INTERVIEW WITH ADRIANO ALMEIDA
On his new book, The Outstanding Factor: Making Dreams Come True in the Stock Market
Published on August 31, 2021 (Amazon Link)
Interviewer: I enjoyed your book very much. Congratulations for the achievement. How would you say this book is different from the original letters you wrote between 2014 and 2017 and published as a compilation in 2018?
Adriano: Glad you enjoyed it. So this new book does include those same concepts in the letters, but I added new examples and improved some of the passages. One of the main inspirations for this book was the question I get repeatedly: How do you find them? I attempted to answer this question in the introduction and by including a chapter for each of ten examples of outstanding companies in Part IV of the book. In the introduction I tell my story and explain my views on how to find the outstanding factor that makes dreams come true. This factor refers to the phenomenon which occurs when an amazing culture combines with an incredible business in secular growth. While I emphasize the importance of focusing on the endgame throughout the book, I believe the introduction adds valuable context and helps to justify my conviction in what we do and why it is different. I often hear people say that we are like other quality-growth investors, but this book shows why I do not agree with that. I also discuss the role of purpose in what I do, and the hazards that investors invariably face when the tide changes. I even broach some controversial topics like short selling and the conflicts of interests in the brokerage and the media industries. Finally, in the last part of the book, I provide my updated library with over 400 book titles. I organized this part into 6 chapters, and as a bonus, I include my top 5 picks for each of 11 genres.
Interviewer: You mention in the Foreword that you believe first person singular is the better form of communication. Why do you say that?
Adriano: I am the author of all of our letters, but it wasn’t my practice for me to sign them. Like other funds do, I wrote my letters with the proverbial “we,” signed by Victori Capital. We figured this would promote a sense of participation among our team members (which I suppose it did), but I’ve come to realize that our customers actually prefer to hear from the person responsible, not a company. That’s the main reason why I wrote this book in first person singular and started signing my investor letters as of Q2-2021. While nothing has really changed in how we operate as a team, I think that this new communication approach will help me get closer to my customers. It took me some years to figure this out, but “my team and I” is more powerful than “we”.
Interviewer: Your paperback has 323 pages, but I noticed that quite a few were dedicated to the Library. Have you really read all those 400+ books?
Adriano: Yes I have, but this was during a span of nearly 30 years. Some of those books, such as Peter Lynch’s classic, One Up On Wall Street, or Phil Fisher’s Common Stocks and Uncommon Profits, I have read more than once – and it was more special the second time. As I mention in the Introduction, I can read at incredible speeds using audio. I use the Kindle’s robot voice to do this, and it works, especially when I follow along with my eyes. The Kindle lets me highlight while listening, then export passages to email. It’s not an exaggeration to say that the improvements in this technology have changed my life. In the first proof of the book, I had merely listed the titles by category, but then I had the idea of listing my top 5 lists at the start of each chapter. Anyway, I have picked up my pace of reading since working from home – so this list includes many recent titles. Now I am discovering old history books that expose how narratives about history change with time. Who knows this fascination will inspire my next book?
Interviewer: What’s Big Seven Press, in Greenwich, CT? Is that your publishing company?
Adriano: When I was getting ready to publish, a friend suggested I look into forming my own printer, instead of using Amazon’s designated name. To do that, he explained, all one needs to do is purchase an ISBN number under the name of a printing company. While it cost a little bit of money, it turned out to be much easier than I thought to start Big Seven Press. The name doesn’t have any particular meaning outside of my fascination with the number seven since childhood. Bizarrely, our office address when we started Victori Capital was 777 Post Road in Darien Connecticut. Today its 177 Broad Street in Stamford. I was born on the seventh, as were my wife and her sister. Both my parents and my wife’s parents, as well as my brother and I, were all married on the seventh. I am not a superstitious person, but you can’t make this stuff up.
Interviewer: Going back to your bullish comment earlier, can you explain why you are bullish?
Adriano: When it comes to being bullish, my reasons are rarely related to the macro backdrop. This is because throughout my career as well as in my extensive readings of market history, I have observed the earnings power and market value of outstanding companies can increase at astonishing rates even as the market goes through its typical cycles. I don’t believe it is possible, and neither is it useful, for investors to focus on unknowables such as interest rates, inflation, elections, and geopolitics. As the September 11 attacks early in my career taught me, and the COVID-19 pandemic confirmed, anything can happen in the short term. The key, in my opinion, is to focus on those few companies that will become dramatically more valuable than the averages. Peter Thiel calls it “exponential dominance” in his book Zero to One. Those who can’t dismiss short-term noise for what it is, or who frequently trade the news, are unlikely to benefit from exponential dominance, because it only delivers in time, over the long-term. All that said, I am not that concerned about the macro backdrop. I don’t think the onset of inflation is that bearish, mostly because it is coming after an extended period of deflation, but my personal opinions on inflation are not that critical to what we do. What really makes me bullish on the future is how the distancing of the winners from the losers is accelerating due to technology. The type of companies we target are benefitting disproportionately from this phenomenon, and the passing of time will only make it more pronounced. When durable, serial compounding by outstanding companies is the ultimate target, the passing of time matters much more than the timing of the entry. Of course timing matters, but it matters nowhere near as much as people who focus on averages tend to assume.
Interviewer: Thanks for that. Is there anything else you would like to share?
Adriano: Yes. My 15 year old son, who loves computer art, made the book cover. I had some crazy ideas about it, but decided to back off and let my son exercise his creative muscle. When he showed me the final product, I immediately loved it! Being a Bauhaus devotee myself, I was pleased when he told me the minimalistic style was intentional.
Have a great weekend!