To be successful in the world of investment management, one has to be passionate about achieving a competitive level of investment returns coupled with a strong desire to meet client expectations. To be successful demanded a rational, understandable and consistent investment discipline. The equity style of investing I focused on was High Quality Large Cap Growth- a style and discipline that was developed and fine tuned over my career. My process was clear. I started using the vast research data bases like Baseline and Morningstar – and screened those data bases to find the investment characteristics I was seeking. Every metric I screened for had to be better than the S&P 500. Having pruned the list of stocks for consideration, I would screen again for positive price momentum using the charts and discipline of William O’Neil & Co. as outlined in his classic book How to Make Money in Stocks. This methodology helped a lot in finding stocks to consider to invest in; to avoid; to hold and to sell. So far the discipline is totally agnostic- a true key to success. It is veer important to eliminate any personal biases developed over a lifetime when making investment decisions. Due diligence is next which covers reading the annual report, assessing management and reviewing analyst opinions. The analysts opinions were not critical. The decision to buy or sell was strictly mine.
But what drove the investment process of putting together a portfolio of stocks was a Thematic Style. This part focused on demographics, life style, productivity, globalization concerns, emerging technology and communications. To provide a simple example of how this works – and this is with perfect hindsight – in the lifestyle theme, I will assume this company passed through the earlier screens. The company I will discuss is Amazon. This company is changing the life style of shopping. The supporting trends of UPS and FEDX shipping volumes along with independent consumer surveys about online shopping corroborate the thesis. This approach also serves to help avoid certain companies in retailing. Look at Walmart. Too many bricks. It is painful to watch this company. It appears to be a battleship trying to turn around in the East River in New York City. The old way of retailing. Amazon, on the other hand, is unburdened in pursuing and developing its business plan. Amazon is like watching a cheetah race across the Serengeti. Thematic investing also makes it easy to explain the rationale of the investment to the client. Valuation is based on price earnings ratio in the absolute, relative to the S&P 500 and relative to the company’s growth rate. To me this ratio was never a deal breaker. ” You get what you pay for” and “Cheap is Cheap”, however P/ E to growth on a relative basis was something I would consider.
The second aspect to my job was client relations. It requires a high level of integrity in establishing the creditability and trust so critical to a long term relationship. It requires good interpersonal skills, professionalism, knowledge of the markets, presenting a rational, informed outlook and consistency in the presentations. You have to truly believe in and be passionate in your communication to the client. I frequently used the Ibbotson and Associates graphics (now part of Morningstar) to provide visual historical input to my presentations. I developed a passion for this aspect of my job and was able to develop relationships that became long lasting.
Some of the clients I worked for were the Scripps Howard Foundation, Marine Engineers Benevolent Association (MEBA), Government of ARUBA Employees Retirement Fund, ORMET a private aluminum company in Pittsburgh, Callaway Gardens in Georgia, the NYS Common Retirement Fund and the New York Steamfitters Local 638 Pension Fund and other Taft-Hartley funds. I also managed a number of portfolios for high net worth individual clients.