[Park Chung-hoon's DotdanBook] For Those Hesitating to Buy Samsung Electronics Stock

Phil Town & Daniel Town's 'Stock Investment Lessons for Father and Daughter'

Daniel's One-Year Investment Training

Dad Phil's Kind Explanations Even for Difficult Questions

Eight Months of Learning the Basics of Value Investing

Collecting and Studying News of Interested Companies

Also Learning to Let Go of Prejudices About the Wealthy

The Secret Curriculum of a Master Investor

Setting the Price for the Entire Company, Not Just One Share

Calculating Flexible Realization of Returns

[Asia Economy Reporter Park Choong-hoon] Recently, among office workers, the hottest topic is Samsung Electronics stock. Where is the bottom? At what price should one buy and sell?

Paradoxically, the stock market crash caused by the novel coronavirus disease (COVID-19) has instead instilled hope for a big win among people. The belief that it is a company that will never fail has led to a doubling of so-called 'Samsung Electronics debt investment (borrowing to invest)'.

Value investing is based on trust in a company and involves long-term investment. It is an investment strategy of buying stocks at prices lower than their intrinsic value based on financial fundamental analysis. Warren Buffett, the 'investment genius,' said, "The basic concept of investing is to regard stocks as the company itself, use market fluctuations as opportunities, and secure a margin of safety." Value investing shines especially when pandemic fears sweep across the globe.

However, although it sounds easy, recklessly jumping into stock investment is very risky. Above all, difficult words and numbers made up of alphabetic acronyms make it hard to enter stock investment easily. It feels like a high wall to investment novices.

Daniel Town, who wrote the new book Stock Investment Lessons from Dad and Daughter, was no different. Daniel, who was particularly weak in math, learned wisdom from her father Phil Town, a value investor, including Warren Buffett and his 40-year business partner Charlie Munger.

Stock Investment Lessons from Dad and Daughter, which ranked on the New York Times bestseller list in 2018, is a book that honestly records the conversations between father and daughter and Daniel’s feelings as she trained in investment for a year. It is an introductory book that awakens the charm of stock investment to 'math dropouts' who lack confidence in numbers and reading financial statements.

However, rather than a typical investment guide, it feels like a Hollywood comedy movie. The author's storytelling shines as he humorously unfolds family matters, daily life, and the awe of encountering investment knowledge for the first time.

As usual, Daniel became interested in stock investment because she longed for financial freedom. She was a startup-specialized lawyer working 80 hours a week. Her body was exhausted, and financial pressures such as student loan repayments continued.

Phil, her father who had been an investor since the 1970s and led prominent investment groups, seriously encouraged his daughter to start value investing. Phil, a Vietnam War veteran, had learned value investing from an investor he met while working as a river guide in the Grand Canyon after his discharge during difficult times.

The father explains Daniel’s sharp questions with very simple terms and analogies. First, why should one invest directly rather than entrusting full investment authority to mutual funds or robo-advisors? Second, what happens if one simply copies Buffett’s investments? No matter how childish the questions, as a 'dad,' he can answer comfortably.

Regarding the first question, the father says that to choose a good fund manager to whom you entrust full investment authority, "you need to understand investing enough to evaluate that person." The answer to the second question is this: those who copied Buffett’s investments exactly made considerable profits. The benefits of investment education do not stop there. It also provides abundant knowledge useful for all investments, whether stocks, real estate, or unlisted companies.

Daniel enters a one-year investment training. However, until more than half of Stock Investment Lessons from Dad and Daughter is passed, there is no scene where Daniel actually invests in stocks. She only opens a stock account online after eight months of training. Before that, she focuses on mastering the basics of value investing.

The first month of training starts by writing about what she would do if given financial freedom and how she would feel when that happens. She makes a list of companies that match her values at home. She creates a folder on her computer desktop to collect news about companies she is interested in.

The journey of investment training also includes overcoming the past. She faces the pain caused by economic hardship, expresses gratitude to those who helped her stay on the right path, and focuses on letting go of prejudices about wealth.

Daniel also learns Munger’s investment principles. Munger’s main principle is simple. Anything can happen in life. Therefore, one must be able to easily predict the long-term prospects of a company. Hence, one must be able to buy stocks at prices lower than the company’s value. A market crash 'event' may occur someday. Buffett holds $100 billion (about 127.3 trillion KRW) in cash to prepare for such an event.

The ultimate goal is to set the price for the entire company, not just one share of the stock she wants to invest in, and to calculate whether she can flexibly realize returns over the investment recovery period. This is by no means an easy process.

When she finally succeeds in 'price estimation,' Daniel joyfully pops open an expensive champagne cork. After about a year, when she is ready to build an investment portfolio, she is as eager as wanting to unwrap a gift placed under the Christmas tree on Christmas morning.

In times dominated by fear and greed like these days, reading a book containing the wisdom of master value investors is very helpful. Daniel learned through her investment training that "anyone can succeed in investing regardless of age, occupation, income, or mathematical talent." She also learned that "investing is not just a simple skill but an essential condition for completing one’s life journey."

Isn’t life about investing in something? Whether it is a lover, a hobby, or any choice, dreaming of a better future is the same. In that sense, stock investment is one of the attractive options.

Phil and Daniel currently co-host a podcast about value investing. In a recent broadcast discussing the stock market crash caused by the COVID-19 situation, the father advised his daughter as follows: "First, keep your surroundings clean, and then buy the stocks you purchased for value investing."

(Written by Daniel Town and Phil Town, translated by Kim In-jung, FN Media, 18,000 KRW)