Money Talks with Candi Carrera

00:00:04: Hey Luxembourg, let's talk about something that really matters, your money and your future.

00:00:10: Welcome to Money Talks, the podcast that

00:00:12: brings

00:00:12: you honest chats with familiar faces from Luxembourg.

00:00:18: You'll hear stories about big decisions in life and in personal finances.

00:00:22: No jargon, no fluff, just conversations that make sense and get you thinking about your own goals and how to reach them.

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00:00:34: Hello everyone and welcome back.

00:00:35: The story we tell today is that of a tech leader turned into an investor.

00:00:40: My guest in this episode is Candy Carrera, who went from leading Microsoft Luxembourg to building a fintech that uses artificial intelligence to guide value investors.

00:00:50: Welcome to Money Talks, Candy.

00:00:52: Thanks a lot, Michaela, for having me today.

00:00:53: It's a privilege for me to be here.

00:00:55: Let's start with something simple that you do, value investing.

00:00:59: What does it mean and how is it different from other investment styles?

00:01:03: Yeah, so value investing has actually been kind of created by Benjamin Graham in the around twenty.

00:01:09: So he wrote a famous book that is called Intelligent Investor.

00:01:11: And to make it short, value investing is pretty straightforward is you buy fantastic companies at cheap or fair prices.

00:01:17: So basically, you I mean, you buy like twenty five to thirty percent below the intrinsic value of the company.

00:01:23: That's a little bit what value investing is all about.

00:01:26: So you have to determine which companies are undervalued.

00:01:30: How do you do that?

00:01:31: Yeah, well, there are various methods for that.

00:01:33: And I think Warren Buffett has been probably, I mean, Warren Buffett is the chair or CEO of Berkshire Hathaway.

00:01:40: So Benjamin Graham was a mentor to Warren Buffett, and he has become one of the wealthiest, I think it's like top ten still in the world, wealthiest persons on earth.

00:01:49: And he has received the question about how you calculate the intrinsic value of companies probably ten thousand times during the life.

00:01:54: So it's a little bit like... the holy grail of value investing, how to calculate intrinsic value.

00:01:59: So basically, to make it short, there are various methods for calculating the intrinsic value, but the most common one is called the discounted cash flow.

00:02:07: So basically, your project was going to be the earnings in the future of the company.

00:02:10: And then you just calculate back and you compare it with a share price that the stock market is giving you today.

00:02:15: And you say, well, the stock market is probably either extremely excited about it.

00:02:21: So it's maybe not the right moment to buy.

00:02:24: the company because it's just overpriced or maybe the market is actually very emotional and depressed about the company.

00:02:30: and then if you understand the business then maybe it's the right moment to buy the company and hope that over the midterm let's say maybe one, two, three, four, five years, maybe even longer.

00:02:39: That actually the market will correctly.

00:02:41: I mean, a lot of people, I have heard this say is that a short term, the market is a voting machine, but long term is a weighing machine.

00:02:49: So that's, I mean, value investors, they hope that over a certain amount of years that the company will actually be correctly weighed by the market.

00:02:55: And this is how you actually become more wealthy by executing value investing.

00:03:02: Let's say if we look at the top ten fifteen companies which are now listed and which are mostly part of many ETFs currently, how many of those are undervalued?

00:03:13: that's always a question.

00:03:15: i get specific because now on the i mean if we take the sp five hundred in the u.s.

00:03:19: typically which is an index a lot of people look at you look at like what is called the the magnificent seven of the magic seven.

00:03:25: i think that today for me at least and again this is this clear where everybody has to do their own homework for me they're overvalued.

00:03:33: i believe that today it's it's a very steep price tag that you would pay on those companies.

00:03:39: So I think that from the top ten most probably there's going to be maybe one or two that are in the value investing zone.

00:03:45: All the other ones are really what is called in the growth investing zone.

00:03:49: And this is where It's a different perspective on things.

00:03:51: You really have to think how fast, like if you look at NVIDIA, for example, how fast will that company continue to grow in the future?

00:03:58: My opinion, and again, disclaimer here, I don't think that the company can keep a pace of twenty five, thirty, forty percent growth for the next twenty three years.

00:04:07: So I believe that today, if me as a value investor, I would consider that company to be overvalued.

00:04:12: What does it mean long term for value investors?

00:04:14: Because for the others, we know we're looking at ten, fifteen, even thirty years.

00:04:17: Is it the same in value investing?

00:04:19: So typically in value investing, so there are two things.

00:04:23: So when you speak about a time horizon, you can speak about when you will actually make a gain on your investment and then also how you calculate intrinsic value based on the number of years that you are factoring in.

