🎙️ Interview with | Quality Investing With Aria
Hello friend! 👋
My name is Yorrin, also known as ‘‘Fluentinvalue’’.
I am pleased to have you here for another interview! Today, we’re interviewing Aria from Quality Investing With Aria.
Check out the previous interview here:
If you’re not following me yet, consider doing so. I provide FREE content to help and inform you in your investment journey. From beginner to advanced, all info will be helpful. :-)
Aria
I’ve been interacting with and following Aria for a while now and love his tweets, YouTube videos, and the humor that comes with every tweet. In this interview, you’ll see his sarcasm and humor reflected. Aria knows his expertise and shares it wholeheartedly on his X. Aria, just like me, invests solely in quality businesses, buying wonderful companies at fair prices and letting the businesses run in its portfolio.
In this interview, we will:
Get to know Aria
Understand where his passion is coming from
Dive deeper into his investable universe
Get to know his investing methodology
Get insights into his risk strategy
Read how he handles criticism
And much, much more!
If you’re not yet following Aria, check out his X & YouTube channel:
Click here for Aria’s X
Click here for Aria’s YouTube channel
Tell us a little bit about yourself. Who are you? How old are you? Where are you from? What are your hobbies besides investing and content creation? What about education?
I’m a Persian dude from Toronto. I love investing and fell in love with it at 16. I prefer going to the gym, spending time with family, and investing. Business history is also very interesting to me.
Can you share your background and what inspired you to start investing?
My friend told me $GM is undervalued based on P/B valuation LOL. Then, I started investing shortly after. Made $150 on AMD in 1 week and said, “Wow, this investing sh*t is SO EASY” – famous last words.
What motivated you to create content about investing on YouTube and X (formerly Twitter)?
I realized there's a real gap in the market for actual qualitative analysis. 90% of finance content revolves around the fundamentals, stock price, current PE, and revenue growth rates. No one actually dives into the moat or competitive advantages of the business; no one does a QUALITATIVE analysis of these businesses. Also, there was a real gap in the market to “not waste your time.” The average finance creator spends multiple minutes per video stuffing their sponsorship down your throat. I never do any of that.
Can you delve into your journey and the key experiences that shaped your passion for investing? How did those experiences influence your investment philosophy?
I’ve been enamored with the flow and existence of money since I was 8.
I’m also relatively risk averse and tend not to be impacted by stress from losing. Hence why I held through a 40% drawdown in my portfolio and didnt sell anything. I am also extremely concentrated atm, which speaks to this risk-on quality of mine.
What does "quality investing" mean to you, and how did you develop this approach? Can you provide specific examples of companies that exemplify this concept?
Terry Smith was the reason why all this quality talk started for me. I’ve watched almost every shareholder meeting of his and read his book. A quality investment is a business that can earn above-average returns for an extended period due to some differentiating factor within that company (moat). My spin on quality investments is not only to buy quality but to buy quality that is growing. People are quick to pile into SPGI, but for a cheaper valuation, you can buy Salesforce, which doesn’t have a multi-decade-long runway of growth and moat that guarantees those returns. But with excellent clarity, I can tell you that Salesforce will grow faster than SPGI for the next decade. My investment horizon isn’t 30+ years. And if it were, I’d buy the index, not SPGI. Therefore, I believe you should seek quality, wide-moat businesses that are growing sustainably in the double digits.
Can you describe your detailed framework for evaluating a company's business model and financial health? How do you assess qualitative factors versus quantitative metrics?
