34) What would a young Buffett do? Svenda´s Manual with David Flood and Jan Svenda

David Flood from elementaryvalue.com and Jan Svenda https://jansvenda.com/ took the time to check 7000 of small, obscure stocks. That´s exactly what I think a young Warren Buffett would do, if he had to start again from 0.

Lucky for you, they tell us what they found in this search of years, just wait to hear this story. 

In the interview, Adam Smith asked Warren about the advice that he would give to a younger Warren Buffett if he entered the markets today. This is what Warren replied:

Adam Smith: If a younger Warren Buffett were coming into the investment field today, what areas would you tell him to point himself in?

Warren Buffett: Well, if he were doing – if he were coming in and working with small sums of capital I’d tell him to do exactly what I did 40-odd years ago, which is to learn about every company in the United States that has publicly traded securities and that bank of knowledge will do him or her terrific good over time.

Smith: But there’s 27,000 public companies.

Buffett: Well, start with the A’s.

Check out this episode!

34) What would a you Buffett do - Svenda´s Manual with David Flood and Jan Svenda

Ney Torres: [00:00:00] Welcome to the show everybody. Today we are talking about Svenda's Manual. Welcome to the show guys.

David Flood: [00:00:09] Thanks for having for us.

Ney Torres: [00:00:10] So, can you explain to me, Jan, how did you create this manual and what is it about? David, how did you create this database? Because I was seeing some other podcasts and you guys went through 7,000 stocks in the OTC market. That's amazing. Then you ended up with 400. So, I really needed to talk about is what did you guys find? What was the process like? Mr. Svenda, would you like to start?

Young Svenda: [00:00:38] Yeah, sure. Thanks a lot. Thanks a lot for the invite. Now, as you mentioned, we did do a lot of research in DOTC space. So, I'm coming from a background of running a newsletter focused on the space. So, for two years I've ran a newsletter focused exclusively on DOTC space. I'm coming from like the deep Valley philosophy, basically searching for the undervalued stocks in the forgotten market. Let's say of the OTC market because a lot of people have a lot of prejudices about how the market works and whether there are actually meaningful opportunities. A lot of that comes from the fact that there is a lot of stocks there and a lot of them are just meaningless. A lot of them are companies that are either pump and dumps that still works or there are companies that are really, you know meaningless in terms of the product. People are trying to do some businesses that are not really great. A lot of that Kind of always makes people kind of feel reserved about the OTC market because they just looked at it a couple of times and they saw, "Well, it's not really not really meaningful. It's not really something probably worth investing in but if you actually do the work and if you go through the market, you will understand there's a lot of like specific investment opportunities that are worth looking into an actually investing. So, I started the newsletter and through that time, I kind of went around the market and really looked at every single company or most of the companies out there and pinpoint which are worth following that the companies that are really should be in the focus of the investors. So, that's kind of the main idea behind the newsletter as well as the database with which we are now working on with David. So, basically the database is kind of cocreation of us two where I kind of came with my research from the newsletter, which I used to run. David came as a kind of individually the investor focused on it, but maybe he can tell you a bit more about it for sure himself. But for me, it was kind of the newsletter. I was always interested in the OTC market and then I understood what is one of the main problems of the market, and that is knowing the companies that are meaningful because there's just so many of them. And so, many of them are just crap. We can talk about it all day. All the great examples, like Bigfoot company and so and so forth, which is just a company that is looking for Bigfoot. And that's without a joke and all these kinds of crappy companies, but then you have also a lot of interesting stocks that can make you money. So, that's a bit about me and how I kind of went about researching the OTC market. I know that you had Dan Shaun on, right?

Ney Torres: [00:03:49] Yeah. Great guy.

Young Svenda: [00:03:52] Yup. Basically, he's doing OTC stuff, right? Very, very similar for a very similar approach.

Ney Torres: [00:04:00] Perfect. David, how do you get involved with the project?