00:04:37: So rough cut of value investor.

00:04:39: Always looks at rough cut between twenty five and thirty years for the valuation.

00:04:43: so a company I mean if you're looking at value investing you typically look at companies that you expect that will still be around in twenty five to thirty years.

00:04:51: Gonna take typical example.

00:04:52: like consumer defensive company so food mean people will have always to continue to drink and to eat.

00:04:59: so this is a type of company that.

00:05:01: A very invest.

00:05:01: typically like and you're looking at the time horizon of twenty five to thirty years in average and there is even academic studies done by a professor.

00:05:08: Professor Foster at the New York University, who has analyzed that even largest companies, they have an average corporate life cycle of twenty years.

00:05:16: So even twenty-five to thirty, factoring that in the valuation, is a little bit over what the actual average on the SPF five hundred would be.

00:05:25: That's one thing.

00:05:26: Then the time horizon, let's say, and let's speak without filters to make money.

00:05:30: Well, actually it depends.

00:05:31: It depends how the market evolves.

00:05:33: So when the market is what we call very hot, maybe you have just to wait.

00:05:39: But when the market, maybe you have the opportunity and that's something that I always do.

00:05:42: I always keep a... pretty strong cash position aside because you never know how tomorrow the market will react.

00:05:48: And then it has happened to me that sometimes after six months already doubled actually my position.

00:05:54: but it can also happen that I had now two companies that I had for seven years in my portfolio for example.

00:05:59: So it really depends also if you like the business and if the market at a certain moment in time because when we speak about valuation sometimes the market also overvalues the company and then you have also to sell the company.

00:06:12: It happened to me in the in with a luxury group that I remember the shepherds were at fifty seven and after six months it was at ninety three.

00:06:20: so the market was fully depressed without valid reasons.

00:06:22: so then of course that's that position only kept for like six months in my portfolio.

00:06:27: What I hear is that you can't really sleep on your investments when you're a value investor.

00:06:31: You have to be awake.

00:06:33: You have to be present and check your portfolio pretty often so that you can seize the opportunities and make adjustments.

00:06:42: It's not like when you put your money in a passive investment and then you can sleep on it.

00:06:46: Well, I think that value investing is nonetheless gets closer to passive investing according to me.

00:06:51: And this is how I look at it.

00:06:52: So something, for example, I also tell my students across the world when they think about using value investing as a method, is I always say that, first of all, think like, if you would have the firepower to buy the full company, would you buy the full company?

00:07:08: Obviously, none of us has the firepower to buy a Nestle or Unilever or Procter and Gamble.

00:07:13: But that's like the first attitude to have actually when you go into it.

00:07:17: And then second thing is like, if stock markets would be just shut down for the next three to five years, would you still feel okay of having invested into that company?

00:07:26: So I think that's the attitude that you need to have.

00:07:28: Of course, and this is also something in terms of, let's say, reassessing your investments.

00:07:34: I mean, I would always recommend to redo it on a quarterly basis because most of the companies, specifically US companies, they provide a full financial update on a quarterly basis.

00:07:44: European companies, they provide a sales update on a quarterly basis and a full financial half so semesterly.

00:07:50: But I think that's a good attitude also to have is every quarter actually to go into your companies and just to reassess, did your initial assumptions, are they still valid or not, in fact?

00:08:01: You've gone from managing a tech giant to creating a tool that helps people invest.

00:08:06: What did you see missing in the world of investing?

00:08:09: Yeah, so actually a lot of things are so missing.

00:08:12: So it's true that I mean I do have a tech background initially and when so when I decided decided just to do something else and now to create this this FinTech company I was.

00:08:24: I'm actually a value investor since twenty five years and I started teaching at scale on the internet like five years ago.

00:08:31: And what I realized when I was speaking to many of my students is that they didn't have a one stop shop tool actually to gain all the necessary, let's call it data and or signals or facts, in fact, to take an appropriate investment decision.

00:08:47: And I was missing that as well.

00:08:48: So I had like an Excel file, and which was great, but it was taking me like two hours to make a calculation of intrinsic valuation.

00:08:55: And with the risk of making mistakes, actually.

00:08:57: So there were a couple of things that were missing.

00:08:59: So we decided without Rian and my co-founder to create Vinge GPT, indeed this AI companion, where we are trying to bring all those elements that we were missing and that we have now and just increasing, let's say the depth of analysis when you invest into companies.

00:09:14: So for example, capturing in one single, let's say AI companion signals like is management treating the customers in a fair way, treating employees in a fair way as well.