Yeah, so for starters, it needs to pass my moat check. I look primarily for network effects, scale economies, cost advantage, pricing power, “standards” moat, brand to a lesser extent, etc. Assuming the business checks those boxes hand over first, it’ll move on to qualitative metrics. odds are the financial statements aren't gonna be perfect. But in general, I look for more cash than debt or cash flow that can cover the debt in 1-2 years (e.g., Mastercard). I would like a business with high margins because it’s much better to produce something at $2 and sell it for $10 than to produce at 6 to sell at $ 10. (gross margins of >60% operating and FCF margins >25% are preferred). I don’t care about ROCE ROIC. They can easily be manipulated. I would like to look at a version of ROCE where I strip out goodwill and intangibles. Frankly, I don't care about this metric at all. I’ve invested in businesses with 5% ROCE because this metric is overrated and flawed in many ways. Stock-based comp is not an issue if I strongly believe and trust management’s word that it will immediately decrease. my patience for this to change for the better is 12-24 months, not more. Clear examples of this are AMZN CRM and UBER right now. All have diluted heavily in the past few years and are reversing course. I believe this trend will continue for all 3. In summary, I analyze the moat by reading up and watching as much as I can on the company via 10ks, substacks, Twitter threads, podcasts, etc., to get a grasp of the moat and quality of the business. Quantitative: I study a handful of metrics and try to build a framework for where those metrics are trending (e.g., how much revenue will grow and for how long, should we expect margin expansion and buybacks for the bottom line figures, etc.). To do this, I use my sponsor Finchat.io using this link here 😉😉.
What research methodologies and tools do you rely on to uncover high-quality investment opportunities? Can you walk us through a recent case study of a company you analyzed and invested in?
Pretty much answered this in the above question. I haven’t delved into any new companies recently. CRM the past couple months, the only thing I left out is that i read up on reddit threads of people using the software when its a B2B company / try to find people in my social circle that use the software or would otherwise know about it. When researching FICO and EFX, I talked to a friend who is a banker, which helped. Also finchat!
Can you elaborate on your risk management strategies and how you protect your portfolio during market downturns? What specific measures do you take to mitigate various types of risk?
How would my gut feel if the stock dropped 30% in a few weeks due to an unforeseen slowdown in growth or another similar catalyst? In the case of CRM this happened and i bought the living fuck out of that dip. In the case of SBUX, it went down 12%, and I sold it right away because the fundamentals had deteriorated due to an unforeseen risk that I did not consider. These two experiences have taught me not to buy if I am unwilling to double and triple if the stock draws down 30% or more. How would my stomach feel losing up to $10,000 just like that?!
How do you approach portfolio construction and asset allocation? What factors influence your decisions to rebalance or adjust your holdings?
I DON'T BELIEVE IN DIVERSIFICATION. BUY THE BEST OPPORTUNITY AVAILABLE TO YOU UNTIL ANOTHER OPPORTUNITY SURFACES, OR IT BECOMES 30-40% of your portfolio. I've done this with both AMZN and CRM. Both have worked out wonderfully. AMZN makes up 38% of my portfolio, and CRM makes up 31%. I bought both when I thought they were the best opportunity in my portfolio. Only once CRM reached 30% did I look elsewhere to deploy my cash despite still being at attractive valuations.
What major market trends and economic indicators do you monitor, and how do they impact your investment decisions? Can you share your perspective on a current trend and its implications?
I don't look at macro at all; I like to occasionally listen to Josh Brown’s podcast TCAF. I think he is a good representation of the mass’s emotional state. Once every few weeks or so, I'll check up on the fear/greed indicator. Purely out of curiosity. I do not rely on these indicators to decide when or when not to invest. I always invest my cash as soon as I get the best opportunity. If there are none, it goes into SCHG, the growth ETF.
How do you stay resilient and adapt your investment strategy amid market volatility and economic uncertainty? Can you share an example of how you navigated a particularly volatile period?
Yeah, I lost 40% of my total portfolio in 2022. But held through it, I have an iron stomach as long as I believe in the stock and its fundamentals, or at least believe that the fundamentals will continue to improve after some short-term headwinds. Another few volatile losses I’ve had was PYPL 67→ 60. I held that one for a year and then swapped it for GOOGL at 132. I think you can see how that outcome has turned out, SBUX sold around $75, initially went into SCHG then ended up into CRM sub $225 a share. Volatility does not impact me too much, as the fundamentals are there. Case and point in CRM. But if the stock is down big due to fundamentals, it's like a mosquito that doesn't go away; it bothers me to my core, and I have to get rid of it.