David Flood: [00:04:03] So, I initially began getting interested in investing in 2013 and I started to study value investing and then I became interested in the deep value side of things. So, looking at Ben Graham's, Net, Net Investing which kind of drew me towards much smaller companies. And then I realized that a lot of the most interesting companies could be found on the over the counter markets. So, I picked up some of the old Walker's manuals, which are these old stock manuals that contain all these old strange companies that you don't really find much information about on the internet and I started to look at other blogs that were writing about these kinds of companies, and I found a Dan Shaun's work and I found a Young Svenda's work as well. So, I decided to follow Young's lead of working my way through the over the counter market stock by stock. And I looked through several thousand companies and then I would write these companies up on my own investment blog, elementaryvalue.com. And then over time, I just kind of started getting closer with other over the counter market investors that were looking at these stocks and then me and Young had a chat and decided that it might be quite cool. We created a product where we put all the interesting companies that we'd found together to create a database that contained all the interesting and meaningful companies because the problem with the over the counter markets is that you've got several thousand companies there but the vast majority of them, they're just complete garbage. They're not even worth looking at that just kind of like that could be frauds or pump and dumps, or just kind of empty shells with no real value. So, we have worked out way through thousands of stocks and basically picked out all the interesting companies and then compiled them into a database for other investors, just to save them hundreds of hours of work going through all these companies.

Ney Torres: [00:06:03] God bless you guys. And what is the process like? Do you have screeners or do you call every company? Because every company is different. How they show financial statements would wonder not reporting to the agencies, especially great companies, dark companies. How do you do it?

Young Svenda: [00:06:19] So, we will class each company that we find depending on whether they report with the SCC whether they are reporting on their own company website or whether they are just not reporting publicly all. So, we'll class these as kind of SCC compliant, gray reporting, which means you can get hold of some information or completely dark, which means that the company is just not reporting any information to the public. And then we focus a lot of our attention on these companies that are either gray reporting or dark. And we conduct a lot of investigations into these companies to try and get hold of financials and find out information about the company because these are often some of the most interesting value propositions for investors where the largest mispricing occurs simply because there's no publicly available information on them. So, we basically do a lot of the hard work to find out that what's going on with these companies, whether they're undervalued and then we add them to the database. And if we can get hold of financials for these companies that are dark by contacting the investor relations department or finding some way of getting hold of them. We can then add these to our database. So, other investors have access to them.

David Flood: [00:07:36] Yeah. I would just add I guess the process looking at the OTC market is really way different than your NASDAQ's and then OICs just because of the lack of lack of screening data. So, for example, you mentioned do you screen for them, do you do that?  A lot of times actually the best way to do that in DOTC market is really to go through as they say A to Z, which is like have one company after another, trying to understand whether there is an opportunity, whether their financials, whether the financials are correct. For example, other screeners and so on and so forth. So, actually relying on screeners in the OTC market, it can be very shortsighted because a lot of times the operators is so obscure or so specific that you can screen for it. I want to example for all is Mills Music Trust which is a great trust that owns royalties for songs basically. And did they just generate the royalties from songs each quarter and we send you a dividend, right? Now, this company, for example, is SCC reporting but it would be very hard to screen for it, right? Because they don't have any assets. They have the portfolio of the rights to the songs but they don't show that on the balance sheet that you show the Corpus of the Trust which is basically just the cash positions and the movements and so on and so forth. They showcase the dividends you could find it through the dividends. But a lot of, again, a lot of times the websites don't have the right dividend yield or you can't really find all of them and so on and so forth. So, a lot of times it's kind of different in, in, in that sense. And so, you could screen for that and try to find it but it would be very hard. By going one by one, you can actually find the company and say, "Hey, this is a great stock because it can yield like 12% a year. Now, for the past few years, even more now. So, these things kind of take time and are a lot of times the manual, if you want to have a really good command of the OTC market. So, the process is 19th century so to speak for some investors but that's maybe perhaps why there are still quite a few interesting opportunities out there because the process is much more manual than in other places.

Ney Torres: [00:09:59] And that's why we're making this interview because that's exactly what the advantages is its hard work, but you guys are making it easier now. I noticed you have the database, you have price to tangible book value meaning you have the company dies, how much you will get back basically. As the only metric, are you guys going to add income expenses or something like that in the future?

Young Svenda: [00:10:31] Yeah. I can certainly go ahead with that. Basically, right now it's price of tangible book just because to give a kind of basic overview of the valuation. If it's really crazy undervalued, you will see below one price a tangible book which can give you a sense of I should look into it because what's behind the next pricing what's there. One note you say is the tangible book is again also kind of manual computation because we kind of know what we should deduct then so also for it's a lot of times book value as a whole can be also misleading. So, we just took the tangible book to kind of showcase what could be the opportunities are right now. But yes, we will add a price to sales and price to earnings, so revenue and earnings. Again, for the SCC stocks it's pretty easy to get the information on your own but we are going to focus on the gray and dark stocks and where are we going to provide more information. So, that's certainly in the works right now, the screening is for the fundamental data is limited to price the tangible book. Although it can already kind of help you but this will be another addition very, very soon.

