Daniel Gladiš: I agree with Buffett, you can't invest in cryptocurrencies, it's just gambling

In an exclusive interview with Daniel Gladiš, we discuss the latest investment topics, including his opinion on cryptocurrencies, his view on Berkshire Hathaway and their latest purchases, and much more.

Daniel Gladiš is the co-founder of the investment fund Vltava Fund, which he founded in 2004, where he is still a director. Vltava Fund is a value-oriented investment fund of qualified investors.

Together today, we look at the merits of Warren Buffett's conglomerate, in which the Vltava Fund also invests. Today, we'll learn why that's the case and why Berkshire is one of the best stocks ever. Hope you enjoy the interview 👇

I've seen that you often write and mention Warren Buffett and Berkshire Hathaway.

Do you advocate a similar investment approach/strategy that Warren Buffett recognizes? What specifically is value investing good at?
We try to think and approach investing similarly to Warren Buffett. Although I am aware that due to the amount of money Buffett has to handle at Berkshire, his hands are quite tied by this and his investment options are quite limited. I wonder how Buffett would invest with much smaller amounts. I think he would be much more active and much more adventurous than how he invests within Berkshire. He says that if he had a portfolio of just a million dollars, he is confident that he would be making 60% a year. He's in a completely different league, but he's also a great resource for learning. What makes value investing good? Value investing should be based on trying to buy assets at a price lower than their value. Any other approach basically doesn't even make sense. So it is a matter of comparing price and value, and all investing should therefore in principle be value investing.

I also saw that you have Berkshire shares in your portfolio in the Vltava Fund. Can you tell us how big a position that is? Since when have you been building it up / adding to it all the time?
We've had Berkshire in our portfolio for about 11 years. It's also been our largest position for a long time. It takes up about 18% of the portfolio. The advantage of active investing is that if one knows a stock in detail, expects it to return more than the market does, and with less risk than the market as a whole, then one can express that attitude with a large concentrated investment. So far, we and our shareholders are very happy with it. The stock has grown more than 4 times during our holding period, yet it is about as
cheap
today
as it was at the beginning. There is one more interesting thing about Berkshire. It is one of the largest companies in the world, perhaps the most profitable stock ever over the long term, and yet a large number of professional investors are actually almost completely unfamiliar with it or have completely distorted ideas about it. I find that incomprehensible. Every serious investor should have this company dissected in every detail. Not because they necessarily want to buy it, but because they want to know what its long-term track record and uniqueness are. It seems pretty obvious to me, and yet it doesn't happen much.

What is it about Warren Buffett's conglomerate that you find interesting? Would you say that Berkshire is a better choice than an index (e.g., the S&P 500) in terms of investing?
I first registered the name Warren Buffett in the early 1990s at Madame Tussauds Wax Museum in London. There was a mannequin of him there with the inscription "Warren Buffett - investor". But it didn't mean much to me at the time, because I was a student and it was just after the revolution. Rather, I remember being struck by the fact that he had these strange big glasses, almost like Elton John. I first bought Berkshire shares in 1995. By then I was already hearing about them from our American clients. If I were to describe Berkshire today, it is a unique business model, unparalleled in the world, and at the same time a company that has an exemplary allocation of capital. If I had to choose between a long-term investment in Berkshire or in the S&P 500, I would not hesitate for a second. Berkshire, in our opinion, has an incomparably better combination of expected return and risk. Its historical outperformance of the index is very likely to continue for a long time to come.

Staying with Berkshire, I'm sure you've noticed that there are new pieces in the 13F filing in their portfolio. The biggest surprise will probably be TSMC - is that any surprise to you? Do you think it was a Warren Buffett purchase?
Buffett has been a very active buyer this year. In the first 9 months of the year, he bought over $50 billion worth of stock. His biggest investments this year are shares in the mining companies Occidental Petroleum and Chevron. Together, they make up the second largest position in Berkshire's investment portfolio behind Apple stock, and it's a pretty strong signal of what Buffett thinks about future oil prices. In the last quarter, the public was probably most surprised by the investment in the aforementioned TSMC. It's not a big investment
, but it's still surprising. Not so much because it is in the technology sector. I think Buffett understands it very well, despite what he says about himself. Rather, I'm surprised that Buffett considers the "China risk" associated with an investment in Taiwan's TSMS to be acceptable. I consider TSMC to be his investment.