How has creating content on YouTube and X influenced your investing practice and vice versa? Can you provide insights into how your audience has impacted your investment approach?
It hasn't impacted me much; I do not optimize to lean toward my audience’s perspective of what's a good investment. In my eyes, I’m trying to maximize portfolio returns, and my YouTube channel is simply a documentation of my decisions, not the other way around. Having 6 holdings, with the top 3 making up 80% of the portfolio, is quite contrarian to your average FinFluencer.
What strategies do you use to engage and educate your audience about complex investment concepts? Can you discuss a specific content that resonated strongly with your followers?
It's probably my valuation framework. People spend too much time analyzing companies and looking solely at the valuation. My spin on it was to factor in the underlying growth of the business and compare. Of course, you have cases like Ulta Beauty that trade at a discount to its growth, but in my opinion, that is justified because it’s a narrow-moat retailer. Does that mean you can’t make money?! No!! It just means you need to tread more carefully and monitor and babysit that holding a little more, looking for possible signs that they're mismanaging the business. I think the real mis pricing is when a wide moat business trades at a discount to its growth, this is evident in the CRM dip. It was trading at a low 20s P/FCF or 4.5% stock based on adjusted FCF yield. Yet, the business grew FCF 43% YoY and had guided for 23-26% Growth for the calendar year 2024. Sure, it might not be sustained, but the slowdown will not dip below the high teens, in my opinion. So even if you assume a modest 16-18% FCF growth rate for the next 3-5 years. The stock was trading at a discount to that value. Add on the fact that TRPO (the remaining revenue in the pipeline) had re-accelerated to 15% Revenue growth. Their pipeline was strong, the FCF story matched up, and it was SO FUCKING OBVIOUS. It’s a SaaS business with 95% recurring revenues. It's not like Starbucks or something where there is a very real risk that in a consumer spending mini recession, their sales could negatively be impacted for a few years, and it would take until 2027 to break even on revenue. >95% recurring revenues, bro! So anyways enough rambling, the best piece of education i could give, look at the Valuation ÷ Estimated Growth. And ask yourself, is this reasonable given the moat and the predictability of my assumptions? This is for CRM, Mastercard, or some other recurring revenue business. The assumptions are almost certain, so paying up a little is okay. But for ULTA, you should demand a massive discount. Thats all.
How do you handle criticism and differing opinions about your investment choices from your audience? Can you share a story of a challenging interaction and what you learned from it?
SOFI cult came after me. Honestly, I'm not commenting on this; I won’t even engage with these people in the future. Bill Murray said it best “It's hard to win an argument with a smart person, but it's damn near impossible to win an argument with a stupid person.” If the other person doesn’t have a ration or reason or understands basic financial metrics, they can’t be told otherwise.
Who are the key individuals or mentors who have influenced your investment journey? How have their teachings and philosophies shaped your approach?
My family friend initially got me into investing and has been a great source to bounce ideas. Furthermore, Dev Kantesaria, who taught me qualitative analysis; Terry Smith, who taught me to compare my weighted average portfolio to the index; and Bill Ackman, for the countless quotes that ring in my head daily
What are your long-term goals for your investment portfolio and content creation efforts? How will you expand and evolve in the next five to ten years?
Five to 10 years is a while. With the portfolio, I will continue adding as much money as possible to every paycheck and invest in the best opportunity. Gradually, I’ll buy more ETFs. With YouTube and Twitter, I only focus on the now and make things happen as I go. Following Amazon's footsteps, I’d like to sell a subscription to my followers at a low price that provides an extreme amount of value via spreadsheets, calculators, reverse DCFs, discord access, exclusive content, etc… “An offer so good, people feel stupid saying no”.
What has been your biggest challenge as an investor and content creator, and how did you overcome it? What key lessons did you learn from this experience?
Holding periods have been interesting, and I’ve bought and sold a lot of stuff recently. Moving forward, I will not buy and sell as much because I’ve finally consolidated to a point where I will keep my holdings as they are.