Ney Torres: [00:11:48] You must mention that you guys have in all of his talks, a section where you can put all the opinions or ask questions and stuff like that for the 400 stocks that you have done. David, I was looking at the qualifications for every stock and I see from bankruptcies, dark stocks, gray stocks, but so Russian SEC. How come do you guys have a Russian SEC?

David Flood: [00:12:16] Well, I might let Young take this one actually because this is one of the stocks that he added to the database. I'll let Young answer that one.

Young Svenda: [00:12:25] Yeah. So, this is a cool one. One of the sources, we don't have many foreign stocks there. So, the OTC market is filled with foreign stocks as well. So, Canadian stocks and so on and so forth. So, when you talk about a 7,000, for example, stocks are usually US based stocks. So, that's really important to kind of say that we don't really have many of the foreign stocks because usually you can just go to Canada and buy it there much better. So, it makes sense. But there are a couple of stocks on the OTC market that are worth following and it's a Russian company, a Russian oil and gas company that has a huge cash position and pays out a lot of dividends. That's so good as GTP wide and that's a dividend play basically, and we covered it in our research as well. We had a guest contributor write about why he believes the stock is great. It's a preferred stock with based mainly dividends and it had some great dividend yields in the past years. And there's actually a way to kind of calculate the dividend yield before it actually happens because you can kind of estimate a dividend from the operation. So, that's why the Russian SCC there.

Ney Torres: [00:13:39] Got it. So, I'm going to ask each one of you guys. Can you give us an example of a crazy undervalue stock they could found? I know you mentioned the music one, the royalty one. Can you give us each one of you an example of what you have found this in looking at 7,000 stocks, basically.

David Flood: [00:13:59] I'll go first. I think, well, a one that I came across which was a really interesting company was ECC Capital Cart which is a ticker symbol, E-C-R-O and this was an old former mortgage REIT that kind of got obliterated in the financial crisis of 2008. And I think that the market had kind of assumed that the company was just kind of dead, so they just kind of left it in the stock price drifted down for several years. The company went completely dark and they weren't responding to shareholders or investors. There was no news coming out but I've came across the stock on the over the counter markets. And initially I kind of just went past it and didn't really pay too much attention to it. But another smart investor who I've become friends with he decided to conduct a bit more research on the company. And he managed to figure out that it was still basically an operating company and it was still receiving money on the ownership in some securitization trusts and it also received some payouts from some litigation. He realized that actually this company was probably sound quite a nice chunk of assets and it was probably hugely undervalued. He kind of built up a position in the company. I bought some shares and some other people did and they began to kind of apply some pressure on management to go current with the financials to kind of update the website and put out some financials just to let investors know what the current state of the company was. So, at that time it was trading at about I think an eighth of a cent. It was below a cent and then they piled the financials and it turned out they had like 7.70 cents in net cash and like 15.40 cents in book value. So, the stock price basically shot up 800% in about two days just because the company put out some information and said, "Well, actually, we've got these assets on our balance sheet. We've got no debt and we're actually a profitable company. Very, very rarely do you ever see those kinds of price moves on any kind of listed stocks, unless there's some kind of completely crazy event that occurs. But regularly, you will see those kinds of events happen on the over the counter markets, just because you're dealing with such small companies and the information that's available is so hard to come by. It requires a lot of research and investigation so then when that kind of information becomes public. You'll see these huge price moves because these companies have such small market capitalizations and often, they're quite illiquid. The shares and not kind of widely traded. So, as soon as there's any kind of demand for the stock, the share price will explode. That's probably one of the most interesting ones that I've come across recently.

