Interview #138 : Sebastian Krog (Treasure Hunting)
Discusses background, types of businesses he likes to invest in, and pitches two Canadian small caps.
For this edition we welcome Sebastian Krog, author of the Treasure Hunting Newsletter.
(Disclaimer: This interview is for informational and educational purposes only, and should not be seen as investment advice. Please do your own research before investing in any company mentioned).
Thanks for taking the time to do this interview.
Can you please tell readers about your background, and how you got involved in investing?
Sure. I first got involved with investing when I was 17 and I read a book about compound interest. I convinced my parents to set up a brokerage account for me so I could buy ETFs, and I started dollar-cost averaging 50EUR or something into an ETF. Eventually, one or two years later, I figured, “Okay, with 50EUR/month I will not get rich.”
So my focus shifted to earning more money with my first entrepreneurial project. First, I started selling products on Amazon when I was 18 or 19, so I stopped investing into ETFs and invested all my money to import the product from China and sell it on Amazon.
This first venture later led me to build a marketing agency around Amazon and later other topics of online marketing. I ran that agency with a business partner until 2024.
During Covid, I picked up on “One up on Wall Street” and then I became obsessed about stock picking and went down the rabbit hole of investing.
Since 2021, when I first read that book, I have basically spent every day learning about investing and researching companies, and since 2024 I’m doing this full time.
What type of businesses, or situations, do you like to invest in?
I like anything that is inflecting, so my main principle is change: anything that flips from negative to positive. There are many ways to achieve that:
Maybe a company focuses its capital allocation on a different segment.
Maybe in the industry headwinds turn into tailwinds.
Maybe the company has a new product.
Maybe there is a change in the industry landscape (e.g. a competitor exiting).
There can really be a lot of different ways, but change is the commonality amongst anything I look at. Obviously change to the positive, not to the negative.
You’ve been a full time investor for two years now. Has your style or approach to investing changed in that time?
I would say the answer about what I look for, I would have given you the same answer two years ago. This concept of change or “inflection points” is still the same. I would just say that the way I’m trying to get to that inflection point may have changed a little bit.
I think on the stock-picking side it’s now actually a little bit bigger company. Two years ago it was really sub-$100 million market cap. Now I almost prefer the $100 to, say, $500 million range because usually those businesses are just a little bit more established.
Also, I approach it now much more from an industry lens. I’ve come to the realization that a lot of the returns and a lot of what drives growth or profits in a business, in most cases, is determined by the industry.
There are some companies who are able to outgrow the industry and those are obviously tremendous, but they are hard to find, and also most of the time somebody has figured that out so that is a little bit more expensive.
There is also some company-specific work going on, but I really pay much closer attention to the industry and also to the downside in general. Anything that maybe has some hard assets where you can say that, OK, there’s a valuation floor.
I also came to appreciate that more because if you get the inflection right then the upside usually takes care of itself.
What do you think has made your newsletter so successful?
And what tips or advice would you give someone who’s thinking of launching their own letter?
Well, I guess it depends on what the goal is that they want to achieve. If you just want to make as much money as you can, that’s probably correlated with how often you write about stuff and how appealing you are to a broad audience.
If you look at the top-earning newsletters, most of them are macro-related because everyone is affected by macro. I didn’t start mine to earn as much money as I can, so for me it’s just the question of what purpose the newsletter should serve.
For me the stock picking always comes first and the newsletter is an expression of sharing my stock picking. I cannot give you much advice on building a successful newsletter because that was never the goal, so I never optimized for that.
I just want to be measured by my returns, and I think that if they do well, the newsletter should at least do OK. That being said, I think this is probably the hardest way to grow a newsletter. But it’s the only sustainable way for me that feels natural.