00:09:26: And also being able just to ask a question to the AI companion in any language.

00:09:29: intrinsic value of Coca-Cola, for example, and get an answer on that.

00:09:33: Because that's basically the holy grail for value investors.

00:09:37: Also, one thing, I mean, I was having a lot of subscription on many websites, so I was really very fragmented to do my research.

00:09:44: So I wanted to have this much more concentrated.

00:09:47: And one of the things that I was missing is that many of those websites, they were providing you financial metrics, but no interpretation of it.

00:09:54: And I think that was missing, actually.

00:09:56: So if you, I mean, I believe that even investor gets ratio of financial metric, an AI companion has a capacity to tell you, well, what's the opinion about this financial metric?

00:10:06: And you have a lot of websites who don't provide this.

00:10:08: So those were a little bit the things that were missing.

00:10:10: Then last but not least, if I can still mention one more, is there was some, and this is now maybe a little bit technical, sorry for the audience here, but earnings manipulation.

00:10:20: I'm very sensitive to try to capture signals of management trying to manipulate earnings, because this can actually, I mean, if you're investing into company, you want management to be serious about it.

00:10:31: And you don't want management to, let's say, put cosmetics on the financials.

00:10:36: So there were some metrics like the Benish Amesco that were missing.

00:10:39: So that's also things that we actually added to the tool to help us.

00:10:42: And we continue to use the tool for ourselves to do better investment decisions, actually.

00:10:47: So

00:10:47: are you saying that now you don't need the Excel sheet anymore?

00:10:50: Correct.

00:10:50: And the machine just does these things with prompting?

00:10:53: yes absolutely yes.

00:10:54: that's the intention of that.

00:10:55: the machine does it with prompting.

00:10:57: of course i mean i will not go into the technicalities of AI Because today, I mean, some people speak about AI hallucinations.

00:11:04: But of course, we have done it in a way that calculations are done in a way that are, let's say, repetitive, repeatable, and let's say, to a certain extent, sure that you're going to have the same results ten times in a row, which is a problem that you may actually have with AI models that are sometimes hallucinating, at least today, how the technology is working.

00:11:23: And how do you make sure that the machine is using the most recent data?

00:11:27: So, I mean, we feed the machine with curated data so we have our own data broker.

00:11:32: so I mean in the world of AI companions or let's call it custom GPTs you have what is called GPT wrapper.

00:11:38: so they just I mean it feels like it's their own AI but it's just a visual interface on top actually of an underlying large language model and it's going to be like open AI data or maybe Google Gemini data or whatever.

00:11:49: I mean we actually do the other way around.

00:11:52: so we are not a wrapper.

00:11:53: what we do is actually we currently use an interface that is very similar to open AI but all the data all the knowledge is actually curated by us.

00:12:00: This is how we can guarantee.

00:12:02: what I always tell when I give AI conferences what I call the trust, transparency and explainability of AI is you really need to have control on the data.

00:12:12: So of course we have data brokers that provide us data, but this is where we bring everything together and then we put our intelligence and our calculations on top of it.

00:12:21: Do you think technology can make us better, not faster investors?

00:12:25: I think both actually answer.

00:12:28: as I was mentioning earlier.

00:12:30: I was listening this morning to a YouTube video from from Satya Nadella the the CEO of Microsoft and it's I'm of course I'm maybe biased because I was working at Microsoft before.

00:12:40: But he actually said and I really believe that answer or summarizes very well what you can how you can look at AI.

00:12:47: I can be at the same time our garden angel and at the same time a cognitive amplifier.

00:12:52: and I think that when I was reflecting on how he was.

00:12:54: structuring the thoughts about how can AI can be perceived.

00:12:58: I actually felt that this is basically what we are trying to achieve with Vingipiti as well.

00:13:02: On one hand, make people gain time.

00:13:05: So it's actually increasing productivity and that you focus as an investor much more on what I call value creating activities.

00:13:12: So doing deeper analysis.

00:13:14: And instead of doing repetitive value destroying low value task life, filling out an Excel file that doesn't create a lot of value.

00:13:21: And so that's the part of the let's say cognitive amplifier.

00:13:25: Then you have the garden angel.

00:13:26: I mean, I think, uh, honestly, we have created the Vingipiti already for ourselves to take better investment decisions.

00:13:32: That's the garden angel part, I think, of Vingipiti as well, in my opinion, at least.

00:13:36: For someone listening to us now, uh, who's trying to understand and maybe, um, has never bought a stock before, what do you think is a good and realistic way to get started?