Young Svenda: [00:17:00] And for me, I think I can give a good example of one that was recently acquired. So, recently kind of finished or the thesis was kind of finished on this one. Basically, it was a car insurance company and I think I like the example, one other reason and that its kind of showcases why the database could be very helpful for people because car insurance company, it was a specialty car insurance company in the US and basically it was labeled as dark on the OTC market with com. So, this is the website where all the companies are and if you were to be an investor, you would just kind of look at it and say, "Oh, it's a dark company. It's probably not worth researching because maybe the financials are not up to date, they are not really usable, easily accessible and so on so forth. But actually, if you did the work you would be able to find that they report audited annual results even quarterly results and that you were actually able to analyze the business. The name of the company was GANS Co. The ticker is G-A-N-S, it's still trading but it's the last days of the trading before the merger happens or at least that's how I checked my brokerage. You can always check time but I'm not super sure whether it went through completely but basically what happened there was and why I want to highlight it is that this company has been producing so much cashflow. That was one thing that really caught my eye. So, it was trading below tangible book. So, basically it was a company that was that had a market gap of like 60-50 million or something like that. Tangible books about like a hundred when I first found it. So, you can see that actually there was upside even in that but then you also had the cashflow which was very, very strong. They were able to produce around 10 million, I think and in free cashflow and sorts of free cashflow yield was also very high. So, basically, it's kind of like that class like the GM that you're looking for, if you're a value investor like it's priced ad fraction tangible book and it's creating cash flow. So, there's not really like some ice cube so to speak or an asset that will have value only if unlocked and on top of all of that, they were actually paying dividends a special dividend. So, not every year, but like every two years they paid out a nice special dividend, a couple of dollars a share. So, when you look at that, you start to think like what's wrong? What am I missing? This is a great opportunity and since I dig into it, I really couldn't find much. I mean, they've been just running their business really well, I mean, it was after a turnaround. So, the company did have some troubled past but basically after 2010, it was turned around by a skilled management team and the cashflow was really strong at our first founded in about 2017 when it was a maybe perhaps like 14-15 dollars a share or something like that. And because I was going through one by one company after another. I was able to give the time to research it properly and to make sure that I find out whether there is an opportunity or not and once I did one analyzes, I mean, it sounded like a no brainer. And then it went up a hundred present over the past two years which was nice because the operation just continued to generate cashflow and so on and so forth. It was just a still a no brainer. But then recently they were acquired in September for about a hundred dollars a year by a different insurer. So, I mean, this was a nice exit. Almost eight times or return and the whole point was that this stock it was not really obscure. I mean, for example, David talked about our dark company and these kind of event driven situations which can be interesting. But for some, it might be just a bit obscure, but really do DC market is not only about that. You can really find companies that make sense are not hard to analyze and actually you can get some advantages by doing the work so I think this is a great idea or a great Chuukese for how the database actually can help investors because with the database you could have known about GANS CO. You could have attracted and you could have done that. I said to herself and see, well it's probably still valuable even if it's trading at $30 a share. So, that's my favorite kind of Crazy undervalued stock because even though the return might be okay it was great of course, and so and so forth. But, but still, I think the whole point was that if this was an easily analyzable situation, which you could really understand and everybody could understand it and it was just there and yeah, I guess not many people or another many investors found about you know, that did the research and got to know about them company. That's my story.

Ney Torres: [00:22:21] Yeah, that's why I want to make this episode. I think this is exactly what the young Warren buffet will do. He will look into the dark stocks. They take some time, the amount of work that you guys are putting in because that that's what the jewels are. The big stuff's already. So, many people are looking at them, they're overpriced or fairly price but this is what you have to do if you want to have big returns. I want to make a couple of questions about those two stocks that you guys mentioned. First of all, David, you mentioned that the stock, you mention there was some pressure on to management to for them to put their financials publicly. How was this process? Because that's very interesting to me. How do you pressure the management? Do you sell emails? You call them. You do a proxified.

