Stock Market Wizards
Claudio Guazzoni: Eliminating The Downside
Claudio Guazzoni started with the simple idea of buying restricted stock at a discounted price. This is how he built his enterprise one deal at a time. He raised his initial stakes from others.
The relevance to investors is not Guazzoni's technique, but rather his premise that "every period has its opportunities where you can find investments that are extremely discounted and have a well-protected downside."
Guazzoni's strategy of buying restricted stock is a perfect example of the principle that opportunities arise when the market participants are treated differently from one another.
In this case, the owners of restricted stock were not allowed to sell their shares, whereas ordinary investors were allowed. This contrast in the treatment of shareholders provided the opportunity for Guazzoni to buy restricted shares at deep discounts. It may have been a very simple idea but still a highly profitable one. The point is that it is not important to complicate things to achieve success.
Guazzoni's entire career has one theme: looking for undervalued assets. All the strategies he has worked on involved buying undervalued assets. The idea of buying assets at prices below their true value does not only generate profit but also limits the downside risk. According to Guazzoni, his philosophy includes eliminating the downside. If one can eliminate downside risk, he can make money at the end of the year.