I’m pleased to announce that Alex Ryzhikov has joined Ewing Morris & Co. as an Investment Analyst. Prior to joining us, Alex worked as an Investment Analyst at Burgundy Asset Management where he was part of the US Large Cap team.
Alex graduated with distinction from Concordia in 2011 with a Bachelor of Commerce degree in Accounting and a Minor in Finance. He also holds a Bachelor of Science degree in Microbiology and Immunology from McGill University. He has successfully achieved the CFA designation.
Alex is well-read, analytical and commercially-minded. I asked Alex to share some of his thoughts on investing for our blog:
Q: What made you choose a career in investment management?
A: Luck plays a disproportionate role in one’s career choice and this is true in my case. I was lucky to be born to loving parents who after the collapse of the Soviet Union decided to start a new life in Canada. It is extremely unlikely that I would have been able to pursue a career in capital markets should we have stayed in Kazakhstan.
My parents never pushed me in a particular direction. However, I am sure that I was influenced in choosing Microbiology and Immunology as my original field of studies by the fact that my father is a pathologist by training. During my second year of studies, my original enthusiasm for the subject waned. On advice from a friend I took a minor in Management while completing my Microbiology and Immunology degree and found that I was more interested in studying businesses than I was in studying microorganisms.
Q: What investment principles do you believe are important?
A: As some beginning tennis players today try to model their game after Rafael Nadal, so I try to model my “investment game” by studying Warren Buffett. As such, I take no credit for the originality of the following investment principles. I also want to highlight that I don’t believe that there is only one “right” way to invest as there are several examples of investors achieving success while employing different approaches. I do believe that the approach I have chosen is best suited for my personality and should therefore maximize the probability of me generating excess returns over my career.
If I had to list only three principles they would be the following:
1- Invest in businesses and not in “pieces of paper” (I guess electronic records would be a more timely expression): focus on understanding the fundamental merits of a business and what a rational buyer would be willing to pay for it in a private transaction. I don’t want to imply that one should remain blissfully ignorant about other factors affecting the supply and demand for a given security, but I do believe that if an investment idea cannot be justified based on the fundamental merits of the business it should not be made at all.
2- Risk is not volatility of the stock price, but permanent impairment in purchasing power of capital under management.
3- No one has the foresight to predict all possible outcomes and accurately measure their probabilities; therefore you should leave yourself enough room to make money even when something does not go as expected. The concept of “margin of safety” is traditionally thought of as buying something at a discount to its intrinsic value, but it can also include free options on new products, markets, etc.
Q: What factors will determine your success as an investor in the long run?
A: By examining successful track records I believe that deliberate practice is an important factor necessary for long-term success (as measured by excess returns on capital under management relative to some objective benchmark). I define deliberate practice as hard work framed by a thoughtful process. Because investment management involves making decisions under condition of uncertainty, randomness (luck) will undoubtedly play an important role in determining my success or failure as an investor. However, I don’t believe that investing is a pure game of chance and therefore my odds of success can be improved by following a clear and rational investment strategy (philosophy).