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My full interview with Barry Schwartz of Baskin Wealth Management originally appeared in my national bestselling book, Market Masters, which is available at Chapters, Indigo, and Coles as well as Costco and Amazon.ca.

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Should Barry Schwartz be smiling? An 18-year compound return of 8.7% doesn’t put him at the front of the pack. Though his clients, who must invest a minimum of $1 million with Barry, sleep well at night knowing that their hard-earned money isn’t wildly gyrating year after year, but growing at a safe and steady pace, albeit above market returns. That’s why Barry is smiling. Barry Schwartz tells it like it is. He’s direct and quick to answer, in such a succinct way that you’d swear he practised his answers days before the interview. To think that Barry pretty much stumbled into the investing world is unusual. Investing wasn’t his original game plan. David Baskin invited Barry into his firm, took him under his wing, and groomed him to be a prudent investor. Barry joined Baskin Wealth Management in 2000 and became a partner in 2005. Today, Barry is completely focused on strong large-cap franchise businesses with explosive free cash flow and an enduring competitive advantage.

Throughout the interview, Barry repeats “free cash flow” over and over again to exemplify its importance. Seriously, as you read through the interview, count how many times Barry says “free cash flow.” In Barry Schwartz’s court, cash is king.

While Barry publicly describes himself as a value investor, it isn’t in the Graham and Dodd sense of the term — buying deep value stocks at below their intrinsic value. Rather, Barry invests in businesses for the long term. Businesses that will not lose their value in 10 years’ time. In fact, Barry invests based on Warren Buffett’s ideologies, ideologies that in my opinion are derived more from Philip Fisher than they are from Benjamin Graham, even though Buffett himself would say otherwise: he claims, “I’m 15% Fisher and 85% Benjamin Graham.”

Before heading up to interview Barry in his office, I grabbed a quick sandwich and drink at Starbucks on the ground floor of his building. It was only until after the interview that I realized Starbucks would fit perfectly into Barry’s ideal portfolio. Upon reaching Barry’s office floor, I was greeted by his assistant, who asked me to take a seat before seeing Barry. When he arrived, it was with a huge smile. Barry struck me as a man who was doing exactly what he wanted to be doing with his life.

Barry Schwartz’s 15 Investing Lessons:

1) “Do you know the famous story about Joseph Kennedy? When he heard the shoe-shine boy or the cabbie give him investment advice, he knew that it was time to sell or short everything.”

2) “We don’t buy Nortel for our clients because it’s not profitable. We stick to profitable companies.” (As recounted by Barry Schwartz)

3) “I only put maximum 5 or 6% in any one stock.”

4) “Stop-losses don’t make sense. For example, you can wake up the next day and find our great stock down 10% for no reason, and you’re cashed out. You’re really giving up all your control in the stock market to nervous people. Lots of stocks are volatile. Even the great ones can go up or down 50% in a year.”

5) “We don’t let the stock market drive our investment decisions. We research companies, we think about their fundamentals, and we buy them with an eye that they’ll be worth a lot more in the future.”

6) “To really make a lot of money with an investment, you need to have conviction and an egotistical attitude to say, ‘The stock market is wrong, and investors are misinformed.’”

7) “Bad things happen to good companies, but that provides you with opportunities. If they’re profitable companies, they can get through it, and sentiment may revert.”

8) “When companies generate free cash flow, and a high amount of free cash flow, good things happen. If you shoot a bazooka, you’re going to blow something up. It’s the same effect with free cash flow. I’ve never made a bad decision by buying into a company paying 8% or 9% free cash flow yield or higher.”

9) “Warren Buffett said something along the lines of, ‘If you have to have a meeting before you go out and raise your prices 10%, that’s not the type of business I want to be in.’”

10) “We’ve gotten smarter over time. When you stick your fingers in the tiger’s cage, you get bit. So you don’t do it again. You know, the cat doesn’t go sit on the hot stove. It learns its lesson and moves on.”

11) “[Great] stocks all have something in common: they’re quality businesses that raise dividends almost every year, that generate a lot of free cash flow, that are in businesses that sell products and services that people use every day, and that have potential for growth.”

12) “You can’t be dogmatic and say, ‘I only buy companies with 10-times earnings, and if I don’t find them, I don’t buy them.’ Well then, of course, if you did that you would never find anything to buy over the last four years.”

13) “Value will often be recognized in the market. That’s why you buy and diversify, because you’re never going to be right on every stock.”

14) “There are always opportunities in companies that don’t have analyst coverage or are neglected or are smaller ideas.”

15) “It is easier [for retail investors] to buy some smaller-cap companies. The billion-dollar or less stocks that a company like ours can’t get access to anymore because we have gotten too big and would own too much of the stock.”

Robin Speziale is the national bestselling author of Market Masters, which is available at Chapters, Indigo, and Coles as well as Costco and Amazon.ca. He lives in Toronto, Ontario. Learn more about Market Masters.