David Flood: [00:23:12] Yes. So, this company in question, some other individuals, I think one of them who runs a small value fund acquired a reasonable sized position. And then he basically contacted the management and said, "Look, well We'd like you to put some financials and raise kind of investor and shareholder awareness about the company. We've done our research and we know that the company is massively undervalued and that you're your sound, a nice asset base. And you don't really have much in the way of debt and in that instance, the management was amenable to becoming more open about the company and they were happy to put out updated financials. Whereas in other instances with some companies on the, over the counter markets the management are not very interested in putting out financials. And in some cases, you have to kind of take the call-in order to get hold of the financials. Every situation is slightly different. You'll find with some companies you can literally just email the secretary or call them up and they'll just mail you out financials. No questions asked. So, I've had financials mailed out to me from America to the United Kingdom and paper mail, no questions asked. I didn't even own shares in the company. I just emailed the secretary and she was very happy to see a certain amount to meet. Whereas other companies are, may contact them and they don't want to talk that they maybe no, one's spoken to them in a long time. There's such a small company they have no investor relations department. They're not used to people asking about the company. So, over time you have to develop a number of different techniques that you can use to research these companies. So. We will use things like we will use pacer where we will go and look at court documents. We will use Google Street View to go and look at the premises. Maybe see how many cars are parked in the parking lot to figure out how many employees they've got. We'll use land tax records to figure out what land that the company owns and how much that land is worth. So, over time, we built up a lot of different techniques to try and figure out what's going on with some of these companies that are dark to figure out whether we think there's a situation where there's going to be an undervalued stock there and anytime we find interesting company or an interesting stock like that, we add it to the database and then we provide our comments about the company and any information that we've managed to get hold of. So, if you get access to the database, you get access to it around 50 different financial reports for dark companies which are not available in the public domain. So, all this kind of information and these techniques we've built up over time, we essentially have just kind of channeled all that into creating the database, just to help other investors that maybe don't have that time to conduct that research or that they're kind of busy with other things in their life.

Ney Torres: [00:26:09] So, the moment you find an interest in a stock, do you put it on the blog? Do you wait a year to release the manual? What do you do?

David Flood: [00:26:19] So, the minute where we will add any interesting new companies that we've, we find we will be adding those the database over time. So, yeah, as soon as we find them, it will be literally, probably a few weeks and then I will be then added to the database once we've conducted some research. Sometimes we may wait because we want to kind of build up a bigger picture on the company. We want to maybe try and get hold of financials or conduct some due diligence. But generally, there's a fairly short time like between when we find a new company and then when it gets added to the database and we're also monitoring for companies that are delisting from the main exchanges like the NASDAQ and the New York Stock Exchange, they will kind of find their way onto the over the counter markets. And they'll then be added to the database as well.

Ney Torres: [00:27:05] Thanks, David. Okay. Young, what are the main problems of OTC, investing in OTC?

Young Svenda: [00:27:14] Main problems. I mean I guess for people; do you mean for people who want to start investing in OTC?

Ney Torres: [00:27:23] Yes. Those people are just starting out and looking at the OTC market that should be aware of this, this and this.

Young Svenda: [00:27:30] Sure. Well, I think there should be a disclosure here really definitely that DOTC market is very different in some ways and the risks are really not very similar to the list market. I think for people who want to start in the OTC, I mean, they should have already had some investing background, not necessarily anything great but just investing in the public market and getting that all already helps a bit just because it can be quite crazy. Sometimes some of the situation can be illiquid when you hold Apple, you are confident that you're going to sell Apple the next day. Apple stock but here in the OTC market sometimes it can become illiquid the stock. So, you can't sell it that fast. So, I think that that is one thing to take in mind. The liquidity of the position and the stock, how easy is it to get in to get out. Of course, if you're dealing with, let's say smaller amounts, I think it's very easy and actually that's also a kind of advantage because if you have smaller amounts, you can actually take advantage of some of the stocks that other bigger investors could not accumulate but perhaps that's one thing. A second thing is knowing that you're not really getting scammed. This is I think fairly easy into OTC market because if there are frauds or if there are pumpkin dumps and the OTC market, it's fairly obvious that they are and there have been so many like cryptocurrency schemes and whatever have you and now call it related schemes for sure where they would start putting out press releases and start showing that, "Oh yeah, the business is booming and so on and so forth." But then actually in reality, there's just nothing but a lot of times, New York or DC space, it's very visible because you can, for example, pull up the SCC filing or try to find more information. If you can't find the information probably it's not worth investing. So, a lot of times that's kind of something you have to be careful about, but I think a lot of times, it just very easy to understand that this sounds fishy. I probably don't want to invest in deal. The next vaccine COVID-19 vaccine, which is somehow the being developed in Cambodia. Totally real, totally could happen in the OTC market, I think there are these examples where it's too good to be true and it's very easily analyzable. So, but on the other hand, there is a kind of like a different process, different due diligence that you have to do in the OTC market space. But of course, where the database that we have you can kind of get a head start and you can kind of see our comments. You can see what's been happening. And the database is one thing, but of course I did a lot of research in the past which you can also purchase. There is an older research that you can purchase that is actually very helpful because they can give you a good Insight into a lot of the stocks that are in the database. So, perhaps the main problems are a bit of the trading itself. Secondly, it's a bit of different processes, different due diligence and kind of perhaps things that are attached to those two challenges and are kind of in between those two groups let's say of risks but I think that's probably the biggest two.