Would you say it is a high risk investment (TSMC)? After all, it is currently ''quiet'', but there is still a lingering risk of conflict with China. Would you also include TSMC in your portfolio under current conditions (risk, price, potential)?
TSMC is clearly a great company, and its price decline this year has made it attractive price-wise as well. I don't think there's much dispute about that. We are, after all, more cautious about a potential conflict with China. Even within Berkshire, the China risk we're taking won't be so hot, as TSMS stock represents only about 0.5% of Berkshire's assets.

The second part of the interview, I'm going to redirect to one of your statements from Twitter where you write:

Almost exactly 2 years ago I warned about $ZM stock in my writings and comments. It was worth 400. I took the rap for supposedly not understanding platforms and "subscription based" businesses. Now those shares are worth 75.

How did you figure out back then that Zoom was somehow ridiculously valued and that it was in for a deep dive to the downside? Are you expecting the company's complete demise?
The main reason was Zoom's stock valuation. If I remember correctly, sometime in the mid-2020s, Zoom had a larger market cap than Exxon. It just didn't make sense. Zoom has a nice product, I use it a lot too, but that doesn't mean it doesn't matter how much the stock is worth. There were plenty of similar insanely overpriced stocks in certain market segments those two years ago. Today, many of them are down 50, 60, 70, 80 percent or more, and for many of them it's still probably far from
terminal. The bursting of the tech bubble in the spring of 2000 provides a pretty good example of what we can expect now. Some stock favorites from the tech bubble that peaked two years ago will probably fade away, some will have trouble staying relevant at all, and even the best ones may take a long time to get prices to new highs. Just look at Microsoft or Cisco and their prices after
2000


.






Is there any formula or formula that you can use to evaluate something similar for another stock? What do you factor in and track in that case?

The basis of stock valuation is common to all companies and industries: the value of the company equals the present value of all future cash flows that shareholders can take home each year without the company's business suffering in its current size and form. Stock valuation is not a natural science and there is no telling what is objectively correct and accurate. It always deals with estimates about the future, with probability, and there is always a fair amount of subjectivity involved in all of this. However, if a stock is 5x or more more more expensive than what could be justified even with optimistic predictions, then no sophisticated analysis is needed to do so. In most cases, a single glance should be sufficient.

At this point, do you have a list of stocks where you have a big exclamation point and are anticipating a similar scenario to what happened with Zoom?
We don't. Rather, we're trying to create lists of stocks we want to buy. Lists of overpriced stocks don't do us any good. We don't short the fund as a matter of principle.

The last section will focus on cryptocurrencies - What is your opinion on cryptocurrencies/Bitcoin in general? Have you ever invested in cryptocurrencies?
You cannot invest in cryptocurrencies. It is not an investment but a speculative asset. Yes, I have tried speculating in bitcoin, not just to talk about something I don't have experience with, I made some money, but mainly to confirm what I already knew before. That I wanted nothing to do with cryptocurrencies. Cryptocurrencies are a completely marginal issue in the financial markets, which in our opinion has little relevance for the future. The amount of money that people have lost in them so far is huge.

Why should I, as a layman, even think about investing in cryptocurrencies? Do you think that maybe in the next 30 years, investors won't have any idea about cryptocurrencies?
The term cryptocurrency investment is an oxymoron. It's pure speculation in an asset that has no intrinsic value, produces no cash flow, and just relies on someone else coming along later who is willing to pay more for the same thing. This has nothing to do with investment. Anyone who wants to can speculate. There is nothing illegal or immoral about speculation in general, but people must not confuse it with investing.

For more such interesting articles and information, keep an eye on Bulios and of course Daniel Gladish who contributed his perspective.

Please note that this is not financial advice. Every investment must go through a thorough analysis.

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