Ep. 25 – Past Performance Does Not Predict Future Returns with Mitchell Van Der Zahn

After graduating with a post-doctorate degree specializing in accounting and finance, Mitchell Van Der Zahn embarked on a career in academia working at major research universities in Hong Kong, Canada, Singapore, and Australia.

During 15 years, Mitchell published more than 50 international peer-refereed journal articles and several research book chapters, a research book, and various professional related articles.

During his academic career, Mitchell instructed at undergraduate, masters and doctoral levels. Overall, Mitchell has successfully supervised 10 doctoral students researching a variety of accounting and finance issues.

In 2012, Mitchell left academia to pursue private sector interests full time. Aside from working in several financial services sector roles, he also launched two start-up firms. One start-up focused on providing logistical and events management services, whilst the other start-up concentrated on providing investment consultancy, research and asset management.

After 7 years following private sector pursuits, Mitchell decided to return to academia taking up a graduate level professorship at a university in Dubai at the start of 2018. The opportunity to live and work in Dubai has provided the chance to broaden and enrich Mitchell’s international accounting and finance knowledge. His move to Dubai, however, was not solely work related as it also provided an opportunity to follow a life-long passion for experiencing new cultures.

Also, Mitchell is a CFA charterholder, and qualified CPA.

In this episode, Mitchell shares his worst investment ever story relying on his past venture’s performance without setting up his stop loss. And heading towards over-exuberance about pay on making money wishing and hoping that the past wins he had from the company will repeat itself.

 

I was not looking at the fundamentals of the company. I just went on and reinvested my money. The parent company was once successful and I just blindly went into it.”

Mitchell Van Der Zahn 

 

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Topics Covered: 

 

01:05 – Mitchell Van Zahn’s professional background

03:20 – His worst investment story venturing in the volatile market of oil in gas in 2010

06:32 – Private equity firm offering the parent entity the chance to sell their subsidiary

7:015 – The subsidiary was privatized, he got his money back from his investment plus a nicer return leaving him with a nice big chunk of change

07:36 – Parent entity announcing the joint venture of injecting assets in the dormant subsidiary turning it into an offshore vessel company.

10:14 – Mitchell’s investment decision based on the past performance of the parent company, the success he had before with the subsidiary company and with the parent company

10:49 – Running on a wish, a hope and an expectation that because they were successful before they will be successful again, not worrying about the finances, fundamentals and failing to look at the macroeconomic picture even if at the point that the oil crisis was happening

12:11 – Catching falling knives: What made Mitchell’s investment worse was basically just kept thinking all the oil price would come back and that everything was just a momentary blip.

15:24 – The fall of the parent company due to bankruptcy [00:16:02] So these parent entities had inflated the book order.

16:57 – Impact of the bankruptcy of the parent company to it’s subsidiary, parent entity farming out or outsourcing to its subsidiary causing its revenue stream to be cut in half

17:57 – Andrew’s takeaways from Mitchell’s investment story

23:31 – One actionable advice from Mitchell to avoid experiencing the same investment fate: Before you make any investment you have to be preclear and have a conviction what your stop loss will be and also what you are planning to sell it.

 

Main Takeaways

Lesson 1: “Always diversify. When you’re buying stocks, buy a portfolio of stocks and not put more than 10 to 5 percent of your money in any one.”– Andrew Stotz

Lesson 2: “Past performance does not guarantee future performance…if a company made money for you, and you liked it, the management did a good job that does not mean that that’s going to work in the future.”– Andrew Stotz

Lesson 3: “Do your research when you’re trying to pick stocks.”– Andrew Stotz

Lesson 4: “It is all about corporate governance. Companies surprise the market with bad corporate governance. If a company is already disappointing the market with bad corporate governance, that’s already in the price. It’s the surprises that happen for various different reasons. And it’s very hard to predict those surprises.”– Andrew Stotz

Lesson 5: “When making investment decisions, you have to try to take that the emotions off things and be a lot more straightforward or have a limit.”– Mitchell Van Der Zahn

Lesson 6: “Try to set a stop loss when you buy a stock and if it hits that stop loss sell it. If it goes down more, then reconsider whether you would allocate some to it. If it goes up well you miss some.”– Andrew Stotz

 

Resources: 

 

Connect with Mitchell Van Zahn:

 

Connect with Andrew Stotz:

About the author, Andrew

Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company that provides institutional and high net worth investors with ready-to-invest stock portfolios that aim to beat the benchmark through superior stock selection.

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