or talking with people through phone or internet makes it challenging to know if what I’m doing helps. So thanks a lot.
Everything looks great when it comes to some of the metrics you look at but I do have one quibble…And this is a personal preference so do whatever works best for you.
I prefer owner’s earnings to owner’s cash profits because OE includes working capital while OCP doesn’t. And since I focus more on the balance sheet side of things – at least to start – I find this more useful.
John: It’s clear form your book and website you spend hours and hours analyzing companies before you invest in them. Do you have a process to screen out certain stocks at a higher level so you can deep dive into a specific company?
Jason: I go into great detail on this question with an answer I wrote on Quora to the question: Is there a faster, simpler, more conclusive way to research stocks?
For those who don’t want to read that I’ll give a quick summary below:
First off, I don’t use any screeners when looking for companies to research now and instead rely on my processes and lists to find companies.
I find any lists I’m interested in – ADR list, country list like Brazil or Indonesia for example, or a list of all the OTC companies – and then do preliminary analysis based on my requirements and preliminary checklist. This can be downloaded for free by signing up to mailing list on my blog.
After this, with any companies remaining I do quick “back of the envelope” valuations.
The ones that are overvalued go on a watchlist for later research. And those that are undervalued or fairly valued I do further research on.
For those that are undervalued or fairly valued I then go to both Morningstar and the company’s website to download its most recent annual report, quarterly report, proxy form, and any recent investor presentations.
I read all these, take notes, and if I find too many red flags discard the company.
On the other hand, if the company still looks promising I then revalue it using all the new information.
This is especially important at this stage because now you have a great idea of what the company does, if it has any competitive advantages, if there are any hidden assets, etc.
For any companies that remain promising I then research any competitors for the company. Get all their most recent financials. Take notes on them. And build a spreadsheet of profitability metrics and relative valuations so I can compare them against each other.
If the company still looks good from here I’ll then look for any recent news and developments to consider in my analysis.
At this point I’ll also read and take notes on the company’s financials going back five to 10 years. I’m also looking for things here that could blow up my investment thesis as well.
At this stage if one of the original company’s competitors looks better I’ll begin full research on that company instead of the original one.
After gathering everything, I then begin to write my investment thesis down. These usually end up being between 20 – 50 pages.
This helps me spot any errors in my investment thesis or thought processes. And it’s also valuable so you can go back to see where you made any mistakes or to see what your analysis and reasons for buying the company was months or years from now.
By the time I’ve finished doing all this research, writing, and editing I’ve put well more than 100 hours into researching one idea and its competitors.
The more I learn the more I add as well so this time is a lot closer to 200 hours total now for one idea potential idea.
The beginning of the process helps me weed out the crap companies fast. And the middle and end of the process helps make sure my investment thesis is still sound, while also helping me identify any potential risks or missing thoughts in the thesis.
I analyzed my data a few years back and found I invested in less than 1 out of every 500 companies I researched.
With more experience, knowledge, and refinement of my processes this number is now likely between 1 out of every 750 – 1,000 I end up buying.
But all this work is paying off.
By implementing this strict process I make far fewer mistakes than I used to.
Through the first five full years of my investment career I’ve produced returns of 29.2% for investors – on average not compounded – every year. This is better than the 25.4% Buffett produced in the first five years of his career on average.
John: What Inspired you to write “How to Value Invest”?
Jason: I wanted to help people not have to go through the often times painful, long, and frustrating experience I did in the first several years of learning about value investing.
I wasn’t able to go to a university because of severe health issues at the time. I didn’t have a mentor to guide me in the right direction. And for the most part other than asking questions here and there from other value investors online, had to figure everything out myself.
While this was a great learning experience, and even if I could go back I wouldn’t change anything. I wrote the book to help others avoid the years of wasted time and frustration I dealt with while beginning to learn.
John: This is probably an unfair question, but I’m going to ask it anyway, how do you go from dedicating yourself to being an excellent value investor in February of 2012, to going after an $8 million acquisition as CEO and Founder of Rivera Holdings roughly four years later?
Jason: It’s not an unfair question at all. And I actually think it’s a good one.
Several friends asked me the same thing – or said people they told about the potential deal asked them the same thing after they told them about my age and experience.
For reference, as I queried investors to raise the money for the acquisition I was still 29. I turned 30 in December of 2016 after the acquisition failed. And at that point still had yet to finish my fifth full year of being a serious investor.
I’ve studied and practiced investing for almost 10 years now but the bulk of the first five years were wasted to some degree through the process trial and error learning and frustration I mentioned above.
So what the hell at age 29, with less than five full years of serious experience under my belt as an investor without a degree from somewhere like Wharton or Columbia Business School made me think I can do an $8 million acquisition?
It’s a good question… But I think an even better one is; why not go for it?
I believe anyone can become and do great things if they’re willing to work and put in the time and effort to learn a valuable skill.