00:13:46: I think what is important is that you think, first of all, as a business owner, when you invest into stock markets.

00:13:51: So as I said already, before is like, would you, if you would have unlimited firepower, would you actually buy the full company?

00:13:58: One thing that I also strongly recommend to my students is, do you understand the industry that you're investing into?

00:14:05: I mean, a lot of people ask me, so can you invest into tech industry?

00:14:08: Because with all humility, I think, I mean, I was more than twenty years in tech industry.

00:14:12: For other reasons, I don't invest into tech industry.

00:14:15: But for example, the industries I indeed don't invest into because I don't understand the industry like financial sector insurance, for example.

00:14:22: And again, I mean, probably those are fantastic industries, but I don't understand a farmer or biotech.

00:14:27: I don't have any, let's say, skills in those type of things.

00:14:31: So I think that's the first thing when you think about investing into stock markets is really to consider that you are investing into real business with real customers and with real employees.

00:14:42: And then I would say that you need to have the courage to put real money into the stock market.

00:14:49: And what I also recommend to the people that I'm talking to are getting a lot of questions is avoid raising debt to invest into stock markets.

00:14:57: I mean, this will wipe your way.

00:14:58: I mean, you need to practice your muscle.

00:15:00: And I'm always saying if you start investing to stock market, consider it a process that you're still going to be.

00:15:06: in the next thirty, forty, fifty years, actually.

00:15:09: And it will actually make you a better, let's say, business person.

00:15:12: You will understand how businesses work if you do the right, if you develop the right muscles.

00:15:17: So I think that's a little bit the things that you have to consider, in my opinion.

00:15:21: Investing is as much about numbers as about emotions.

00:15:25: And you can easily get excited when the markets go up or down, fear, excitement, overconfidence, bias, like you just mentioned.

00:15:34: How do you manage emotions when market fluctuates?

00:15:38: Yeah, you stick to your process.

00:15:40: So I think what is important, I mean, I learned this over the last twenty five years, and I made mistakes as well.

00:15:46: They did not wipe me out.

00:15:47: And that's something also important to learn that you're going to make mistakes.

00:15:52: And when you invest into stock market and you go into first position, I mean, you invest into first position to the stock market, you have to accept that markets will be emotional.

00:16:03: There's gonna be, and you will never be able to tie markets that even academic studies about this, that being able to adequately predict markets, humans are one out of two times actually wrong.

00:16:13: It's like basically flipping the coin.

00:16:14: It's like playing lottery.

00:16:16: So I think what is important is that you stick to the process and that you stick to the things that you know.

00:16:21: Some people would consider this like an anchoring bias.

00:16:24: I don't consider this like this.

00:16:25: I think that when, so first of all, you you understand, for example, the industries that you're in, you understand the process that makes you take a decision, yes or no.

00:16:37: I think one thing that is important as well is, as I said before, just consider that markets will go up and down and history of the last two hundred years has proven this.

00:16:48: And I think that you have to, let's say, accept this.

00:16:53: Of course, when the markets are going up, everybody tends to become excited and sometimes arrogant.

00:16:59: This is when arrogance kicks in, where you're going to make mistakes because you become actually too much overconfident.

00:17:05: And this is where you're going to actually go out of your of your repetitive process.

00:17:09: I think that for me, at least for having done this for the last twenty five years, sticking to your repetitive process will give you a frame and you should not go out of that frame.

00:17:19: I think that's really what would help help me actually, I mean, at the age of forty nine to gain my financial independence and intellectual independence.

00:17:27: is that I really kept to that process.

00:17:30: And for example, Don't I don't invest into it?

00:17:32: I don't understand.

00:17:33: Even now I hear a news.

00:17:35: No, I will not do this.

00:17:37: And I always stick to the facts as well.

00:17:38: I don't like to read opinions.

00:17:40: I like to read facts.

00:17:41: And when you build up this muscle, so it's really a long term process, I think that you're going to become better at it and you will be able to navigate through up, up and downturns of the markets.

00:17:51: Last thing I can mention, because when market is going up, I mean, everybody feels super smart about it.

00:17:55: So again, this is where arrogance kicks in.

00:17:57: You have to.

00:17:58: pay attention to this as a human.

00:18:00: When markets go down, as long as you have done your repetitive process, one of the things that I do as well, I always keep a cash position maybe to do cost averaging.

00:18:10: So cost averaging, what does it mean just for our listeners?

00:18:13: So cost averaging is basically, if you want to invest into a company and you feel that the company is undervalued, you will not throw a hundred percent of your cash into it.

