Motley Fool Hidden Gems Investing - Meet the Fool: Asit Sharma

Episode Date: June 15, 2024

How do you go from writing poetry to reading 10Ks for a living?  Asit Sharma is a Senior Analyst at The Motley Fool and a frequent guest on the show. In today’s episode, Asit talks with Mary Long about “the long and winding road” of his investing journey, mistakes he’s made along the way, and advice for navigating a career pivot. Have an analyst you want us to feature on an upcoming “Meet the Fool” episode? Want to share your own investing journey with us? Send us a note (or a voice recording!) to [e-mail] Also: Join Stock Advisor, The Motley Fool’s flagship investing service, at www.fool.com/asit Host: Mary Long Guest: Asit Sharma Producer: Ricky Mulvey Engineer: Tim Sparks Tickers mentioned: AMZN Learn more about your ad choices. Visit megaphone.fm/adchoices

You've got to try breakfast at A&W. You've got to try breakfast at A&W. And what better way than with the delicious Pret Organic Coffee? Starting with just one dollar, all day, every day, now until December 31st. You've got to try breakfast at A&W. At participating A&W locations in Ontario. If you're looking to get into this business, it's just try to be a synthesis and not a reductionist.

And what I mean by that is take different learnings from your life and apply them to the narratives you hear about a company and start looking at what might be an outcome of a business performance. It takes some time. It takes like three years to get a feedback loop on how good you are. I'm Mary Long, and that's Asit Sharma. a senior analyst at The Fool who works on our Stock Advisor portfolio. This weekend, we're spending some time with a couple of the analysts you hear from regularly

on Motley Fool Money so that you can get to know them even better. I caught up with Asit recently to learn more about how he went from writing poetry and reading esoteric novels to becoming a Foolish analyst. We also discuss what he gained from being broke, his initial thoughts on Amazon, and lessons learned from early tries at entrepreneurship. Also, we'd love to hear about your own investing journey. Send us a note or a voice recording at podcasts at fool.com. That's podcasts with an S at fool.com to tell us about how you got to be the investor you are today.

Asit, I'm glad that I get some time to chat with you about the path that you took to wind up where you are today, because you've alluded to me many times that it was a long and winding road, but I don't actually myself know what that road looks like. So let's zoom out. Tell us about this road. How did you wind up in a role as an investment analyst? Mary, it's a great question for anyone who's in this industry, because I think there's nothing in the middle. There are straight paths to being someone who makes investment choices. And then there's the other type, which is like these long paths that are very circuitous and go in unexpected directions. So I'll start with a question you'd asked me to think about, which is how did I first

get started in just the idea of investing? Was it like through an early job or as a hobby? And I'll say that when I was a teenager, like a lot of other folks, I sort of started dabbling in stocks. I think I bought my first stock before I had any facial hair. So maybe 12, I'm guessing. And I, at that time, was interested in mutual funds. This is before the ETF explosion. I'm sort of dating myself here. And I bought this company's mutual fund. It was the 20th Century Ultra Fund. It's since been renamed. I think it went into a family called

the American set of funds. I had somehow scraped together a couple hundred bucks. And I think I probably cheated a friend out of some rare comics to do this, but I bought this mutual fund and it really like just performed so well. I would look at it a few years later, the stock price was going up. I had set it with my local broker, which I bought it through. Actually, I went physically into this dude's office, plunked down my money and we had set it to reinvest any dividends that it gave. And it really just sparked my interest. I'll return to what happened to this as we move along. But that's how I sort of got interested in all of this. Okay. So how did you first find this ultra mutual fund out of all of them? How'd you pick

that? Yeah. It was the old throw a dart exercise. Back in the day, you would go to the public Library and they'd have the daily newspaper on racks, on these beautiful wooden racks. And you'd pull out the Wall Street Journal and look at the stock prices. And they started having mutual fund prices. And I think that's how I stumbled on it. I wish I could say to you that, Mary, I was just such a genius. I mean, at that age, it was so clear to me that this fund was going to outperform. I looked at the holdings, the track record, the management. I mean, it was obvious, but it wasn't. It was just a guess. I like the name, I think. In those days, ultra sounded more than bland or it's going to do okay. This is ultra. So you like the name, you throw a dart at the wall,