How has being part of an investing and content creation community enriched your experience? Can you share an instance where networking led to a significant insight or opportunity?
Oh man, I won't share too many details about this individual. But we’ve become great friends and often call for a few hours, talking about everything. He’s become a true friend. Unfortunately, he lives on a different continent, so it’s sometimes difficult to talk. Nonetheless, we text back and forth frequently. He was a great help in helping me understand Salesforce because his work involves that type of stuff. Great guy.
Can you provide a detailed analysis of sectors or industries you view as undervalued and explain the underlying factors driving your perspective?
Software, bro. Software is the best industry to invest in, so software has many advantages. Also, shout out Mastercard. They’re deeply undervalued, below 450.
Finally, what message or advice would you like to share with your audience, especially those just starting their investing journey?
Buy the S&P 500. Don’t follow me into stocks.
⚡Lightning round
Would you rather allocate your entire portfolio to a highly-researched stock you believe in or in a widely diversified index?
Ill go 100% AMZN no problem.
If you could have one superpower to help you with investing, would you choose the ability to predict market trends or the ability to always find undervalued stocks?
In the wise words of Terry Smith, even if you knew what would happen, you might not know the market’s reaction to such news. The second option is easy.
If you could only invest in one sector for the next 10 years, which one would it be and why?
Software/Tech it’s a fucking brilliant business model.
If you had to join a billionaire's investment team (e.g., Warren Buffett, Elon Musk, Jeff Bezos), whose team would you join and why?
Bezos, I like his personality; he is a smart man.
✅ Do’s and ❌ Don’ts
Do’s
Make lots of money and invest as much as you can.
Concentrate your portfolio on less than 10 holdings.
Research stocks more than others are willing to go, try to find the CEO’s interview on CNBC at their old job. That’s how fucking deep you need to go.
Have a grounded framework and a list of x items as to why you invested in this business. Babysit and monitor your holdings quarterly.
Buy fast-growing businesses; if you are picking stocks, your companies should hand over fist be growing faster than the S&P; how the fuck else are you gonna outperform.
Don’ts
Diversify to like 25 holdings; you’re not a closet ETF, and holdings below ~3% ish are meaningless to your total performance
buy slow-growing businesses. I do not care how many buybacks they do. 5% rev growth is garbage.
Buy broken businesses that are facing big issues, fuck Starbucks, fuck Nike, fuck Alibaba, fuck PYPL. Your opportunity cost on any of these is to own Mastercard, google, or any other wide-moat, high-quality business that grows every quarter on autopilot. Why make your life difficult? In investing, you’re not rewarded for the difficulty of your thesis → “WELL ACTUALLY PYPL IS GONNA INCREASE ITS TAKE RATE AFTER A TROUGH IN Q3 AND THEN THEYLL RELEASE THIS ADS PLATFORM AND ALSO THEIR NEW BNPL…” stop bro, just buy mastercard
Dont sit in cash, obviously save some for personal expenses and living costs and what not. But brokerage money? Money that’s in your investment account? Just fucking invest it, man. Odds are you’re losing more money to idle cash than your holdings going down (maybe not, idk). maybe keep <5% cash for fire sale scenarios. Or at least have your money in ETFs, which you are allowed to sell whenever for fire sales.
Don't buy cult stocks you don’t understand just because an influencer sounded confident when talking about it. Clear examples SOFI PLTR TSLA. Also, just cuz the stock went up doesn’t mean shit. If the PE goes from 50→100 on TSLA, the stock will go up 100% as a result. Investors are simply speculating on this asset and its not fundamentally driven, Look at anything buffett has ever said on this type of stuff. Always buy cash flows; never buy because you’re hoping to sell it to another fucker at a more expensive price. Cheers
That is it for today!
Thank you, Aria, for your creative answers, haha! Like I said in the intro, follow Aria on his social media to get more of this type of content. Thank you, Aria, for participating in this interview. I appreciate it, and I appreciate you!
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