I am happy to publish my second interview – this time with someone with whom I’ve done many joint videos on YouTube. As a stock investor and blogger myself, I am also interested in what my colleagues are thinking, saying, writing or in this case broadcasting about different topics regarding stock investments.
My guest today is Daniel, the founder-operator of the German YouTube channel “Investflow” (see here).
I did not have to think for too long whom I’d like to have as my next guest in my interview series.
More than a year ago, I wrote Daniel an email, asking him whether he’d like to discuss different topics regarding stocks and stock market investing on his YouTube channel. I was also ready to come into a live stream to face his viewer’s questions live.
Since then, we have recorded and released several videos, often with controversial views (from the consensus perspective). You can find our three last recordings here, here and here.
Now, I wanted to let Daniel face my questions and to let him share his personal views and beliefs with us. What I give him credit for is to directly and openly saying what he thinks – no matter the case.
With this short intro, let’s dive in.
source: Jorge Guillen on Pixabay
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Interview with Daniel from “Investflow” (YouTube)
Alan: Hey Daniel. I am very happy to have you as a special guest on my blog for an interview. Some of my readers will know you already from the videos we recorded together for your YouTube channel.
But now, I want to give you the stage on my site to present your views and beliefs – I also learnt a few things and perspectives I didn’t know before.
Often, we both are shaking our heads about the obvious mistakes especially retail investors are tapping into, based on the failures we experienced ourselves. One such thing that arose several times was the too high focus just on the past performance of a stock and the history of a company, as if it would be that easy to project the future solely from it.
But, let’s first start with an introduction. Tell us a bit about you and your work.
Daniel: Hey, my name is Daniel, I am 35 years old and have two kids. Besides my job as content creator on YouTube, I am also working for a fintech from Munich as social media manager.
Alan: How did you start investing in stocks? What was your motivation and has anybody in your family invested in stocks before you?
Daniel: I bought my first stock at the age of twelve. It was the IPO of t-online, a subsidiary of Deutsche Telekom (ISIN: DE0005557508, Ticker: DTE), just before the dotcom bubble burst. After the shares cratered horrendously in a short period of time, me and also my father, both lost interest in the stock market.
Only in my late-20s, when I received a small inheritance, but did not know what to do with the money, I have found my way back to the stock market. The motivation was straightforward – put the money to work. My dad from time to time today also holds some stocks, however, rather on a short-term basis.
Alan: Please, name one or two investors you look up to.
Daniel: Ken Fisher and Daniel Loeb. Fisher, due to his similar stock selection compared to mine and Loeb, because he pursues a very focussed strategy, where he holds big parts of his portfolio concentrated in a few stocks. I am handling my portfolio the same.
Alan: As I am personally a firm believer in learning by doing and especially by doing mistakes: What were your biggest mistakes that were true eye-openers for you? What did you learn and how did it improve your investing?
Daniel: My biggest mistake was to search for ten-baggers or even better hundred-baggers. After a few successes (I did not know what I was doing from today’s perspective), almost all stock picks later strongly came back down again.
As if this weren’t enough, this triggered my next mistake: again and again buying more fallen hot stocks, at times four to six more tranches which only resulted in huge holdings of losers in my portfolio. Unfortunately, often these were stocks that one never wants to hold as highly-weighted core investments, but at best as small additions – hot stocks as they are. 🙂
Alan: What’s your greatest weakness still that you’d like to improve?
Daniel: I am often too pessimistic about the businesses. That’s why I am staying away from turnaround cases.
Alan: How would you describe your investment style without using the words “value investor”?
Daniel: High focus on quality. A small amount of stocks with very high quality regarding numbers, cash flows and the business model.
source: Mohamed Hassan on Pixabay
Alan: What are your investment goals?
Daniel: Max return, respectively beating the S&P500 on a long-term basis.
Alan: What is your understanding of risk when investing?
Daniel: Over a long time horizon of 15+ years and by holding stocks of high-quality businesses (or ETFs holding them), the risk (of losing or not earning any money) is approaching zero. If there’s no positive performance with stocks and ETFs over such a long period, we are certainly dealing with other and more meaningful problems on earth.
Alan: I find it very interesting that stock markets have risen by 7–8% p.a. historically over the cycles – how come 80% of average Joes don’t make any money with stocks?
Daniel: In the past and as a small retail investor, you had an information deficit. Over the last decade or so, this issue is almost solved, thanks to the internet. It took much time, if it was possible at all, to get certain information from companies.
The pros had an edge. Nonetheless, the broader masses fail to earn money with stocks due to different reasons:
Overconfidence / hubris: many believe to have all the necessary information to justify a stock investment simply by looking at the profit and loss statement and maybe add the PE ratio. However, a serious stock analysis is complex and requires some experience.
Bad mindset: Human beings are driven by emotions. When things are going bad on the markets, many sell. When things are going (too) good, they buy and continue to buy.
Another thing is, they do not hold onto their strategy. When in one year tech stocks turn sour, they get sold often close to the bottom in order to reallocate to dividend stocks which in turn had a great return. What then happens is that the tech stocks start to turn up again and that the dividend stocks underperform or even fall.
Investing in numbers, not businesses: If investing were mainly about numbers, likely everyone with a business administration or economics diploma should beat the market by a huge margin. It is striking that many people even don’t know what the companies are doing, what their competitive edge is (or whether there is one at all). These all make it much harder to anticipate the future of the business in question.
Timing the market and macro investing: Many people try to time the market and act proactively to any political events, wars or other sort of news. If investing based on these aspects were so easy, economists would be unbeatable. Most often especially these people are very bad investors, because the stock market has its own rules.