and it turns out that this mutual fund winds up doing really well. Was it seeing those awesome returns that kind of got you hooked and then set a fire to pursue this as a career? Or did that career pursuit come later? I think it planted a seed. I had started with a passbook savings account and I was fascinated by how interest worked, that you could take your passbook back to the bank. Again, I'm dating myself. But when I was a very small kid, like seven years old and you had a summer job, some of you who are listening today will quite remember this. You would take your cash to the bank and the teller would write the amount in the passbook. And sometimes when you would go back, he or she would credit the amount of interest you had earned.

that was really fascinating to me. And then this also planted a seed. I sort of forgot all about this. I've always had a love for literature. I majored in English literature in college. I went to grad school for a master's degree in English literature in NYU in the early 90s. And this takes us to where I sort of circled back to investing. So how'd you circle back? You graduate grad school and you've got a master's in literature, you've got an undergrad degree in literature, and you set off into the big wide world, what falls into your lap then? Yeah, that's basically the story.

I actually didn't quite graduate on time, but that's another podcast segment. We can talk about that after you and I finish taping. But I was about to graduate and I was broke in New York City. I had a beautiful, small apartment. It was the size of a closet on Sullivan Street downtown. And I was looking at trying to pay my rent for the month. I went to the school's database in the graduate school where they were placing people who had these types of degrees and an investment house called Payne Weber, very old, respected investment bank, which had grown to be one of the largest investment bank slash brokerages in the country, had an opening for people with editing skills, communication skills to come in and edit their mutual fund newsletters. So, I applied for that job.

I got it. And suddenly, I found myself walking into this amazing building, Midtown Manhattan. This is on Avenue of the Americas. But New Yorkers who are listening will say, there's no Avenue of the Americas. You're talking about Sixth Avenue. So, I walk into this building, a few doors across the street down from Rockefeller Center, an amazing lobby filled with glorious art. We'll get to that in a moment.

It didn't look like a brokerage company at all. It looked like a museum. And I started working there and I would go around interviewing investment analysts and those who actually managed money. And they would tell me how their funds did that quarter. And I'd write it up. It would go out to subscribers at the investment bank and the retail brokerage products. And that's how I got started in the investment world.

That was my first so-called investing job. It actually was on the marketing side of investing. And so then how did you make the leap from the marketing side of investing to the actual analysis? Yeah, I found myself broke again. So after a year, I really loved that job, but it was paying some ungodly low amount. I think like $9 or $10 at that time in New York City was not enough to live. So I ended up, I got married around that time. My wife and I worked on a small business idea that was a lot of fun, a small publishing house that the internet was just taking off. We tried to do it online before there was much of an apparatus or market for that. It didn't work. So, we went back to my hometown of Raleigh, North Carolina, and I started life again. I was now in my late 20s, early 30s, right around 30. And I went back to school. I took some more finance courses. I got certified public accountant. I started working in an old school accounting firm, and that's where I really got my start in investing because that's where I learned about financials, balance sheets, income statements,

statements of cash flows as well. And that was a really great experience for me. I love that we get this look at your pre-investing career and that you studied literature and that is still a love that I know that you have to this day. Do you view that passion as something that's separate from the investment analysis world of your life? Or do you think that the skills that you learned in that degree and in that field set you up for success somehow in your current job? I think they're all related. I think that the best investors that I've come across are those who are multidisciplinarians.

Either they've got a bent for history or kite surfing or they're really amazing foodies. There's some passion that they have that kindles this idea to learn, to continually learn. So I think the passion for literature maybe goes hand in hand in this business because you're anyway always trying to figure out what the narrative is. Management's got a narrative. You're trying to suss that out. Does this make sense or is it BS? You've got a narrative. I think the company can do X. The market has a narrative. We think the company is worth Y. So, some of this loving stories, loving the idea of a story really has gone hand in hand with the lessons I learned in analyzing financial statements, working different businesses. I also

worked later in my career as a person in a middle market company, manufacturer, where we had a lot of like colorful narratives. Our white collar portion of the company, the finance team, was just adjutting our offices, the warehouse part of this company where all the floor workers were, and we had a lot of interchange. So it was like part of my day was trying to figure out, okay, are we going to be able to make payroll next month? So we're going towards the great recession here. And the other part was just listening to the stories of the guys who were running the printing presses in the building, which takes us to like the next part of my career. I found myself broke. The Great Recession happened. There's a common theme.

