Ex-Asset Manager With 6-Figure Portfolio Reveals How He Chooses Stocks

  • Michael Schattmann has been investing in stocks for more than 10 years.
  • He told Insider how he chooses his stocks and why he doesn’t believe in ETFs or dividends.
  • His main piece of advice is to honor every single cent.

Like many, when Michael Schattmann was a student he had jobs over the vacation period.  At one stage, he decided to work as a painter. 

“That was pretty hard work and that’s why I decided to do something useful with the money,” he said.

At the time, he was paid five euros an hour (just over $5), earning 200 euros ($226) a week. 

“I did that for three weeks and was very proud of myself,” said Schattmann. 

For him, that was a “huge amount of money.”

At the time, his mother gave him the book “The Way to Financial Freedom” by Bodo Schäfer. He was “a bit hooked.” He decided he wanted to invest his money in shares.

“I just got lucky”

He chose electronics company Sony as he had heard that the company was going to launch the Playstation 4. 

“I don’t really have anything to do with consoles and only overheard this through friends,” Schattmann said. 

He thought that if Sony released a console soon, its stock price would go up. 

“I thought, this is full of important information and I absolutely have to get in now.” 

He thought about it for two or three days and then went to see his grandfather. His grandfather was the only one in his family who had a portfolio, he said. 

Schattmann gave him a large part of his savings and asked him to buy as many Sony shares as possible. 

“They then went up a lot relatively quickly,” Schattmann recalled. 

“That really got me hooked.”

It turned out that the increase in Sony’s share price actually had nothing to do with the Playstation 4. 

“After all, this information was all over the media, everyone knew it. It was neither insider information nor a price driver,” said Schattmann.

“I was simply lucky at the time,” he admitted. 

However, he said he saw how quickly money could be used to make even more money and he was excited. 

“I’ve been involved with the stock market ever since,” he added.

“Stocks are the best asset class for me”

After graduating from high school, he decided to study business law because it “opens a lot of doors for you.” 

He said you can go into business law firms as well as consulting. 

“I think you have this good mix of law and business.” 

He started studying at 19, got his bachelor’s at 22, and his dual masters at 24. After his bachelor’s degree, he worked in the M&A department of one company, Schattmann said. He also worked as an asset manager. 

In 2019, he turned his stock market hobby into a career and has since been working independently as a consultant, helping people realize their “personal stock market success,” as he put it.

He himself has invested most of his money in stocks. 

“That’s the best asset class for me,” he said. 

After more than 10 years in the stock market, his portfolio is in the six-figure range, he said. In total, he currently owns shares in 18 companies. These include Allianz, Tesla, Walmart, the logistics company Hapag Lloyd, and the pharmaceutical company Evotec.

“When I invest in ETFs, I buy a lot of crap”

When selecting his stocks, he focuses primarily on sales, gross profit — which calculates the difference between sales revenue and cost of goods sold —, and Ebit margin. This tells how high the profit — before interest and taxes — is as a percentage of the company’s sales. With an Ebit margin of over 15 percent, companies are considered to be particularly profitable.

If the figures are right, Schattmann looks at the competition. When comparing them, he then notices whether a company is extremely highly or lowly valued. 

“I personally find the comparison with competitors most important to answer the question: are there dangers of being forced out of the market?” 

To compare companies, he said he’s developed an Excel tool for himself. 

“That’s where I enter the numbers, and then the metrics I need are automatically calculated,” he said.

He still does a discounted cash flow analysis and looks to see if a company is over- or undervalued. Finally, he analyzes the management. He says it’s important for the CEO to have experience in the industry and not to be straight out of college. 

“If a CEO only takes the job because a hefty salary beckons, then I wouldn’t buy a stock,” he said.

He doesn’t invest in ETFs, he said, because he buys “a lot of crap” with them. 

“That’s why I only invest in individual stocks. There I can choose the companies myself,” he went on. 

Schattmann also thinks “nothing at all” of dividends. 

“I think it’s much better when companies don’t hand out the money to shareholders but invest it in their growth,” he said.

“I’d rather see them take advantage of those dividends,” he added. 

He admits that experts in these businesses will know more than a “small fish” like him, however. He doesn’t rule out investments because of dividends but he’s also not one to bet on them alone.

“I want to use the money to buy my freedom”

He said that his healthy capital is due to good savings and investing from a young age. He also noted that he’s held the shares for a long time and that he’s invested his money well, thus giving him a good return.

He’s not set a specific goal for his portfolio, nor does he want to spend it for the time being. 

“I don’t want to spend the money, I want to use it to buy my freedom,” Schattmann said. 

“It’s a nice feeling to go to work knowing that if I don’t feel like it the day after tomorrow, I’ll quit because I have enough money.” 

You go through life with a “certain lightness” when you have a cushion, he added.

He also gave some important advice to prospective investors.

“You should honor every single euro, every single cent,” he said. 

Before starting out in the stock market, you should develop a strategy. No matter how big or small the investment. 

“The stock market isn’t a child’s birthday party,” Schattmann said. 

Those who don’t want to “throw their hard-earned money into the fireplace” should really put some thought into it. 

“Otherwise it ends badly and that would be a great pity,” he said.

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