This is chapter two of a guide
to REIT stocks. Begin here.

About Noam

Noam Ganel, CFA is the founder of Pen&Paper, a value-oriented, contrary-minded journal of the financial markets. Since 2010, Ganel works for Silvergate as Vice President in Capital Markets and provides advisory services to family offices, public and private companies and hedge funds on their capital allocation decisions.

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About Pen&Paper

Pen&Paper is a value-oriented publication about investment ideas, wealth management, and financial wellness. It is art canvas. But instead of color palettes, there are stock screeners. And instead of an artboard, there is a Charles Schwab brokerage account.

While traditionally, it is a team of professionals that performs investment activities, I am responsible for all decisions. In other words, I am the research analyst, portfolio manager, and chief investment officer.

My goal is to contribute to the internet's wealth of knowledge about investments. I only write original content and focus on topics I find to be important over the long term.

Pen & Paper started as a blog in 2016 and grew to become much more than that. It now serves an educational platform and a digital record of my investment idea. While the website is evolving, my investment philosophy invariably stands on the same three beliefs.

First, as the name of the website, Pen & Paper, alludes to, the skills and tools for sensible stock investing are available to us all.

Second, the responsibility for our financial well-being cannot and should not be delegated away.

Third, lifelong learning is a goal that stands on its own. We are lucky to live in a time where there are also financial awards for it.

I write for an audience that wants to understand how things work and who also likes to read. I don't look down at my readers by narrowing my investing ideas into "sound bites."

Each article includes a detailed description of the issue at hand. I sift through publicly-available financial statements of about 80 to 100 companies each week. From that list, I typically find two or three companies of interest. I then read more about the companies. And if one of them meets my "back of the envelope" underwriting, I then perform in-depth, bottom-up research and analysis.

I meticulously analyze the business, the product, the management and past capital allocation decisions. I look moats, growth, and simple businesses that I can understand.

In short, I do my homework.

What's different

We are outsiders to the investment community in that we have zero interest in managing your money. We don't have an opaque fee structure or a misaligned incentive structure.

The investment industry's standard 2/20 management fee model is, from the manager's perspective is a "heads I win tails I don't lose much" incentive structure. In our view, managing other people's money as a source of income should be a thing of the past.

We eat what we cook. Not a single investment idea is suggested before we commit to investing in the stock ourselves. Over 90% of our net worth is held in these stock positions.

We are conservative investors and, perhaps, are too careful in the stock research. We may miss out on a significant market returns as a result. We didn’t buy a single Bitcoin for example.

Our (modern) approach to investing can be stated as follows: There is no reason why intelligent investors cannot manage their funds in today's capital markets. Opening a brokerage account takes a few minutes and with just a few clicks, investors can buy and sell the same stocks, for the same prices, that "sophisticated" investment funds can.

My focus

We are concentrate, bottom-up value-oriented investors. We focus on U.S. listed, publicly traded firms with a market capitalization that is typically less than a billion dollars. Small-cap stock, as this area of the stock market is called, is less glorious than the area of mega-cap stock, such as Facebook and Amazon. But it is also much simpler to understand. To see the difference, read GE's annual report and then read Carriage Services’ annual report.

We typically buy stocks in distressed markets, shunned by reputable Wall Street firms. For example, we bought Seritage Growth Properties at the same investors  retail REITs.

Our portfolio of stocks market value will go radically up and down. Much more violently than the market as whole. As a result, we never have and never will leverage our positions by borrowing funds.  

Our investing criteria is rigid. We like to buy companies that are trading no more than 70% of the Net Asset Value. We rarely pay more than 10 times the normalized earnings per share. We like businesses that show pre-tax return on tangible assets of at least 15% to 20% with a prudent management that is personally invested in the company.

Because of the rigid criteria, similar to our refusal to leverage our portfolio, our future returns will be penalized as we will surely miss out on opportunities that are outside of this focus.

Additional resources

Resources on financial planning

The American Association of Individual Investors is a good starting place. They often write about concepts you should familiarize yourself with. Such topics include stocks for the long termRoth IRAhealth care reform tax implicationsinsurance productsdiversification, and human capital. Their annual fee is $49 - worth the cost. 

We recommend two blogs. The first is Mr. Moustache, which is the story of a 45-year old engineer who decided to save most of the earnings. He has excellent lessons about savings. Some of our favorite articles include: The 4% Rule: The Easy Answer to How Much Do I need for retirement, and  A Millionaire is made ten bucks at a time.

Chai with Pabrai is Mohnish Pabrai's musings about stocks, wisdom, and life in general. He mostly writes about stock investments. By exposure to his writing, you will become a better thinker and consequently better in arranging life goals and working towards what matters. Some of our favorite posts include: Steer clear of the short side. Download the article here. And The Danger in Buying the Biggest, which you can download here.  

Common questions

Working with Noam

How do I schedule a meeting?  
You can schedule a free, 15-minute consultation online to meet by phone or video conference at a time that convenient for you. It is usually no more than a few days to reach us. 

What is your background? 
I have a 12-year experience in the investment management profession. I currently serve as Vice President in Capital Markets for Silvergate Bank. Before that, I studied and completed a graduate degree in business administration from Chapman University. I passed all three levels of the CFA exam and earned the CFA charter in 2016.  

Do you delegate the investment management duties? 
I don't delegate any of the decision-making processes. 

Financial planning

Why is financial planning important? 
It is unlikely that you will stumble upon the desired financial future that you want without planning. Our nature emphasizes the now at the expense of the future. But that does not mean we can't do anything about that. 
Financial planning is a lighthouse that will keep you in the right direction. It guides your decision in life and holds you accountable when you deviate from them.  

What does financial planning include? 
Financial planning is a strategy. It is how to plan for a home purchase. Or how to leverage employee benefits, bonuses, and stock options. It is a strategy for retirement and how to navigate finances through life and career transitions. 

How can I learn more about financial planning? 
Our favorite resources are The American Association of Individual InvestorsMister Mustache, and Chai with Pabrai

Can I get a sample of a financial plan?  
Absolutely. Contact us for in-depth samples. 

Why is your subscription price? 
We have a simple and straight forward pricing model. We charge a a monthly subscription fee of $12. We only want to partner with engaged subscribers and found that this pricing serves as the best filtering mechanism. 

All backed by our satisfaction guarantee. If for any reason you're not completely satisfied, we'll refund any eligible fee and work with you to make things right.
What if I am unhappy? 
If for any reason you're not completely satisfied, we will refund any eligible fee and work with you to make things right.  Refund requests are available within one year of the date that the fee was charged. Contact us for more information on our collection and refund program. 

How can I be sure my information will be kept private? 
We take your security and privacy seriously. When you interact with us, we use several safeguards to protect your information. We work with government agencies, law enforcement, and other financial services firms to secure your data. Contact us for more details about our security and privacy measures. 

Which robo advisor do you recommend? 
The most popular robo advisors are Betterment, Wealthfront, Ellevest, SoFi Invest, and Charles Schwab Intelligent Portfolios. 

Betterment sets the standard for service. It offers automatic rebalancing, tax-loss harvesting, a retirement plan. Wealthfront offers goal-based investing that helps you understand how choices today will affect your future.  Ellevest targets women. It is goal-based investing without an account minimum. 

SoFi is the most investor-friendly service. In addition to the standard services, it offers career services and access to advisors and other SoFi products. Charles Schwab Intelligent Portfolios is investor-friendly and provides no-cost features such as rebalancing and 24/7 access to U.S. based customer service. Their account minimum is $5,000. 

(To be clear: we are not compensated - in any form - by the list of robo advisors companies listed above.)