There's a theme. I hope I'll be able to retire someday. And so many companies had just such an upheaval in old school manufacturing industries during the Great Recession. I ended up leaving the company and put out a shingle as a consultant. And I started working with small businesses and advising them on finance and strategies. So that was another learning experience for me. And at the same time, I started writing for fool.com. So the Motley Fool had a web service, a web blogging network. I joined that.

And for 10 years, I wrote thousands of articles on every conceivable topic and paid some dues there. I learned a lot there as well. So let's maybe talk about early lessons and mistakes. So when you when you're starting off in your investment career, you have any stories of stocks that you picked that I'll take positive stories where the stock turned out really well. We've already talked about ultra. So table that one. But maybe also stories of stocks that did not do so well that you've learned some greater lesson from. Well, you know, Mary, I want to talk about a mistake. And this is something that I've learned from a lot of other Foolish investors. There's a great thing here at The Motley Fool. If you spend time with any of our analysts, they love to talk about their mistakes. Tom Gardner models this behavior and so many others, because if you can get to a point where you can look at your

mistakes without all the cringe and learn something from them, it makes you stronger as an investor. So this is a mistake that I made personally during the time I was writing for The Motley Fool for those 10 years. I looked at Amazon.com time and time again and never bought it. It was such a big mistake. And in fact, I wrote articles really panning Amazon.com. I'm going to talk about a humiliating story that I wrote. It's called Ground Control to Amazon, Seattle, We Have a Problem. I'm going to read you some of the subheads of this article. It's hard to ignore signs that Amazon stock may soon revisit earth. elusive profits from other services. There is no there where Amazon is going at its current

valuation. It's time to value Amazon for what it is today. Final thought, a rational course of action. In this article, Mary, I actually compare the PE ratio of amazon.com, not only to Cisco systems, which I trumpet as a profitable tech company, but I compare it to the great pyramids how high they are. I compare it to the stratospheric stunt that Red Bull pulled when it had Felix Baumgartner jump out of his stratospace capsule. I really tore up this PE ratio. I was just looking back the other day at Amazon's performance since I wrote that article, and it's up some 1200%. Nice. Enough said. I want to say, let me say, no, let me take that back. One more thing.

Hubris is like the bouncer at the nightclub of elite investing. I mean, if you want to join that club, you can't have an ego. You can't have this kind of like self-satisfied, arrogant air. You've got to check that at the door and learn to be humble because this business is going to teach you every single day that you don't have it figured out. So you've moved around in your career. You've collected different degrees. You've worked in different industries.

What advice do you have for people who are on one career path now and are hoping to break into investing as a career? Or maybe investing is not even on their radar, but they're just looking to make a career pivot. Any advice for someone who's looking for a career change and how to navigate that? Yeah, absolutely. The first thing I just want to set the table stakes here. It's not that hard.

If I can do it with my background as someone who used to write poetry and read esoteric novels, you can do it if you want to be an investor. The second is to, I've already said this, but to pursue a passion outside of investing. So, start learning about how things work in the stock market. There's lots of great books that you can read. We often talk about books like One Up on Wall Street by Peter Lynch. That's a great starter book. Read Warren Buffett's Annual Shareholder Letters.

That's another great source to learn. And go to the web and start figuring it out. It's not rocket science. Don't have a fear of financial statements is the second one. anyone can actually leaf through a set of financial statements and start to understand what they're communicating. So don't let that scare you. Spend some time with those. So embrace what's difficult because it's actually not that difficult. I think listen to podcasts. There's this amazing podcast called Motley Fool Money, which I highly recommend. If you listen to that

daily, you will increase your knowledge sort of exponentially. And I'd also say if you're looking