Sponsored by Chicago Board Options Exchange
A few years ago, Chris Lahiji broke into fund managing at the ripe old age of nineteen. Today he discusses buying stocks that have market caps of less than $200 million, the teachings of Dave Chappelle, and-- sacrilegiously for us diehard Tom Wolfe fans-- Sherman McCoy's "idiocy."
In Bonfire of the Vanities, Sherman McCoy attempts to explain to his four-year-old daughter what he does for a living. How would you explain to a four-year-old what you do?
First off, I think that children are bad investments. Think about it for a second. 
The cost of raising a child have soared in recent years (now over $300,000 before you send the brats off to college), and the amount of respect youngsters have for their parental units continues to plunge, like Ford's stock.
Sherman is an idiot in my opinion for fornicating without protection or birth control. To a four year old, daddy buys candy for $1 and sells it for $2.
Describe your trading strategy.
To buy companies trading less than "intrinsic value" and sitting on them for an infinite period of time. Intrinsic value is calculated by free cash flow and net tangible metrics. I use a convoluted software system that calculates the cheapest stocks on paper, and then do some tantalizing research with my forensic accountant, to figure the "actual" worth of businesses.
Since I only buy stocks that have market caps of less than $200 million, my universe is limited. As of today, the software system recommends seven stocks, a historic new low.
How did you get your first job in finance?
I begged the right person at A.G. Edwards. Became an intern for them at 19 for a very short while, and then went on to write reports for an online newsletter.
If you were starting out in your career now, where would you want to work?
The United States government, a wholly owned subsidiary of Goldman Sachs.
What is your favorite career accomplishment/best trade ever?
Getting a check every month for loving what I do. The accomplishment is even more profound when the check does not bounce. Most people (99% of them) in the financial services industry are only in it solely for the monetary benefits, hot men and women it attracts, and the unlimited supply of free alcohol at conferences. For me, analyzing stocks are a hobby, not an occupation.
Who are your heroes or role models, fictional or real?
Fictional Heroes:
MacGyver: He taught me that it’s okay to hurt people, as long as you don't use guns. The man can also make a hydrogen bomb out of bubble gum and paper clips.
Holden Caulfield: Both of us abhor the superficiality of things in life.
Tron Carter (Chappelle Show): Due to a "hot hand in a dice game", he becomes the richest man in America, and buys babies for "straight cash". His entrepreneurial drive as a cocaine dealer is worthy of praise.
Role Models:
My Great Teachers (can count them on one hand) who accelerated the belief that anything in life is achievable and promoted an incredible work ethic
High School Librarians: For facilitating my fascination with information.
"Weird" Al Yankovic: After three decades, the man is still going strong with his parodies. A beacon of hope for nerds around the world.
Goran Ivanisevic: Won Wimbledon as a wild card entry in 2001. "The trouble with me is that every match I play against five opponents: umpire, crowd, ball boys, court, and myself." I feel that way in business.
What is the most important quality a trader should have?
Confidence and the ability to admit that they can be wrong at times.
What is the worst character fault for a trader?
An upset stomach. Going to the bathroom prevents you from tracking your investments. Tums are a necessity.
Tell us about the lowest of low points, the time you thought should just give it all up and take a simpler, easier job?
When someone writes an article defaming you with false information and slander (happens annually).
When someone pretends to be your friend, just so they can steal your information. (Happens monthly).
When someone lies to you about certain information, and causes you to lose money in an investment. (Happens weekly, but I don't take their calls).
When someone discounts your ability as an investor, because of your age or the color of your skin. (Happens everyday).
What job would you have taken? What's your 'exit strategy'—how long until you retire or move on?
I was an English major and originally wanted to become a teacher educating kids on how corporate America is going to shaft them in life. s long as I find undervalued investments, I'll stay in the game. My exit strategy is death.
What is your motto?
"Numbers don't lie, people do."
Whose teachings are more useful in your business—Machiavelli, Sun Tzu, Jesus Christ or Marquis de Sade? (Feel free to nominate another choice.)
Dave Chappelle: "Nighty Night, keep that butt hole tight".
Translation: Always be aware of your surroundings, because once you drop your guard, someone is going to take unfair advantage of you.
(If you missed the last installment, featuring independent trader James DePorre, click here. And if you think you’d make a good subject, or want to nominate someone else, please email us at tips (at) dealbreaker (dot) com--subject line: “Better Know A Trader”).
Posted by pete, Nov 03, 2006 12:00PM
This is the best interview yet.
He makes jokes but obviously there is substance there.