At the end of my career I want to be known as the best investor, businessman, and capital allocator ever. Yes, even better than Warren Buffett.
Is this likely, I know the answer to this is no.
But I’ve always shot for the stars… No one ever says they want to be the tenth best investor ever, or the fifth best quarterback ever, or the second best golfer ever, etc.
To do great things I believe you have to have huge goals you can work towards and then do everything in your power to work towards those goals.
So why not start by going after an $8 million acquisition?
Could I have started going after a $100,000 company? Yes. Would it have been far easier? Definitely. But would $100,000 change my life drastically and allow me to help other people change their lives for the better? No. At least not to the degree I want to help.
Why put limits on your potential, the money you make, and the amount of people you can help?
The saying: “If I could just help one person that’d be enough” has never made sense to me. If you can help one person you can help hundreds, thousands, millions, or even billions. Why stop at one?
Like I said above I want to help as many people as I possibly can. But to do that requires great sums of money. And to have great sums of money I need to go after big targets.
I’m working towards that. And it just happened that when I began looking I found an $8 million company to go after that was a great business.
Did I plan this when I started looking, no. But again, why not go after it if it’s there?
If I went after a $100,000 target and completed the acquisition I would have a $100,000 company but not learned as much in the process, gained as much experience, or grew my connections like I did and continue doing.
I’d rather fail huge but still make massive progress towards my goals then set small goals, reach them, and still be disappointed by not doing what I truly want to do.
But by doing and going after big things negativity creeps in so if you go this route you need to be prepared.
Below are some of the negative things I’ve heard since going after that acquisition.
- He’s crazy.
- Who the hell is he to think he can go after an $8 million acquisition?
- Why the hell are you going after an $8 million acquisition? This was one of my own thoughts at the beginning of the process by the way so this isn’t limited to others thoughts.
- Why are you going after such a big target to start? Again, one of my own thoughts.
- Can you pull this off?
- What if you fail?
- What if you succeed? This question came after someone questioned my experience running this size of a business.
- You’re so young still, why not take your time and start slow?
- You’re so young still why do you think you can do this?
Something else I learned from Be Obsessed or Be Average is: “If you can, you must.”
I have the skills and mindset necessary to help a lot of people so I feel an obligation to work towards helping as many people as I possibly can.
Something else that will illustrate why I went after such a big target to start and how my goals are intertwined with that is from a post I wrote on Facebook about a month ago which I repost below.
“I know that I have the ability to ACHIEVE the object of my DEFINITE PURPOSE in life; therefore I DEMAND of myself persistent, continuous action toward its attainment, and I here and now promise to render such action.
I realize the DOMINATING THOUGHTS of my mind will eventually reproduce themselves in outward, physical action, and gradually transform themselves into physical reality; therefore I will CONCENTRATE my thoughts for 30 min. daily upon the task of thinking of the person I intend to become, thereby creating in my mind a clear MENTAL PICTURE.
I know through the principle of autosuggestion, any desire that I PERSISTENTLY hold will eventually seek expression through some practical means of attaining the object back of it; therefore, I will devote 10 min. daily to DEMANDING of myself the development of SELF-CONFIDENCE.
I have clearly written down a description of my DEFINITE CHIEF AIM in life, and I will never stop trying until I shall have developed sufficient self-confidence for its attainment.”
– Bruce Lee
This is a perfect reflection of where I’m at and what I work on every day as well.
Something I’ll add to these thoughts is from Grant Cardone’s book Be Obsessed or Be Average – “If you can, you must”
What this combination of thoughts means to me is that because I have the ability to help people throughout the US and world through my knowledge and businesses, I must – at a moral and ethical level – help as many people in my lifetime as I possibly can.
If I don’t do everything in my power every day to excel, work towards achieving my goals, and build great businesses and wealth to help as many people as I can, I’m betraying my deepest moral convictions and ethics. Failing myself, failing my family and kids, and failing those I could help.
Sorry about this long answer but it’s such a great question you asked which leads to a bunch of other questions and answers.
I hope this question and answer resonate with your readers on some level.
John: Is Rivera Holdings open to non-accredited investors?
Jason: Yes it is. If they’re based in the United States and are either US citizens, green card holders, or naturalized citizens.
Unfortunately, I can only accept outside the US investors at this point if they’re accredited.
John: Where can folks go for more information about investing with Rivera Holdings?
Jason: They can visit my website and go to my blog Value Investing Journey for more information on Rivera Holdings. At the following link they can also view The Rivera Holdings Acquisition criteria. And here they can sign up for the Rivera Holdings mailing list where I send out potential deals I’m working on that investors can invest in.
This mailing list is also where I share some of my exclusive past recommendation issues/investment thesis with subscribers.
Thanks a lot for having me on to do this John.
John: Thank you very much Jason.