Ney Torres: [00:31:07] Thank you. So, I have two more questions for you guys. What's your position sizing? How do you see position sizing regularly? In my case, just to make a point is if I invest somewhere from 1% to 3% is because I'm kind of a speculating, maybe these will work or not. I'm not very sure, but statistically, that stock seems cheap. So, one to 3%, if I have some certainty will go up to 10% to 20 even 30%, what is your position sizing like?

David Flood: [00:31:41] So, I'll answer the first. Personally, I hold quite a lot of stocks in my portfolio. I tend to follow an approach which is quite similar to Don Shaun. I'll own maybe 30, 40, 50 stocks but I'll probably only put maybe one, 2% in each one. But then occasionally if I find a certain situation with a company where I think it warrants a larger position then I may kind of go in heavy with that company. But generally, it's kind of a small position in a lot of stocks which is kind of influenced as well by the approach that Walter Schloss Luce used to take away would kind of just buy a large basket of undervalued companies and then just kind of wait for them to play out. So, that's the kind of position sizing that I have.

Young Svenda: [00:32:32] For me, it really varies but on the long side because I do quite a lot of shorts selling as well but like on the long side and OTC space. I think concentration can be can be pretty good if you have long-term horizon. So, I think one thing to take into account is just how long you're capable and comfortable with holding the assets. A lot of times the DOTC space. I think some of the thesis has to play out over a year. Some of them not so much. Some of them can be within a month or within half a year. But a lot of times it's about the comfortable comfort levels of the duration. And so, for me, for example, I'm very comfortable with holding something for 10 years even if it's not really going to move that much, for example, it's a dividend yield or so on and so forth. So, that's one thing and then for the percentages, concentration is pretty good. I would not go above 10% personally because I had some bad experience with that very early on. And I think that I, one of my rules is not to go over 10% ever and with the statistical opportunities. I mean, of course, you can build up a position quite early on, start small and just track the company and track the developments. I think I would have very mature similar approach in that regard to you and the only thing is not to cross 10%, so I don't really make a huge philosophy out of it or have a specifically kind of like statistical approach where I would somehow try to manage the portfolio too much but in the OTC long space, I think the concentration can be a good thing but you have to be kind of careful with how long you are capable of holding it and so on and so forth. Otherwise, of course you can have a portfolio of many, many, many stocks that might start to move but perhaps, maybe that's where David can come in as well a bit because he is doing a lot of research of low price stocks and waiting for the turnarounds or some events that might unlock some of the value where of course it makes sense to go for a larger portfolio and try to let's say diversify but in my mind, in the long space in the long side of the OTC space for me, it's about quite concentrated.

Ney Torres: [00:35:06] Thank you guys. The final question, what would you tell yourself when you started these whole stocks and investing in stocks journey? Let's start with David.

David Flood: [00:35:21] So, initially, when I started investing, I was probably what you would call a Buffett Pro. So, I was kind of like infatuated with the modern Warren Buffett, which was looking for these large companies that had durable, competitive advantages. And thinking of buying these companies and then holding them forever. Over time, they're just not a really suitable approach for a small investor to take the whole reason that Warren Buffett uses that approach is because he's dealing with hundreds of billions of dollars. So, he can't go and buy these kinds of tiny little companies anymore. So, then I found an interview that you'd done, I think he was asked a question by someone it was asked basically what would you do if you were starting out with a small amount of capital. And he said, I would be looking at these, basically these tiny companies on the over the counter markets, the secondary markets. And I would be, I'm trying to find really undervalued situations. So, I think if I could give myself some advice when I first started, it would be to go straight to looking at these very small, very illiquid companies on secondary right markets, rather than looking for large companies that have moats. Because that's just not really the best approach for a small investor in my view. I think the small investor can gain an advantage by going where the large institutions can't. And that is basically looking at these tiny companies that are on the, over the counter markets and maybe the aim market of the London stock exchange. If you can focus your attention on these really smaller liquid companies, you'll find much greater mispricing, but also you can kind of have an advantage from information arbitrage. If you're willing to conduct a lot of research into these small companies which way under the radar then you can do quite well for yourself. So, I think that's the advice I would give myself.

