Monday, August 10, 2009

Ali Interviews Paul Sonkin

Tariq Ali: Could you talk a little about Fortress International (NASDAQ:FIGI) with your take on the situation there?

Paul Sonkin: I think it’s a very very well run company. I think that they had some challenges with some of their customers getting financing but I think that long term it’s going to be a great investment because it’s a play on server farms and on these data processing facilities. Even though near term they may not put up great numbers. I think that long term they’re capable of some meaningful earnings growth and generating a lot of free cash flow. I was sitting with the CEO of the company about a month ago and if you just look at the companies that they’ve done initial build outs for I think they can get about $400M of revenue just by building out the facilities that they’ve already started to work on. Because when you put up a facility if they put up a 150,000 facility, they may only build out 20,000 feet but as more tenants come in they get that add on work.

Tariq Ali: As a teacher, do you have any advice for students of value investing right now?

Paul Sonkin: I think that it’s a great time for young people to be getting into the business. If you look, a lot of the firms were created after the aftermath of the 20’s, there were a lot of firms created after the 70’s. I think that there are a lot of firms that will be created out of the aftermath of 2008. So I think that it’s a good time to be getting into the business. Usually, the advice that I give my students is to keep your eyes open and your mouth shut. One of the pearls of wisdom that I give them is if your boss asks you for a red umbrella, don’t bring him a blue one and explain how it’s going to keep him dry. Just give your boss what he wants. I think that there are a lot of people who start working that get off on the wrong foot.

Tariq Ali: Do you have any book recommendations?

Paul Sonkin: There are several books that I really like. I like Hidden Champions by Hermann Simon. David Dreman wrote a book back in the 70’s called Psychology and the Stock Market. Another one I really like is Style Investing by Richard Bernstein. And all of the classics.