Jose Najarro

Maybe so, but oftentimes that's not the case.

But what you're trying to do is find a relationship between the quality of the business and price that is much better than what is out there in the market in general, so to speak.

And the reason it's important to understand value investing from that lens is because right now the conventional wisdom or the way people explain it, it's kind of been reduced to investments that are focused almost exclusively in mature companies and investments that have like low financial ratios, like price to book ratio or most notably price to earnings ratios and any type of ratios or financial metrics that are relatively low.

And that's not necessarily true because you can buy a higher price-to-earnings ratio company that's undervalued and you can buy a low price-to-earnings ratio company that's overvalued.

At the end of the day, what I like to say and what I express on my book is that every valuation...

has a set of kind of like implicit assumptions or expectations that are built into that valuation.

So in terms of what growth the company is going to achieve, what reinvestment returns they're going to achieve with what they do with their cash flows, whether that's new projects, dividends or whatever.

And so what you have to think about is, are those assumptions realistic or not?

If the assumptions that are embedded in the valuation are too optimistic, then it's likely overvalued because what's going to end up happening for you to get returns that you want is going to be less than what the assumptions commanded kind of initially.

so that's kind of how i look at it and the important thing of looking at it that way is that you're not restricting yourself to any sort of a type of a stage of a business whether it's mature or not you're just focusing on finding value and in fact in our fund our highest position is for a company that conventionally would be called a non-value play and a

potentially, and a high growth stock.

But we consider it value just because relative to the expectations that we have, we think it's undervalued.

No, absolutely.

And I love that question because there's really a lot of motivations towards the book.

Some of them are like professional and career wise, like obviously having the book out there and being able to express my views to existing and potential investors, it's helpful because it instills more trust in them.

Right.

But then there's also kind of like the more personal side of

what I was trying to achieve with the book.

And I essentially wanted to call out how typically Wall Street, with very few exceptions, misses the most important thing about what creates value in a company and therefore how to value them.

Right.