Young Svenda: [00:37:20] Yeah, for me, I think would be the same which perhaps is not really a surprise since what we're doing right now. And that's of course, maybe a slight bias, but I think it's about informational advantage. It's really about what David said, where if you're trying to hunt when, where everybody else's hunting then of course, you're going to have a lot less probability of finding something interesting and finding a piece of information that actually not many people have. It's not about having the information that nobody else has but it's about having information that only few has if you have an app that's already good enough. And I think in the OTC market probably you're going to find something like that. If you are going to focus on it, I think I'll be careful with starting out all guns blazing and just investing a lot now in the OTC market but carefully, trying out a few stock, trying out the research and so on and so forth because it is about that information advantage that you can attach you can attain in the OTC market, right? And in investing, that's all there is to it. If you know some things that other people don't then you want right, you're going to have the better outcomes. So, that's the core of investing and I think a lot of times some smaller investors might think, well, nowadays that's kind of impossible or they might seem it's not really attainable but I think that if you go small and if you start looking into the obscure, you can probably find something that that really works. What a good example of information advantage because it kind of seems elusive, right? So, it seems like, "Okay, can I really find something that actually where the information is not really out there yet? And can I actually get advantage of that? I think one example from the OTC space for me was a company that was being acquired. And so, what exactly what happened was that I was just going through with the OTC market. I was going at one time by one and then I stumbled upon this company. And I knew it before I looked into it but it wasn't really that interesting, but I looked into it and it was after market hours. So, basically the market already closed. And I just kind of did my usual search. I looked at the website, I look at the press releases if there were any and I suddenly noticed that after hours in the market as well that they announced that they're going to be acquired basically. And the share price of the company was $1 and so it was about it was six or 7:00 PM EST or something like that and basically, I said, "Well, I mean okay the share price is $1 per share and the merger or the acquisition is going to happen at $2." So, basically someone is paying a hundred percent more than what the market was paying for the company just before the market closed. And of course, before the news of the acquisition and basically, I thought to myself, "Okay, I'm going to go with a try. I'm just going to set up an order and I'm going to try to buy some shares the next morning." And I'm going to try to buy like, I don't know, like for 1.20-1.10 just the slight premium to the closing price, but of course slight a lot less to the acquisition price. And I'll see if somebody can actually sell me the stock for that price. It wouldn't make any sense because the information is out there is going to get acquired at $2 per share. Why would you sell it to anyone at 1.10 or 1.20? So, I was just like, "Okay, well, I'm just going to give it a try. I'm going to put few hundred dollars here and see what happens." And guess what, actually, the next day I kind of just did my usual stuff worked. And then I looked at it in my brokerage account and I saw that actually someone sold the company, sold the shares to me at, I think overall, like the average was 1.25 or something like that. And I was able to sell that the very day for $2 a share just because the market finally realized, "Oh shit, a there is a merger going on. The acquisition and actually the right price for the stock is $2, not a 1.25 that someone told it to me at that. This is really the epitomal move kind of information advantage which can still sometimes happen. Again, of course, this was rather an odd ball situation. It doesn't happen that often but it boils down to this where it's something that not many people know and you can take advantage of that.

Ney Torres: [00:41:58] Thank you very much, gentleman. This has been a great episode. This is exactly what I think people should start with either willing to put the time into it. Start with A's. David, what's your blog work? Where can people find you?

David Flood: [00:42:12] You can get in touch with me at elementaryvalue.com, which is a blog where I write about these tiny little companies and you can also get in touch with me on Twitter @elementaryvalue.

Ney Torres: [00:42:25] Thank you very much. Mr. Young, where can people find you?

Young Svenda: [00:42:28] And yeah, so the best thing is to for the listeners to check out Svendamanual.com, where you will be able to get access to the database that we've talked about so much in this episode. So, that's the best way to contact manuals as well, but I'm on Twitter as well as just my name, Young Svenda. Do checkouts for the manual.com where me and David are building the database and providing commentary and providing some updates for people interested in the OTC space.

Ney Torres: [00:42:59] Thank you so much, gentlemen. It's been a pleasure. See you in the next location.

Young Svenda: [00:43:05] Thanks a lot.

David Flood: [00:43:05] Thank you.