00:18:21: Maybe you're gonna do one, two, three rounds because you will not be able to perfectly time the market.

00:18:27: It has been proven, actually, that COSARaging is a very, very powerful method to actually increase your wealth.

00:18:34: I heard about a tendency that youth today make confused investing with gambling because you can do rapid gains with certain asset classes because you can feel like you can play around with knowledge, but a little bit with luck as well.

00:18:50: How do you teach your students in Luxembourg and in Malaga?

00:18:53: not to confuse these two concepts.

00:18:55: Investing is not gambling.

00:18:57: Is where I always bring back the fact that investing.

00:19:00: and again, I'm a stock market investor.

00:19:02: So I invest into real companies.

00:19:04: I don't invest into ETFs indexes.

00:19:07: I don't have.

00:19:07: I don't invest into currencies.

00:19:10: I don't invest into gold type of assets.

00:19:13: So I invest into real companies because those are real companies which are real businesses with real managers and with real customers and suppliers and customers that may be happy.

00:19:23: and will continue to pay a price for the products and the service of the company.

00:19:27: And this is why I try to teach my students as well in general that when you put your money into an asset, first of all, you understand the asset class that you're investing into.

00:19:38: And for me, I mean, having been a business person or still being a business person, I invest into a real company.

00:19:44: So this gives me somehow a feeling that below a ticker with a price at the stock market, market is giving me today, there is real substance.

00:19:54: And I unfortunately hear very often that people invest into things where they have, first of all, no clue into what they invest in.

00:20:01: And secondly, there is no substance behind this.

00:20:03: As you are mentioning, this is like gambling.

00:20:05: And so I want people to think like business owners when they invest into stock markets.

00:20:11: AI tools like yours will change the way people learn and practice investing in the coming years?

00:20:17: Yes, I think so.

00:20:18: And I hope so.

00:20:19: I mean, and again, I don't want to speak too much about our tool, but we have created the tool with an educational first angle.

00:20:26: So I was mentioning earlier that one of the things that I was missing as an investor before we started building this tool in two thousand twenty three is that so many websites don't provide you interpretation of things.

00:20:37: And and of course, some people and even regulators may say, but that's the job of a banker or financial advisor to do that.

00:20:44: I believe that today with the advances of technology that actually you may have tools which will give you interesting information and so that's beyond what typical websites give you and I clearly believe that this is a strength that AI will bring actually being able to talk in natural language to people and make things understandable.

00:21:04: that sometimes feel like very complex and even Warren Buffett has been speaking about it was Charlie Munch actually no more about the priesthood of the financial sector, that there are people who tend to make things more complex so that it's not easy to digest for a common person that has never invested into the stock market.

00:21:24: And I think this is where AI will help.

00:21:26: in my opinion, yes.

00:21:27: My honest feeling is that for the next five to ten years, there's going to be still humans in the loop that will have oversight over what AI is doing and correcting AI, of course.

00:21:37: Maybe in ten years time, it will be AI developing its own AI.

00:21:41: We don't know, but some entrepreneurs would like to have this.

00:21:44: I'm not sure if we'd like to have this.

00:21:46: As we're getting close to the end of this episode, maybe we can put a personal touch to the last question.

00:21:52: If you could give one piece of advice to your younger self, what would it be?

00:21:57: Why have you not started earlier?

00:21:59: How early?

00:22:00: How early?

00:22:02: I can say that my kids, I try to educate.

00:22:04: I mean, they already now invested into the stock market.

00:22:07: So I have a daughter of fourteen and a boy of eighteen.

00:22:10: So they're now invested for a little bit more than a year into stock market.

00:22:13: Of course, they're using Vingipiti.

00:22:14: That's obvious.

00:22:15: But because they are, and I'm like this as well, a little bit lazy.

00:22:20: But yeah, start as early as possible and develop your muscle.

00:22:24: I mean, don't go into it and think that you're going to make the quick buck, as they say in the US, that you're going to make a lot of money very quickly.

00:22:30: Just go there and it will make you a better professional just by being fluent in investing and reading financial reports, reading corporate strategy, documents, those type of things.

00:22:40: So start as early as possible.

00:22:41: That would be the advice to myself many years ago.

00:22:45: Thank you very much kindly for joining us and for sharing all this knowledge.

00:22:49: You reminded us that technology is here to sharpen human judgment, not necessarily replace it.

00:22:54: I hope today's conversation inspired our listeners.

00:22:57: I'm Mihaela and until next time, keep learning and keep reflecting.

00:23:01: Curiosity compounds just like good investments.