Alan: Let’s talk about the current environment. The S&P500 is currently near its all-time high, volatility is pretty low and near a multi-year low even (we are talking shortly prior to Christmas 2023). Are these signs important for you and how are you positioned? How do you make sure not to be misdirected by your emotions?
Daniel: Because in my earlier life I have been a poker player, I am completely without emotions when it comes to investing, even if I am handling bigger sums. Where the S&P500 currently stands, how volatile the markets are, etc. – I don’t care.
I am focussing solely on the companies in my portfolio, how they are doing in their businesses and also on my watchlist. This strategy paid off greatly over the last years, because I often have shown really bad timing with my calls. Sure, I always have an opinion regarding the current environment, but I don’t act or react to it as I am practicing buy and hold.
Alan: What’s your take on reading posts and comments like “the greatest generational buying opportunity” or “I am buying the dip aggressively”?
I am talking about mainstream stocks like Coca-Cola (ISIN: US1912161007, Ticker: KO), but also hefty losers like 3M (ISIN: US88579Y1010, Ticker: MMM), Verizon (ISIN: US92343V1044, Ticker: VZ), PayPal (ISIN: US70450Y1038, Ticker: PYPL), Walgreens (ISIN: US9314271084, Ticker: WBA), tobacco stocks or some prominent fallen angels from Germany? Juicy dividends or pure ignorance?
Daniel: Usually with a shallow smile, because you can see here clearly why a certain group of people has no success with investing in stocks. They only look at the current share price and the PE ratio while spotting “opportunities of the century” and “no-brainers”.
When I face them in my live streams with some figures from the balance sheet for example, especially regarding companies like Fresenius (ISIN: DE0005785604, Ticker: FRE), Bayer (ISIN: DE000BAY0017, Ticker: BAYN) – both from Germany – or 3M, they often shine with a lack of knowledge.
Especially here in Germany, the topic of dividends is a tough one, because many people do not even understand dividends, that they are a form of profit sharing and not a substitute for interest, but also no gifts. Many just look at the history and the current yield and invest based on these aspects, a fatal approach.
Alan: Do you prefer a concentrated portfolio (if so, how many positions circa?) or ETF-like compositions?
Daniel: Personally, as said, I am investing in a concentrated way. Currently, I have 17 stock positions in my portfolio. However, my plan is to reduce them more towards 11–13, because I am of the opinion that with a focussed strategy, you have the highest chance to outperform. It is easier to find one outperformer than two or even three.
Alan: Which three stocks are your favorites currently and why? How much potential do you see?
Daniel:
- Microsoft (ISIN: US5949181045, Ticker: MSFT): No stock has such a favorable risk / reward ratio from my perspective. The biggest potential over the next years can be found in the cloud business, which is not only strongly growing, but it is dominated by just a few competitors.
- Alphabet (ISIN: US02079K3059, Ticker: GOOGL): Currently, the best business model on earth. Statistically, every day there are more search inquiries than people on the planet. With every search, you get a full set of ads. Strong margins, no alternatives or threads, growing market, future proof. Way more is not possible for this business.
The biggest potential lies in AI (through its subsidiary DeepMind) as well as this incredible treasure trove of data which is generated each day. Data is the new gold or oil. - Amazon (ISIN: US0231351067, Ticker: AMZN): “Always day one” is the practiced motto. Amazon still feels like a start-up with an insatiable hunger for more. The biggest potential here are the ad market, as they are currently the fastest growing ad company of such a size and the strong cloud IaaS business which they invented.
Besides, I think that they will be able to increase margins in their core e-commerce business over the next years.
Alan: How much are social networks influencing your personal investment decisions as well as your idea generation?
Daniel: The latter, the idea generation, strongly, however, my investment decisions in no way. Everyone is solely responsible for the own investment decisions and should act accordingly. One can use the internet well to source lots of information, but other opinions should never have the final say in your decisions. Ideas of course are always welcome and for this part, the internet is a great platform.
Alan: Please answer to the following terms with just the first few words that come to your mind:
- Fundamental analysis
- Energy stocks
- High dividend yields
Daniel:
- Fundamental Analysis – my passion and for me the only way to look at stocks
- Energy stocks – uninvestable
- High dividends yields – an alarm signal
Alan: Tell us a bit about your own work, how and why did you start your own blog?
Daniel: I’ve founded my YouTube channel while being unemployed in January 2020. At that time, I was on a marketing seminar for three months to discover something new. Because I had lots of spare time, I thought that trying is not dying.
Without any prior experience in video recording, presenting, video cutting or YouTube, I started it. My first analysis was about Amazon because it was my favorite stock at that time. I also found out that there was rather little analysis about stocks on German YouTube channels. This first video took me twelve days until it was finished.
Despite very few clicks, I resumed. After only two months and the imposed lockdowns and practically the whole nation sitting at home while stocks collapsed, my channel did the opposite: it exploded. In just a few months I hit the 10,000 subscriber mark and towards the end of 2020 even 15,000 had clicked the button to follow me.
Due to my channel starting to pay off financially for me, I decided from April 2021 to do this as my main job and to upload every week a new video to entertain YouTube Germany with stock videos.
Financially, it is quite lucrative, however and not to be underestimated, it requires lots of effort. I am spending on average 50–60 hours a week (sometimes more) to produce my content.
Alan: Thanks a lot, Daniel, for your time, this interview and of course our collaboration in general. It was very insightful to hear / read the thoughts of another investor and colleague. All the best to you!
Daniel: Thank you, All the best to you and your readers, too.
Subscribe for free to Daniel’s YouTube channel (see here, German language skills required), to never miss a new video. From time to time, Daniel is doing live streams where you can ask him anything.
Conclusion
It was a very insightful Q&A with Daniel. Thank you!
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