🎙️Not So Ordinary Guy

Interview Pavel Kozanov

The Partners of Compounding Quality are amazing.

It’s what makes the Community so special: we all learn from each other.

Today, you’ll learn about Pavel, a vivid reader of Compounding Quality since the first hour.

Pavel Kozanov is a Bulgarian who came to the United States at age 23 with only $200 in his pockets.

Fast forward to today and he has built an investment portfolio of almost $1 million and secured the financial future of his entire family.

Pavel Kozanov together with his 3 kids

🎙️Interview Pavel Kozanov

Compounding Quality: Nice to see you, Pavel. Can you tell me a bit about yourself?

Pavel Kozanov: It’s an honor to see you again, Pieter (Pavel and I met at the Berkshire Hathaway AGM in 2023).

My name is Pavel Kozanov. I was born in Bulgaria. Together with my best friend from high school, I moved to the United States when I was 23 years old to finish my education there.

After I finished my studies, I moved to Canada where I still live today together with my beautiful wife and my three children.

Compounding Quality: How did your investment journey start?

Pavel Kozanov: In the early years, I always tried to save as much as I possibly could. I saved around 50-60% of my monthly income and used this money to build an emergency fund to secure the financial future of my family.

After a while, I started realizing that it’s way better to let your money work for you versus keeping it in a savings account. To quote Warren Buffett: “If you don't find a way to make money while you sleep, you will work until you die.”

That’s why I started to get interested in investing. I started investing during the Financial Crisis and I’m very happy that I did.

Initially, I focused on dividend investing. I wanted to create a secondary income and when my dividend income could exceed the income of my regular job, I could reach financial independence.

Compounding Quality: Do you still focus on dividend investing today?

Pavel Kozanov: No. Gradually I made the switch from dividend investing to quality investing thanks to Compounding Quality and William Green’s excellent book Richer, Wiser, Happier.

I realized that while companies like AT&T might pay an attractive dividend, they are not able to grow their intrinsic value at attractive rates.

Thanks to Compounding Quality, I started to realize that the quality of a business is more important than dividend income.

Paying a dividend only makes sense when the company doesn’t have any attractive reinvestment opportunities. That’s why I started to focus on things like the healthiness of the balance sheet, the Return On Invested Capital (ROIC), and so on.

A few years ago, I wouldn’t even consider investing in companies like Constellation Software, Markel, Berkshire Hathaway, or Google. Today, these companies are within my portfolio and I am very proud of that.

As an investor, you should always keep learning and keep evolving. As Charlie Munger once said: “Those who keep learning keep rising in life.”

Compounding Quality: How did you discover Compounding Quality and which role did it play in your investment journey?

Pavel Kozanov: I saw a tweet of Compounding Quality and started following you on X (Twitter). After a while, I started reading your newsletter and it was love at first sight.

There is a lot of people writing about investing but sometimes it just clicks with you.

You have the unique gift to make complex topics easily digestible and that’s something I love.

Today, Compounding Quality is my favorite investment newsletter and if I could only read one newsletter, it would be yours.

It’s also lovely to see that you are still very humble. Being humble is very important when you want to be successful in life.

Compounding Quality: What’s the best investment you’ve ever made?

Pavel Kozanov: Warren Buffett often says that the best investment you can make is always one in yourself. I completely agree with him.

So my best investment wasn’t an investment in stocks.

When I moved from Bulgaria to Chicago at age 23, I only had $200 in my pockets and I had to pay for university, my living expenses, and so on.

I spent some money on getting my commercial driver's license, and I drove trucks for a while. This investment in myself has made me a lot of money.

Let’s give you another example. In 2017, I started getting interested in options. Every single day after work, I sat down and read for about one hour a day learning everything I possibly could about the subject. I did this for about 3 months.

Over the past 5 years, I’ve probably made around $60,000 via options. This means that an investment of 90 hours in knowledge made me $60,000. That’s about $667 per hour.

True knowledge is power. The best investment is always one in yourself.

Compounding Quality: How much do you read a day?

Pavel Kozanov: I love to read. I always try to read as much as I possibly can.

On average, I probably read around 60-90 minutes a day. Furthermore, I also listen to a lot of audiobooks.

Some books I’d like to recommend to the audience are 100 Baggers by Chris Mayer, The Five Rules of Successful Stock Investing by Pat Dorsey and The Joys Of Compounding by Gautam Baid.

I’m also really looking forward to reading your book, The Art of Quality Investing (the book will be published on the 1st of May 2024).

Compounding Quality: I know you as a great father. Which financial rules would you like to pass on to your children?

Pavel Kozanov: Today, I still save and invest 50-60% of my monthly income. I would advise my kids to always live below their means. To save big and to safe often.

Invest a certain percentage of your money in stocks every single month and you can’t help but become wealthy.

It’s all about your mentality. I think everyone should have a rainy-day fund for unforeseen circumstances. This will provide you with a lot of peace of mind.

Another thing I’d like to pass on is the power of passion. All great entrepreneurs made a success of their business because they did it with passion. What you do with passion, you do better.

Compounding Quality: If you were obliged to invest all your investable assets with one person and you couldn’t choose Warren or Charlie, who would you pick?

Pavel Kozanov: I would pick two investors:

• Terry Smith

• François Rochon

Both gentlemen are excellent Quality Investors if you ask me.

Compounding Quality: What are your favorite stocks right now?

Pavel Kozanov: My 2 favorite stocks today are Google and Constellation Software. They performed really well in the past but I think they still have a bright future ahead.

I’m also starting to look into Lumine Group, Lumine is a spin-off from Constellation Software and focuses on acquiring and building companies in the communications and media software industry.

Last but not least, I also love Markel. Markel is like a mini-Berkshire.

I think that being defensive is more important than being aggressive in investing. To quote Charlie Munger once more: "It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent."

Compounding Quality: Last year we met in Omaha during the AGM of Berkshire Hathaway. Why should everyone attend the Berkshire AGM?

Pavel Kozanov: Going to Omaha was a life-changing event for me. Not because I saw Charlie and Warren in real life, but because of all the interesting people I met during the weekend.

I was able to talk with you, shook hands with William Green, and made a lot of amazing new friends.

I’m so grateful to be able to exchange ideas with like-minded people and that’s also what makes the Community of Compounding Quality so powerful.

I think that everyone who is serious about investing should attend the Berkshire Hathaway AGM at least once in their life.

Compounding Quality: Thank you very much, Pavel. It was an honor to talk with you.

Pavel Kozanov: Thank you, Pieter. The honor was all mine.

Pavel’s Portfolio

Curious about which stocks Pavel owns?

I’m sharing his Portfolio with his approval:

The stocks I like the most within Pavel’s portfolio? Automatic Data Processing, Brown & Brown, Constellation Software, Evolution AB, Markel, Mastercard, OTC Markets, Ulta Beauty and Visa.

That’s it for today.

Happy Compounding!
Pieter (Compounding Quality)
PS Did you know that Pavel has a Subtack too? You can check it out here.

Whenever you’re ready

That’s it for today.

Whenever you’re ready, here’s how I can help you:

You now only pay $399 instead of $499.

Thank you for reading!
Pieter (Compounding Quality)

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Finchat: Financial data

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